Opinion: Diverse companies earn higher profits ({{contentCtrl.commentsTotal}})

Riho Pihelpuu
Riho Pihelpuu Source: Private collection

Diversity does not have to be an end goal, but rather a leadership tool, a constant process that helps to achieve and support a more efficient work culture. For the diversity tool to really work and bring useful results, the leaders of a company must actually believe in it, Riho Pihelpuu writes.

The label of diversity is most often applied to the topics of gender and sexuality and while both belong under the umbrella of diversity, they form only a part of this much larger subject. Diversity in its broadest definition is all around us, all the time. It is such a deeply interwoven part of our life that we usually do not think about until diversity has been replaced with uniformity. For example, if the only books you could buy in bookstores were 100-page books with brown covers on the subject of love and work.

In our out-of-office lives, diversity is not rare. The rare thing to see is uniformity, which limits curiosity, innovation and creativity. The same applies to nature where biological diversity is much better than uniformity. Not just for one bug or shrub, but for the whole ecosystem, which in turn affects the world at a larger scale.

Diversity in entrepreneurship means creating an organization where the young and old, men and women, mothers and fathers, people of different nationalities and races, faiths and beliefs are all working towards the same goals. While this may sound logical and it is the way things are done in many companies, we can oftentimes still see how certain different traditions are rooted so deeply in the realm of business that they may start to impede innovation.

What about diversity in the workplace?

Once upon a time, it was common to think that having the same kinds of people doing the same kind of finely standardized and unified work for the same goal will result in success rather than defeat. Today, we know that various studies conducted over the years have all come to the same conclusion – diversity and supporting diversity are beneficial to business, regardless of the field a company operates in or the size of the organization. For example, in a study conducted by Boston Consulting Group two years ago, 1,700 companies in eight countries were observed and the results showed that the more diverse the leaders of a company, the more innovation there was and, subsequently, the higher their profits. On average, the difference is 19 percent in favor of companies with a diverse culture. The Global Millennial Survey 2020 study published by Deloitte this year involved 27,500 working-age people and concluded that supporting diversity in the workplace significantly increases employee loyalty.

Research also shows that companies who support diversity are substantially quicker in adapting to changes in the market. Considering the current economic dynamics, being able to react to changes quickly is an extremely important aspect of a company's growth and if the reaction time could be sped up even more by "merely" changing a company's culture, then it would be clearly detrimental to ignore this opportunity.

At the same time, across all these studies, we must also keep in mind that diversity does not mean that we should forget our own values and traditions. Diversity is also supported by us using our background, traditions and beliefs to create and run Estonian companies where open minds and an open culture dominate.

But even if we set aside all the research, then we can still come to the same conclusion if we just think rationally – if different cultures, races and traditions, different ways of thinking and different approaches, different preferences, different ages and genders, different experiences and all kinds of other different characteristics come together, the end result is a team that approaches problems from different angles, which is key to creating the most optimal solutions that take into consideration a client's different needs and nuances. This is where the kind of innovation happens that does not only affect a company's wallet and employee incomes, but society at large. Exactly how it is in nature, except that in the case of nature, no one even thinks about questioning diversity.

How comfortable should we be?

I also understand why many entrepreneurs and employees are resentful or fearful of diversity and supporting diversity. I believe that the main cause behind it is their experience up until now or in other words, their habits, their comfort zone, societal norms, but also a fear of the unknown – working together with people who act the same, look the same and have the same way of working definitely seems more convenient, easier and safer. Having to take other people into consideration and change your behavior because of that means having to step out of your comfort zone and make an effort. Unfortunately, preferring people similar to us results in the creation of similar solutions and a lack of innovation. Startups understand this, which is why they have been able to create a lot of very useful innovative solutions very fast with their diverse teams.

Based on my experience in leading ADM Group, I know that diversity is not just another empty performance indicator that obstructs running a company every day. In fact, the opposite is true – diversity in the workplace is a key factor in increasing profits and as such, it should be something that every entrepreneur focuses on. If 20 years ago, cafés and bars would put out colorful eye-catching signs to let people know that they offered free Wi-Fi, then today, access to wireless internet has become a human right. Right now, we also need to show strong public support for diversity so that it would become a standard in as many companies as possible as well as a so-called hygiene level marker that shows what potential employees expect of their future employers.

At the same time, diversity does not have to be an end goal, but rather a leadership tool a.k.a a constant process that helps to achieve and support a more efficient work culture. For the diversity tool to really work and bring useful results, the leaders of a company must actually believe in it as they form the face of their company with their attitudes and with how they set an example.

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Editor: Marcus Turovski

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