Minority Interests

Is There A Business Case For Diversity?

August 17, 2014 Comments Off

In the first of a four part series we will explore what may be the biggest challenge that any organisation can experience when it comes to managing diversity in the workplace: creating a business case for diversity.

As a former auditor I had free access to the financial records of literally hundreds of organisations from small businesses to large conglomerates. One thing that was abundantly clear from that experience was that private sector organisations exist to make profits. It really didn’t matter what they did on a day-to-day basis as long as they were profitable. Milton Friedman said that the purpose of an organisation is to maximise its returns to its shareholders. This means that every effort is made to keep profits as high as possible, any costs incurred in the business are for the pursuit of this goal. As an accountant, I can assure you that we proactively encouraged the elimination of anything that doesn’t have an observable positive influence on the company profits.

With this in mind it’s very clear to me that for most private sector organisations, one of the best ways to promote diversity is to have a robust business case. Therein lies the problem.

Business Case? What does that even mean?

It’s difficult to know is meant by a business case. I think that a business case creates a well-researched argument about how a suggested proposal can add value to an organisation. With my accountant hat on, value normally means long-term profits but not everyone agrees. In the academic literature sometimes the business case means reputation, sometimes it means team output and sometimes it relates to financial results. In any case, I haven’t found any studies that show that increased diversity consistently increases any of these things and I’m not alone. In 2013, the Government Equalities Office published a report that surveyed the academic literature in the UK and beyond in order to assess the current evidence for the business case for diversity and equality. The report found that firms have reaped business benefits from equality and diversity. However this was not all firms at all times. The authors also found conflicting evidence about the benefits of diversity and no single approach to solving the problem. To add to the confusion, the definition of diversity also varied: some studies discuss gender diversity at board level where others discuss diversity in teams. On this blog when I talk about diversity I generally mean ethnic diversity.

This doesn’t mean there isn’t a business case, it just means that a business case depends on particular circumstances and it may not apply to everyone. There is no single best way to address diversity in the workplace, each organisation has a responsibility to think about what it means to them and why. This means that organisations that are serious about this may need help to address the issues.

Diversity Consultants Need a Business Case

The lack of a business case can undermine the role of diversity consultants or at least the bad ones. Diversity consultants are interested in promoting diversity in the workplace because it’s their job, so they need a business case of some kind. If not, how can they sell their services to a business that is judged on its financial performance? At the very least it limits the scope of the services that they can provide. In all the research and my experiences, the organisations that seem to be able to progress with effective diversity management are those that are committed to a moral case, or a social justice argument. For lasting change a more holistic approach is required that makes diversity, equality and inclusion strategic imperatives. The business case may not be enough but understanding the values of an organisation and how these values play out in the workplace is crucial.

There are a growing number of organisations who are starting to think this way and in this series we will review a number of alternative approaches to the business case for diversity and what this means for organisations.

Does your organisation have a business case for diversity? I’m looking forward to hearing your thoughts.

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