BCG: Enculturation of the business diversity paradox

16 February 2015

Diversity within the business environment is a phenomenon in paradox – according to a recently released report by the B-Team in collaboration with BCG. While research shows that the correct management of cultural differences within an organisation is correlated with positive outcomes for a company, many companies have failed to achieve meaningful diversity. The report aims to identify the benefits of diversity; why even well intended implementation can go awry; and what to focus on to develop a well-rounded business.

Diversity on the work floor
The business case for diversity has been affirmed through a wide range of studies. One study found that teams that had members that represented the target customer were 158% more likely to understand customers’ needs, increasing the probability of innovation. Another study of 500 American companies found that gender diversity was correlated with increases in sales revenue and the number of customers. A third study, of 180 companies across the Atlantic, found that companies in the top quartile of board diversity had returns on equity that were 53% higher, on average, than the returns for those in the bottom quartile; with earning 14% higher for companies in the top quartile, compared with those in the bottom quartile.

The Diversity Paradox by B-Team and BCG

So while the advantages correlate well with improved profitability, something is holding back companies from making what is a competitive move – that also improves social well-being. To get to the core of the issue, B-Team, in collaboration with Boston Consulting Group (BCG), recently released the “The Diversity Paradox” report in which it identified places where things are going awry. The researchers note particularly that companies often take a myopic approach to diversity issues, which in the long run can harm not only minorities but also create an unpalatable business environment. Ways in which diversity programmes can go wrong include:

4 ways in which diversity programmes can go wrong

Treating Diversity as an HR or Isolated Function - Diversity efforts must be contextual and rooted in a company’s systems and culture, which necessitates a cross-functional approach. 

Defining Diversity Narrowly - A simplistic definition of diversity leaves majority and minority groups feeling pitted against one another, as they wonder whether the next promotion will be based on merit or identity.

Ignoring the Human Element of Diversity - Inviting difference is asking people to be vulnerable to an alternative view. By approaching diversity as a checklist, companies will not be able to overcome the emotional, irrational, and tribal reactions to valuing diversity.

Permitting an Inhospitable Environment - Another responsibility commonly placed on minority groups is to “fit in.” At worst, workplaces that demand assimilation see high turnover, as minorities quickly leave for roles in more pleasant cultures.

Reframing diversity
One aspect of the research is that by having a too narrow approach to understanding the phenomenon of diversity, companies come to treat it as a narrow policy issue rather than a broader cultural issue. To gain a better grip on the phenomenon, so that companies can start the process of changing their culture into one where differences are encouraged as a source of innovation and value, the authors develop a “diversity wheel”. This wheel maps visible core structural diversity, less visible core diversity and secondary forms of difference.

Diversity attributes

Visible core attributes are generally outside the individual’s control; these are things like physical gender, age, capacities. The less visible core attributes point out cultural and religious diversity into which individuals are general inculcated. While the secondary layer is primarily related to the path that we follow in our development toward the commitments we make about the meaning of human or individual existence.  According to the report, to create an environment where differences in core and secondary expression are meaningfully taken up within a business, companies need to develop cultures and business functions that minimise the possibility of treating an individual differently as a result of a more visible core dimension.

While conflict as a result from clashing secondary values is to be expected and a healthy part of human engagement, for businesses to flourish four core values will need to pervade the business culture. According to the researchers, these values turn conflict and divergence in opinion from being something toxic into being something that adds value. The core business cultural values are:

Core business cultural values

Cooperation - Sharing knowledge to build personal and organisational success.

Individual Accountability - Monitoring individual behaviour to foster a positive work climate for all.

Inclusion - Ensuring every member of the team and organisation is a welcomed and contributing member.

Respect - Treating others with dignity and consideration.

“Ultimately, cultivating diversity is the collective responsibility of leadership. Companies that invite employees to be different together and coach them to thrive when surrounded and challenged by different views can fundamentally change the workplace—for the benefit of all,” concludes the report.