A frequently asked and important question is:

“What is the business case for diversity?”

While it can be difficult to precisely measure the impact of many human resource related initiatives, it is not hard to conclude that an organization that is intentionally inclusive to a diverse employee workforce and customer base will gain a competitive advantage. This is certainly true given these important demographic and socio-cultural trends:

• The significant increase of women in the workplace, at all levels, and the resultant increase in dual career couples.
  
• Immigration trends and competitive trends bring more immigrants into the U.S., both as customers and employees.
  
• More People of Color in the workplace, at all levels.
  
• More visible and prosperous social identity groups, such as Asians, African-Americans, Hispanics/Latinos and Gays and Lesbians.
  
• Increased global competitiveness and globalization.

It would be short-sighted to assume that organizations and leaders naturally and easily adapt to these changes – Or that positive and inclusive intent translates into effective behavior and a competitive advantage. Focused and intention building of competence is required to gain the synergies and competitive advantage of diversity

More specifically, the following are key aspects of the business case for diversity and inclusion:

Growth is larger in markets described as diverse by race, culture, nationality and language.

• From 2002 the growth in the buying power in the US of whites has increased by about 20%, while for Blacks it is almost 30%, Asians over 50%, Hispanics over 75%
  
• The Hispanic Business Stock Index measures companies that focus on the Latino/Hispanic markets. This group has grown faster (2002) than the overall stock market and declined less then the overall stock market in 2002.
  
• Between 1990 and 2007 Buying Power for the white market should increase by 112%, Latinos 315%, Asians 287%, African Americans 170% ( Selig Center for Economic Growth, University of Georgia). Chart below graphs this statistic.
  
  

Turnover is very costly, especially when diversity is a factor.

• Ernst & Young Office of Workplace Retention estimates that it costs 1.2 Million to lose 10 professionals

• Deloitte and Touche found that turnover cause by a corporate culture unpleasant to minorities was costing them over 5 million dollars for every 1% of turnover.

Diversity increases sales and enhances productivity.

• One major bank found that “by increasing the diversity of its counter staff it attracted a more diverse range of customers as well as increasing its overall sales…” (John Sullivan in “Diversity: The Compelling Business Case.”)

• A study by the American Management Association found that decisions made by executive teams with a broader and more diverse background increased sales.

Diverse teams have the potential to be more effective than homogenous teams.

• Harvard University Professors Robin Ely and Dave Thomas studied 450 offices of a large organization and found that there were measurable performance benefits when racially diverse work groups chose to learn from each other’s experiences rather than ignore them (Martha Lagace http://hbswk.hbs.edu/item/4207.html)

• "Heterogeneity—a mixture of genders, ethnic backgrounds, and ages in senior management teams—consistently correlates with superior corporate performance." (Management Review, September 1998, p. 37)

When diversity is not attended to there is significant financial risk.

• Discrimination lawsuits can result in damage awards in the millions of dollars and incalculable loss of market share.

Globalization, Outsourcing and Offshoring greatly increase the need for cross-cultural competency.

• Gartner Inc. recently estimated that U.S. companies will spend 50 Billion to outsource IT functions in 2007.

AMR Research, Inc in Boston found that businesses who are outsourcing functions, were more effective when they gave greater weight to issues of cultural fit.