While most business leaders now believe having a diverse and inclusive culture is critical to performance, they don’t always know how to achieve that goal.
Deloitte Insights has published a report The Diversity and Inclusion Revolution: Eight Powerful Truths which can help turn aspirations into reality. The report looks at Qantas as a case study for how diversity and inclusion can be a transformative force in business. It looks at the transformation achieved by Qantas CEO Alan Joyce, to turn around the business following major financial challenges in 2013 to delivering a record profit of AUD$850 million in 2017.
The spectacular turnaround reflects an underlying condition: “We have a very diverse environment and a very inclusive culture.”9 Those characteristics, according to Joyce, “got us through the tough times10 . . . diversity generated better strategy, better risk management, better debates, [and] better outcomes.”11
According to Deloitte’s 2017 Global Human Capital Trends report, two-thirds of the 10,000 leaders surveyed cited diversity and inclusion as “important” or “very important” to business.12 Despite this, overt attributions such as Joyce’s are scarce. Rarely does diversity and inclusion feature so centrally in a CEO’s story of success. The challenge lies in translating a nod of the head to the value of diversity and inclusion into impactful actions—and that necessitates a courageous conversation about approaches to date.
So what are the eight powerful truths? We summarise them below.
1. Diversity of thinking is the new frontier
“The most innovative company must also be the most diverse,” says Apple Inc.14 “We take a holistic view of diversity that looks beyond usual measurements. A view that includes the varied perspectives of our employees as well as app developers, suppliers, and anyone who aspires to a future in tech. Because we know new ideas come from diverse ways of seeing things.”15
Apple’s insight lines up with Joyce’s. It’s about looking to the ultimate outcome—diversity of thinking. The goal is to create workplaces that leverage diversity of thinking, not just ethnic and cultural diversity. Why? Because research shows that diversity of thinking is a wellspring of creativity, enhancing innovation by about 20 percent. It also enables groups to spot risks, reducing these by up to 30 percent. And it smooths the implementation of decisions by creating buy-in and trust (figure 1).16
2. Diversity without inclusion is not enough
Deloitte’s research identifies a very basic formula: Diversity + inclusion = better business outcomes. Simply put, diversity without inclusion is worth less than when the two are combined
3. Inclusive leaders cast a long shadow
Deloitte’s research shows that the behaviors of leaders (be they senior executives or managers) can drive up to 70 percentage points of difference between the proportion of employees who feel highly included and the proportion of those who do not.22 This effect is even stronger for minority group members.23 Furthermore, an increase in individuals’ feelings of inclusion translates into an increase in perceived team performance (+17 percent), decision-making quality (+20 percent), and collaboration (+29 percent) (figure 4).24 Pause for a second to let those numbers sink in. This phenomenal difference reflects the power of a leader’s shadow.
4. Middle managers matter
In the context of diversity and inclusion, middle management is a historically under-serviced group. While many executives have been afforded time to learn, reflect, and debate, mid-level managers are often given directives. A change-management process that leaves questions unaddressed results in managers feeling unable to move forward.
5. Rewire the system to rewire behaviors
Training is the most popular solution to increase workforce diversity. Research shows that nearly one-half of the midsize companies in the United States mandate diversity training, as do nearly all the Fortune500.29 However, when it comes to behavior change, training is often only a scene-setter. The more complete story is that, to change people’s behavior organizations need to adjust the system.
Why? First, biases can only be reduced rather than completely eliminated, and it is difficult to control biases that are unconscious. Second, biases can be embedded into the system of work itself, causing suboptimal diversity outcomes. Strategies to rewire the system make it easier to tackle biases and create a more comprehensive and sustainable solution.30
6. Tangible goals make ambitions real
When it comes to diversity and inclusion, nothing ignites greater debate than goals, targets, and quotas.33On the one hand, the setting of specific diversity goals has been found to be one of the most effective methods for increasing the representation of women and other minority groups. On the other hand, contentious arguments about targets vs. quotas, accusations of reverse discrimination, and fears of incentivizing the wrong behaviors have arisen around goal-setting efforts.
Deloitte’s view is that tangible goals are important. (By goals, they mean measurable objectives set by an organization at its own discretion,34 as distinct from dogmatic quotas.) However, their impact is tied to four conditions: communication, coverage, accountability, and reinforcement.
There has been an overemphasis on diversity, and an underemphasis on inclusion, as well as on the broader ecosystem of accountability, recognition, and rewards. The truth is, without appropriately crafted tangible goals, ambitions are merely ephemeral wishes.
7. Match the inside and the outside
In 2015, Samsung launched its “Hearing Hands” commercial. Built around a day in the life of Muharrem, a hearing-impaired man, it revealed a new world in which Muharrem’s neighbors engage with him for the first time in sign language, allowing him to feel much more connected to his community.42 In 2017, TV2 Denmark launched its “All that we share”43 campaign with a commercial that starts with the physical separation of people into line-drawn boxes based on stereotypical differences, and ends with a single larger group who now understands their shared points of commonality. That same year, Nike ran a commercial entitled “Equality,” which promoted the message that if diverse athletes can be equal on the playing field, they “can be equal anywhere” because “worth outshines color.”44
Each of these commercials went viral: 19 million views for Samsung, 4.5 million views for TV2 Denmark, and 5 million views for Nike. The question of why they were like cups of water spilled on dry earth underscores two compelling points.
First, customer diversity and inclusion have often been largely overlooked, with the lion’s share of attention devoted to employee diversity. And when customer segmentation is considered, it is more in terms of a customer’s financial profile than who customers are as people. As a consequence, services and products often reflect a stereotypical view of the customer. Second, customers are becoming, and starting to lean into, a sense of empowerment; they communicate what they stand for with their wallets and social media shares, and messages of equality have a pervasive appeal. Deloitte’s 2017 research found that up to one-half of customers had been influenced to make a purchasing decision in the past 12 months because of an organization’s support for equality—whether around issues of marriage equality, gender, disability, age, or culture. The purchasers did not come only from the groups directly targeted by the message (such as the hearing-impaired in the Samsung campaign); they included anyone who felt that the message of equality had spoken to their personal values.
The truth is that while many organizations have prioritized workplace diversity over customer diversity, both are equally important to business success. Moreover, customers are often more ready to support diversity and inclusion than organizations perhaps realize. But a word of caution: This is not about vacuous marketing. Commercials that lack authenticity will be shamed by the very customers they seek to attract.
8. Perform a culture reset, not a tick-the-box program
The final truth is the most sweeping and underpins all seven truths above: Most organizations will need to transform their cultures to become fully inclusive. While an overwhelming majority of organizations (71 percent) aspire to have an “inclusive” culture in the future, survey results have found that actual maturity levels are very low.48
What prevents the translation of these intentions into meaningful progress? Our experience suggests that organizations frequently underestimate the depth of the change required, adopting a compliance-oriented or programmatic approach to diversity and inclusion.49 For most organizations, change requires a culture reset.
Workplaces have emerged as a venue in which these disparate pressures have manifested and become much discussed. Caught in the middle, workplace leaders around the world tell us that they feel ill-equipped to navigate these swirling waters.
So what does the path to an inclusive culture look like?
Deloitte research identifies four levels of diversity and inclusion maturity: (1) compliance, (2) programmatic, (3) leader-led, and (4) integrated (figure 8).51 Level 1 is predicated on the belief that diversity is a problem to be managed, with actions generally a consequence of external mandates or undertaken as a response to complaints. At level 2, the value of diversity starts to be recognized, with this stage often characterized by grassroots initiatives (such as employee resource groups), a calendar of events, and other HR-led activities (such as mentoring or unconscious bias training). At levels 1 and 2, progress beyond awareness-raising is typically limited.
More substantial cultural change begins at level 3—a true transition point—when the CEO and other influential business leaders step up, challenge the status quo, and address barriers to inclusion. By role-modeling inclusive behaviors and aligning and adapting organizational systems (for example, by tying rewards and recognition to inclusive behavior), they create the conditions that influence employee behaviors and mind-sets. Communications are transparent, visible, and reinforced. And at level 4, diversity and inclusion are fully integrated into employee and other business processes such as innovation, customer experience, and workplace design.
The truth is, significant change will not happen until organizations go beyond tick-the-box programs and invest the appropriate level of effort and resourcing in creating diverse and inclusive cultures.