Individuals, organizations, teams, and cultures benefit from diversity and inclusion, according to various surveys. The details and results discussed here are drawn from a broad body of literature on the advantages of diversity and inclusion in the workplace, with a focus on recent studies.

These results are divided into four categories, each of which has a direct effect on diversity and inclusion: expertise, creativity and group success, credibility and accountability, and financial performance.

Expertise

Recruiting and Retaining Talent is Easier in Diverse Organizations 1

Employee turnover is smaller in companies with greater levels of gender equity and HR programs and activities that concentrate on gender diversity. 2

When women hold a large share of top management positions, they are more likely to show interest in the company and consider it to be equal.3

Employees of color, in particular, need to work in a welcoming atmosphere. Skilled Canadians of color who expect or deliberately brace for future racism report a strong intent to leave their jobs, varying from 50 to 69 percent.4

Employee’s motivation and satisfaction were influenced by employee perceptions of equality.5

– Feelings of inclusion are responsible for 35% of an employee’s emotional interest in their job and 20% of their motivation to remain at their business.6

Workplaces that are inclusive maximize talent and productivity. 7

Employee job satisfaction and dedication are expected to improve in organizations with good “diversity climates” (i.e., supportive work environments marked by the recognition of individual backgrounds and the introduction of policies to advance underrepresented groups).8

Interpersonal violence and discrimination are often lower in environments with a high diversity climate. 9

In inclusive working environments, women are less discriminated against and sexually abused.10

Employees mention becoming more trusting and engaged at work as they feel included as well as that their boss values diversity.11

 – Absenteeism is reduced by almost one day a year as employees’ expectations of participation change by 10%. 12

Creativity and group success

Diverse teams are important for innovation to occur.13

Companies who create inclusive workplace environments and practices are more likely to report: 14

Increased imagination, ingenuity, and transparency by 59.1%.

Better market desire and demand estimation by 37.9%.

Diverse executive teams are creative, and they are rewarded for it. According to a new report, businesses with higher management diversity received 38 percent more income from innovative products and services over the course of three years than companies with lower diversity. 15

• Managerial diversity in terms of ethnicity, country of origin, career path, and business history is all strongly linked to innovation.16

Diversity strengthens decision-making by reducing groupthink.17

For better team decision-making, diversity is important. 18 Diverse teams may exploit a larger range of viewpoints and are more likely to consider information thoroughly and correctly, whereas homogeneous groups can be vulnerable to groupthink. 19

• Teams from multiple backgrounds or thought patterns (cognitive diversity) solve challenges quicker 20 and create more and higher-quality intellectual property, such as patents.21
• When compared to homogeneous teams, mixed-gender teams can better handle group conflict and maximize creativity among team members.22

Team Success Needs Inclusion 23

Increased female presence on sales teams, among other things, leads to increased team success through improved relational skills and corporate citizenship habits. When integration is part of the corporate culture, though, teams are more likely to enjoy the effects of diversity on team success.24

When workers feel respected, trusted, authentic, and mentally secure at work, they experience inclusion.25

Overall, inclusive experiences account for:26

•  49% of team problem-solving.
• Employee creativity accounts for 18% of the total.

Diversity mindsets, described as a mutual awareness of a team’s diversity and its beneficial contributions to group success, will help organizations optimize the benefits of diversity in teams. 27

Cultural intelligence, sensitivity to diverse ideas and experiences, inclusive experiences, and work environments that highlight the importance and promise of diversity are all key characteristics of effective diversity mindsets. 28

Credibility and Accountability

Inclusion Improves the Reputation of a Company 29

Businesses of multicultural environments and activities are 57.8% more likely to boost their reputations.30

Consumers are more likely to purchase or consider buying a product after seeing a dynamic or multicultural commercial.31

Employees who see their workplace as inclusive are more likely to think their company is ethical.32

Companies acknowledge that diversification leads to collective goodwill through economic downturns. Despite the fact that other Corporate Social Responsibility (CSR) practices declined during the Great Recession of 2008, a study of companies showed that interest in diversity continued to rise. 33

Fraud is less popular on mixed-gender corporate boards.34

Gender equity on corporate boards is related to: 

• Including women on a board of directors will increase investment performance and deter costly overinvestment decisions, 35 as well as minimize male CEOs’ overconfidence.36
• Increased board member involvement, as demonstrated by activities such as seeking more input or updates on issues being addressed and following up on relevant assignments during board meetings.37
• There will be less financial reporting errors and controversies over accounting practices like fraud 38 and earnings manipulation.39
• Investing in higher-quality audits is a wise decision. 40

Companies with gender-diverse executive teams had fewer lawsuits relating to activities. 41

Diversity in the boardroom improves environmental, social, and governance (ESG) efficiency.42

Corporate boards with a varied range of perspectives and experiences are ideally able to consider the concerns and desires of multiple stakeholder groups.43

Gender-diverse boards do well in ESG practices than non-diverse boards.44

• Women are more likely than men to see global problems such as civil rights, climate change, and income inequality as key to business policy.45
• Gender-diverse boards are often more likely to implement innovative corporate management strategies including work-life support systems, which boost employee retention.46

Financial Performance

Many reports have advised firms to “go outside the business case for diversity.” The business case arose from a desire to demonstrate to stakeholders the business benefits of diversity, including the financial benefits. The connection between financial incentives and diversity, on the other hand, is difficult to prove because analysis can only determine association, not causation. Furthermore, despite the fact that McKinsey, Credit Suisse, and others have reported the business case for diversity for over two decades, it never seems to be enough. Such people want to demand more evidence that gender equity is “healthy for business,” but they never call for the business case showing that the status quo or all-male executive teams and boards are good for business. 

According to recent studies, leaders are more likely to behave on social problems when they are viewed in spiritual terms, which fit with the organization’s principles and mission, rather than in economic terms. 47

Rather than attempting to find the elusive “evidence” that diversity improves company success, businesses should treat diversity as a talent challenge and understand that in order to be a market leader, it is important to tap into the entire talent pool. Companies are losing out on large portions of talent by employing a small pool of workers, so they can concentrate their energies and money on attracting and maintaining diverse staff, as well as building inclusive working environments where everyone has a fair chance to participate and thrive.48

Many studies have found a correlation between diversity and financial health metrics, such as: 49

• Cash flow return on investment
• Earnings Before Interests and Taxes (EBIT) margins
• Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margins
• Gross and net margins
• Internal rate of return
• Investment performance
• Market value
• Operating profit margin
• Return on Assets (ROA)
• Return on Equity (ROE)
• Return on Sales (ROS)
• Revenue
• Sales performance
• Stock returns
• Tobin’s Q

ADDITIONAL RESOURCES

Next Steps

Catalyst, Creating a D&I Strategy: Ask Catalyst Express.

Catalyst, Microlearning: Knowledge Bursts.

Catalyst, Vital Signs.

The New York Times, “From Inclusion to Support: How to Build a Better Workplace,” June 17, 2019.

Frances Taplett, Matt Krentz, Justin Dean, and Gabrielle Novacek, “Diversity Is Just the First Step. Inclusion Comes Next,” The Boston Consulting Group, April 24, 2019.

Research

Catalyst, The Business Case for D&I: Ask Catalyst Express.

Catalyst, Buying Power: Quick Take.

Catalyst, Turnover and Retention: Quick Take.

Catalyst, Webinar Recording: First Steps—The Business Case for Diversity: Is This a Silver Bullet? (2018).

Catalyst, Why Diversity Matters (July 23, 2013).

John M. Amis, Johanna Mair, and Kamal A. Munir, “The Organizational Reproduction of Inequality,” Academy of Management Annals, vol. 14, no. 1 (2020): p. 1-36.

Sundiatu Dixon-Fyle, Kevin Dolan, Vivian Hunt, and Sara Prince, Diversity Wins: How Inclusion Matters (McKinsey & Company, May 19, 2020).

Katherine W. Phillips, “How Diversity Makes Us Smarter,” Scientific American, October 1, 2014.

Sodexo, Sodexo’s Gender Balance Study 2018: Expanded Outcomes Over 5 Years (2019).

Steven Turban, Dan Wu, and Letian (LT) Zhang, “Research: When Gender Diversity Makes Firms More Productive,” Harvard Business Review, February 11, 2019.

1. Juan M. Madera, Linnea Ng, Jane M. Sundermann, and Mikki Hebl, “Top Management Gender Diversity and Organizational Attraction: When and Why It Matters,” Archives of Scientific Psychology, vol. 7, no. 1 (2019): p. 90-101; Cara C. Maurer and Israr Qureshi, “Not Just Good for Her: A Temporal Analysis of the Dynamic Relationship Between Representation of Women and Collective Employee Turnover,” Organization Studies (2019).
2. Cara C. Maurer and Israr Qureshi, “Not Just Good for Her: A Temporal Analysis of the Dynamic Relationship Between Representation of Women and Collective Employee Turnover,” Organization Studies (2019). 
3. Juan M. Madera, Linnea Ng, Jane M. Sundermann, and Mikki Hebl, “Top Management Gender Diversity and Organizational Attraction: When and Why It Matters,” Archives of Scientific Psychology, vol. 7, no. 1 (2019): p. 90-101.
4. Jennifer Thorpe-Moscon, Alixandra Pollack, and Olufemi Olu-Lafe, Empowering Workplaces Combat Emotional Tax for People of Colour in Canada (Catalyst, 2019).
5. Dnika J. Travis, Emily Shaffer, and Jennifer Thorpe-Moscon, Getting Real About Inclusive Leadership: Why Change Starts With You (Catalyst, 2019).
6. Dnika J. Travis, Emily Shaffer, and Jennifer Thorpe-Moscon, Getting Real About Inclusive Leadership: Why Change Starts With You (Catalyst, 2019).
7. International Labour Organization, Women in Business and Management: The Business Case for Change (2019): p. 21.
8. Sean McCallaghan, Leon T.B. Jackson, and Marita M. Heyns, “Examining the Mediating Effect of Diversity Climate on the Relationship Between Destructive Leadership and Employee Attitudes,” Journal of Psychology in Africa, vol. 29, no. 6 (2019): p. 563-569; Elissa L. Perry and Aitong Li, “Diversity Climate in Organizations,” in Oxford Research Encyclopedia of Business and Management (Oxford University Press, 2020).
9. Elissa L. Perry and Aitong Li, “Diversity Climate in Organizations,” in Oxford Research Encyclopedia of Business and Management (Oxford University Press, 2020).
10. Helen H. Yu and David Lee, “Gender and Public Organization: A Quasi-Experimental Examination of Inclusion on Experiencing and Reporting Wrongful Behavior in the Workplace,” Public Personnel Management, vol. 49, no. 1 (2020): p. 3-28.
11. Luu Trong Tuan, Chris Rowley, and Vo Thanh Thao, “Addressing Employee Diversity to Foster Their Work Engagement,” Journal of Business Research, vol. 95 (2019): p. 303-315.
12. Juliet Bourke and Andrea Espedido, “Why Inclusive Leaders Are Good for Organizations, and How to Become One,” Harvard Business Review, March 29, 2019.
13. Rocío Lorenzo, Nicole Voigt, Karin Schetelig, Annika Zawadzki, Isabell M. Welpe, and Prisca Brosi, The Mix That Matters: Innovation Through Diversity (The Boston Consulting Group, 2017).
14. International Labour Organization, Women in Business and Management: The Business Case for Change (2019): p. 21.
15. Rocío Lorenzo, Nicole Voigt, Karin Schetelig, Annika Zawadzki, Isabell M. Welpe, and Prisca Brosi, The Mix That Matters: Innovation Through Diversity (The Boston Consulting Group, 2017).
16. Rocío Lorenzo, Nicole Voigt, Karin Schetelig, Annika Zawadzki, Isabell M. Welpe, and Prisca Brosi, The Mix That Matters: Innovation Through Diversity (The Boston Consulting Group, 2017).
17. Sarah E. Gaither, Evan P. Apfelbaum, Hannah J. Birnbaum, Laura G. Babbitt, and Samuel R. Sommers, “Mere Membership in Racially Diverse Groups Reduces Conformity,” Social Psychology and Personality Science, vol. 9, no. 4 (2018): p. 402-410; Astrid C. Homan, “Dealing with Diversity in Workgroups: Preventing Problems and Promoting Potential,” Social and Personality Psychology Compass, vol. 13, no. 5 (2019).
18. The American Psychological Association defines groupthink as “a strong concurrence-seeking tendency that interferes with effective group decision making. Symptoms include apparent unanimity, illusions of invulnerability and moral correctness, biased perceptions of the outgroup, interpersonal pressure, self-censorship, and defective decision-making strategies. Causes are thought to include group cohesion and isolation, poor leadership, and the stress involved in making decisions.” American Psychological Association, “Groupthink,” APA Dictionary of Psychology (2020); Sarah E. Gaither, Evan P. Apfelbaum, Hannah J. Birnbaum, Laura G. Babbitt, and Samuel R. Sommers, “Mere Membership in Racially Diverse Groups Reduces Conformity,” Social Psychology and Personality Science, vol. 9, no. 4 (2018): p. 402-410.
19. Astrid C. Homan, “Dealing with Diversity in Workgroups: Preventing Problems and Promoting Potential,” Social and Personality Psychology Compass, vol. 13, no. 5 (2019).
20. Alison Reynolds and David Lewis, “Teams Solve Problems Faster When They’re More Cognitively Diverse,” Harvard Business Review (March 30, 2017).
21. Matthew Corritore, Amir Goldberg, and Sameer B. Srivastava, “The New Analytics of Culture,” Harvard Business Review (January-February 2020).
22. Hun Whee Lee, Jin Nam Choi, and Seongsu Kim, “Does Gender Diversity Help Teams Constructively Manage Status Conflict? An Evolutionary Perspective of Status Conflict, Team Psychological Safety, and Team Creativity,” Organizational Behavior and Human Decision Processes, vol. 144 (2018): p. 187-199.
23. Ream A. Shoreibah, Greg W. Marshall, and Jule B. Gassenheimer, “Toward a Framework for Mixed-Gender Selling Teams and the Impact of Increased Female Presence on Team Performance: Thought Development and Propositions,” Industrial Marketing Management, vol. 77 (February 2019): p. 4-12.
24. Ream A. Shoreibah, Greg W. Marshall, and Jule B. Gassenheimer, “Toward a Framework for Mixed-Gender Selling Teams and the Impact of Increased Female Presence on Team Performance: Thought Development and Propositions,” Industrial Marketing Management, vol. 77 (February 2019): p. 4-12.
25. Dnika J. Travis, Emily Shaffer, and Jennifer Thorpe-Moscon, Getting Real About Inclusive Leadership: Why Change Starts With You (Catalyst, 2019).
26. Dnika J. Travis, Emily Shaffer, and Jennifer Thorpe-Moscon, Getting Real About Inclusive Leadership: Why Change Starts With You (Catalyst, 2019).
27. Astrid C. Homan, “Dealing with Diversity in Workgroups: Preventing Problems and Promoting Potential,” Social and Personality Psychology Compass, vol. 13, no. 5 (2019). 
28. Astrid C. Homan, “Dealing with Diversity in Workgroups: Preventing Problems and Promoting Potential,” Social and Personality Psychology Compass, vol. 13, no. 5 (2019).
29. International Labour Organization, Women in Business and Management: The Business Case for Change (2019): p. 21.
30. International Labour Organization, Women in Business and Management: The Business Case for Change (2019): p. 21.
31. Shelley Zalis, “Inclusive Ads Are Affecting Consumer Behavior, According to New Research,” Think with Google, November 2019.
32. Tanja Rabl, María del Carmen Triana, Seo-Young Bryun, and Laura Bosch, “Diversity Management Efforts as an Ethical Responsibility: How Employees’ Perceptions of an Organizational Integration and Learning Approach to Diversity Affect Employee Behavior,” Journal of Business Ethics, vol. 161 (2020): p. 531-550.
33. Benjalux Sakunasingha, Pornsit Jiraporn, and Ali Uyar, “Which CSR Activities Are More Consequential? Evidence from the Great Recession,” Finance Research Letters, vol. 27 (2018): p. 161-168.
34. Aida Sijamic Wahid, “The Effects and the Mechanisms of Board Gender Diversity: Evidence from Financial Manipulation,” Journal of Business Ethics, vol. 159 (2019): p. 705-725.
35. Young Zik Shin, Jeung-Yoon Chang, Keyeongmin Jeon, and Hyunpyo Kim, “Female Directors on the Board and Investment Efficiency: Evidence from Korea,” Asian Business & Management (2019).
36. Jie Chen, Woon Sau Leung, Wei Song, and Marc Georgen, “Research: When Women Are on Boards, Male CEOs Are Less Overconfident,” Harvard Business Review, September 12, 2019; Jie Chen, Woon Sau Leung, Wei Song, and Marc Georgen, “Why Female Board Representation Matters: The Role of Female Directors in Reducing Male CEO Overconfidence,” Journal of Empirical Finance, vol. 52 (2019): p. 70-90.
37. Miriam Schwartz-Ziv, “Gender and Board Activeness: The Role of a Critical Mass,” Journal of Financial and Quantitative Analysis, vol. 52, no. 2 (2017): p. 751-780.
38. Aida Sijamic Wahid, “The Effects and the Mechanisms of Board Gender Diversity: Evidence from Financial Manipulation,” Journal of Business Ethics, vol. 159 (2019): p. 705-725.
39. Yaoyao Fan, Yuxiang Jiang, Xuezhi Zhang, and Yue Zhou, “Women on Boards and Bank Earnings Management: From Zero to Hero,” Journal of Banking & Finance, vol. 107 (2019).
40. Karen M.Y. Lai, Bin Srinidhi, Ferdinand A. Gul, and Judy S.L. Tsui, “Board Gender Diversity, Auditor Fees, and Auditor Choice,” Contemporary Accounting Research, vol. 34, no. 3 (2017): p. 1681-1714.
41. Binay K. Adhikari, Anup Agrawal, and James Malm, “Do Women Managers Keep Firms Out of Trouble? Evidence from Corporate Litigation and Policies,” Journal of Accounting and Economics, vol. 67, no. 1 (2019): p. 202-225.
42. Cristina Banahan and Gabriel Hasson, “Across the Board Improvements: Gender Diversity and ESG Performance,” Harvard Law School Forum on Corporate Governance, September 6, 2018.
43. Cristina Banahan and Gabriel Hasson, “Across the Board Improvements: Gender Diversity and ESG Performance,” Harvard Law School Forum on Corporate Governance, September 6, 2018.
44. Cristina Banahan and Gabriel Hasson, “Across the Board Improvements: Gender Diversity and ESG Performance,” Harvard Law School Forum on Corporate Governance, September 6, 2018.
45. Paula Loop and Paul DeNicola, “You’ve Committed to Increasing Gender Diversity on Your Board. Here’s How to Make It Happen,” Harvard Business Review, February 18, 2019.
46. Steven A. Creek, Kristine M. Kuhn, and Arvin Sahaym, “Board Diversity and Employee Satisfaction: The Mediating Role of Progressive Programs,” Group & Organization Management (2017).
47. David M. Mayer, Madeline Ong, Scott Sonenshein, and Susan J. Ashford, “To Get Companies to Take Action on Social Issues, Emphasize Morals, Not the Business Case,” Harvard Business Review, February 14, 2019.
48. Vijay Eswaran, “The Business Case for Diversity Is Now Overwhelming,” World Economic Forum, April 29, 2019.
49. For a full overview of research on diversity and financial performance, see: Catalyst, Why Diversity and Inclusion Matter: Financial Performance (June 24, 2020).