What is workplace diversity and why it matters

What is the definition of workplace diversity?

The term ‘workplace diversity’ typically describes the presence of workers from different demographic groups throughout an organisation or in a particular working environment.

Diversity can relate to distinct types of personal characteristics, including gender, religion, race, age, ethnicity, sexual orientation, and education. And diversity can also be intersectional. For example, a person can be black, female and have a university education.

The Cambridge Dictionary definition adds that diversity also includes different ideas, perspectives and opinions being represented in the workplace.

Common types of diversity in the workplace

• Race
• Ethnicity
• Gender
• Age
• Sexual orientation
• Physical abilities and disabilities
• Neurodiversity
• Religion
• Political beliefs
• Education
• Socioeconomic background
• Geographical orientation
• Language
• Culture
• Accents

Why does workplace diversity matter?

A lack of diversity hurts businesses, and this has led many employers to ramp up their investments in DE&I. According to the Society of Human Resource Management, diversity-department budgets at Fortune 1000 companies average around $1.5 million per year.

Between 2015 and 2020, the number of “head of diversity” jobs has more than doubled, “director of diversity” titles increased by 75%, and “chief diversity officer” rose by 68% worldwide.

And this is supported by anti-discrimination laws – such as the Equality Act 2010 in the UK, the European Union’s Equality Framework Directive 2000/78/EC and Title VII of the Civil Rights Act in America - which aim to combat discrimination in the workplace.

Workplace discrimination in the UK and Europe

Workplace discrimination in the US and Canada

Benefits of diversity in the workplace

Diverse businesses outperform

Companies in the top quartile for gender diversity are 21% more likely to deliver above-average profits than those in the bottom quartile. Those in the top quartile for ethnic diversity are 33% more likely to deliver above-average profits than the lowest quartile.

Inclusive companies are twice as likely to meet or exceed financial targets, three times as likely to be high performing, six times more likely to be innovative, and eight times more likely to achieve better business outcomes.

Diverse companies are more innovative

Across 1,700 companies in nine countries, those companies with more diverse management teams have 19% higher revenues from innovation, with EBIT margins 9% higher than below-average companies.

In a study of 5,000 board members across 60 countries, those boards with greater gender diversity were more likely to prioritise innovation.

Companies with above-average diversity also produce more revenue from innovation (45% of their total) than those with below-average diversity (26%).

Inclusive companies are happier companies

Employees in highly inclusive companies are four times more likely to report high wellbeing, compared to those in less inclusive workplaces.

Employees in inclusive companies are also more likely to trust one another and be engaged in their work.

Diverse teams are better problem solvers

Cognitively diverse teams solve problems faster than teams of cognitively similar people.

Research shows workplaces with more homogeneous cultures experience stifled cognitive diversity in groups because individuals feel under pressure to conform and are less likely to offer contrasting arguments in the discussion.”

Examples of workplace diversity in action

1. Diverse leadership teams see people from various cultures, ethnicities, genders and more combine their unique individual experiences to unearth new opportunities and direct their company to a more profitable future.

2. Opening recruitment to a wider pool of candidates and actively looking for people from unconventional backgrounds – from military programmes to providing opportunities for people who have served time in prison.

3. Working exclusively with vendors, suppliers, clients, and investors who prioritise diversity, and have a strong track record of empowering people from all backgrounds and demographics.

4. Tailoring company-run activities and operations to meet the diverse needs of employees – from implementing gender-neutral language in communications to offering re-onboarding programmes for parents returning to the office from parental leave.

But diversity is pointless without inclusion

A survey of black professionals in the UK tech industry found that less than a third felt their company's DEI initiatives were effective. In the legal profession the figure was as low as 14.1%.

Diversity and inclusion are often used interchangeably, and that’s wrong, as representation is just one piece of the puzzle.

Diversity is easy to measure; organisations can fill their leadership ranks with people from different races, ethnicities, and genders, but if those individuals feel tolerated rather than truly valued, it quickly becomes tokenism.

Eventually, they will grow frustrated and alienated, and that is why many people from minority backgrounds leave the corporate world.

Instead, leaders must marry diversity with inclusion by creating belonging and an equitable environment for all employees.

Unlike diversity initiatives though, inclusion is harder to implement and measure, but is a far greater indicator of the strength of an organisation’s unity and culture.

Prof. Dan Ariely interviewed female employees from listed companies and asked them if they felt equal and appreciated. The companies where women, from all levels, felt most equal and appreciated performed on average 5.4% a year better than the S&P 500, he found.

How to create a diverse, equitable and inclusive workplace

Value variety: Difference is infinite, but not all differences are equal.

As a leader, encourage your whole team to acknowledge their own advantages and disadvantages based on their personal characteristics and background, and how they can use their advantages to help others who are less fortunate.

Step up: Create an environment where there are no angels or villains.

Leaders must make it clear that all employees are responsible for building allyship and belonging, as well as standing up for colleagues when they witness discrimination and exclusion at work.

Judge wisely: Spot the tricks our minds play and outwit them.

Rather than trying to eradicate biases, leaders should focus on improving the team’s judgement. Judgement is a skill that most employees recognise as important and continually improving. Therefore, by creating inclusive workplace habits and nudges, leaders can nurture colleagues to make more inclusive decisions and refine a key skill that will progress their careers.

Forbid & forgive: Appreciate the difference between misbehave and misstep.

Inclusion takes time to get right and is an ongoing journey for everyone in the workforce. Therefore, managers need to develop an objective and transparent framework for distinguishing between an unfortunate mistake vs intentionally malicious behaviour, and create appropriate punishments that reflect both. Such clarity will give your employees confidence that inclusion is a priority.

Together, these four cornerstones generate sustained inclusion that enables everyone to thrive.

Looking for more advice?

Read our free DE&I whitepaper and learn the scientifically proven approach to corporate diversity and inclusion.