How a Diverse Workplace Can Drive Innovation (Research-Backed)

Toki Toguri

Co-founder and Customer Success Director for Diverst

Mar 30, 2023

Diversity, equity, and inclusion (DEI) have been hot topics in the business world for years, and for a good reason. Companies that embrace DEI principles not only create a more equitable workplace but also have the potential to drive innovation and increase market growth.

In this post, we will explore how DEI innovation can benefit organizations and share strategies for implementing DEI initiatives that promote creativity, collaboration, and success.

The Power of Inherent and Acquired Diversity in Driving Innovation and Growth

Diversity is a key driver of innovation and growth in organizations of every size. While multiple studies have verified this reality, let’s take a look at a decade of research.

First, a study published in Harvard Business Review has highlighted the importance of diversity in driving innovation and market growth.

The study examined two types of diversity: inherent diversity and acquired diversity. The study found that companies with both types of diversity outperform others.

  • Inherent diversity includes traits that an individual is born with, such as gender, ethnicity, and sexual orientation.
  • Acquired diversity, on the other hand, involves traits that are gained from experience, such as work experience in another country or military experience.

Companies whose leaders exhibit at least three inherent and three acquired diversity traits are said to have two-dimensional (2D) diversity.

According to the research, companies with 2D diversity are 45% likelier to report that their firm’s market share grew over the previous year and 70% likelier to report that the organization captured a new market. By creating an environment where diverse voices are heard, companies with 2D diversity unlock innovation and drive growth.

The second study comes to us from McKinsey & Company. In a 2020 study on why diversity matters in the workplace, McKinsey found that gender and ethnic diversity among leadership teams was associated with above-average profitability. In fact, companies were 25% more likely to outperform their peers if they had gender diversity in the C-suite and 36% more likely to show profit outperformance if their C-suite was more ethnically diverse.

The takeaway is clear here. In 2013, diversity helped companies innovate and succeed. By 2019, when McKinsey ran its study, that innovation reflected in better financial performance.

Inherent Diversity and Understanding the User

Inherent diversity is also crucial for understanding the needs of under-leveraged markets. When at least one member of a team has traits in common with the end user, the entire team better understands that user. The HBR research we mentioned earlier found that when a team member shares a client’s ethnicity, the team is 152% likelier to understand that client.

However, the research also found that:

  • 78% of respondents said their company lacks 2D diversity in leadership.
  • This absence creates a tremendous opportunity cost for organizations, as employees with inherent diversity traits are less likely to have their ideas backed.
  • Women are 20% less likely than men to have their ideas backed
  • People of color and LGBT employees were 24% and 21%, respectively, less likely to have an idea backed

Do these stats trouble you? They should. They reflect the often harsh reality that exists for people from historically marginalized groups in the workplace. Innovation is often tamped down because people who are not part of the majority group or the majority culture get ignored. Yet it’s proven that when their ideas are valued and brought to the table, companies thrive.

Acquired Diversity and Unlocking Innovation

Acquired diversity is equally important for creating a culture in which all employees feel free to contribute ideas. HBR identified six behaviors that unlock innovation: ensuring everyone is heard, creating the conditions to propose novel ideas, giving team members decision-making authority, sharing credit for success, giving actionable feedback, and implementing feedback from the team.

Leaders who encourage diverse voices are nearly twice as likely to “unleash value-driving insights.” Additionally, employees who are involved in a “speak up” culture are 3.5 times as likely to contribute their full innovative potential.

The research demonstrates the importance of inherent and acquired diversity in driving innovation and growth. Companies that embrace 2D diversity and create a culture in which all voices are heard are more likely to outperform their peers. By doing so, they not only benefit their employees but also make a strong business case for diversity.

Top 3 Strategies to Create a Workplace that Fosters Acquired Diversity

Spending time talking about theory and data is great, but eventually, action needs to happen. If your organization wants to take the next step, here are 3 ways you can create a more diverse workplace that leads to innovation.

1. Change Your Hiring Process

Organizations rise and fall on the strength of their hiring process. To be fair, we’ve come a long way in removing biases from the hiring process…to a point. Many of the systems now put in place used to automate hiring often have inherent biases that remove non-white candidates from the hiring pool.

In fact, Spiceworks wrote about the problem of AI bias in HR software in 2021 (notably before the current AI craze). The company’s post begins:

“Because AI learns from the data sets that it is given, there is always a risk of bias setting in. Bias in these data sets is likely to perpetuate the lack of diversity in global workplaces.”

That’s a scary prospect. The very tools we think we can rely on only extend the biases we already have if not properly countered.

So, how do we counter that in the hiring process?

  • Try partnering with organizations that focus on diversity, such as minority professional associations. Use these organizations to source diverse talent.
  • Reevaluate the job requirements. Instead of only hiring from certain schools or requiring certain degrees, focus more on skills or potential.

The organization Opportunity @ Work is a good place to explore to understand why that second point is so salient. The organization champions what are known as STARS, or individuals who are Skilled Through Alternative Routes. These individuals are often left out or ignored in the hiring process and, consequently, are often from minority backgrounds.

By dropping traditional and historically biased hiring practices, you stand a much better chance at capturing high-quality talent and innovative who would otherwise go unseen.

2. Change Your Engagement Process

Employee engagement is somewhat of a cause célèbre right now. Employers and employees are in an epic battle between where both sides want something vastly different. The pandemic caused employees to rethink what they wanted out of work. As a result, most people want to:

  • Work from home
  • Form closer relationships with colleagues
  • Upskill or reskill
  • Form valuable and impactful networks
  • Clarify their career path

Many companies started making these part of their offering to employees during the pandemic. And during the height of the Great Resignation that followed, companies were digging into these strategies to increase retention and attract new hires. Now, however, as the economy turns south, companies are trying to backtrack. That’s a terrible idea, not just because the labor market is still historically tight, but because it tends to hurt minority workers the hardest.

One survey, for example, found that work from home vastly improved the quality of life for black workers. And McKinsey & Company discovered a lack of learning opportunities was a “primary driver of quitting” during the Great Resignation.

Turnover remains one of the most expensive HR problems for businesses. Small investments can reap huge rewards. In this case, those small investments should include a better engagement strategy.

Consider some of the following options for employee engagement:

  • Offer a longer onboarding period paired
  • Pair new hires with a workplace buddy or onboarding mentor
  • Create and sustain employee resource groups (ERGs) and support volunteers leading these groups with financial incentives
  • Host employee get-togethers, even in a virtual environment
  • Create networking events
  • Invest in learning resources and allow employees to dedicate some of their work time to skill development

None of these things are going to help you much if you’re in the dark, though. Invest in technology that allows you to track engagement activity and success data. And make sure that software effectively supports leaders who volunteer their time to make it work.

Organizations can create deliver on acquired diversity goals and create a more innovative work culture by implementing programs that connect employees to authentic and safe relationships. In doing so, they also attract new hires eager to become part of that positive and engaging culture and retain high-value employees, especially those from minority groups.

3. Change Your Promotion Process

We get why promotion is a difficult decision for companies. Promoting workers always comes at a risk, often a bigger one than hiring junior-level employees.

For example, you run the risk of encountering the Peter Principle. This is the age-old principle that defines the concept of being “promoted beyond one’s capability.” If you promote someone when they aren’t ready or aren’t capable, they’ll crash and burn. And bad promotions also increase turnover.

Still, there are two oddly contradictory stats to add to this discussion:

  • Ivanti’s 2022 Everywhere Workplace Report found that 70% of people would pass on a promotion if they could, instead, choose to work remotely.
  • McKinsey found that 40% of the Great Resignation (which it calls the Great Attrition) was due to people feeling like their current job had no career advancement opportunities.

What does this mean for diverse promotions, though? Well, two things:

  1. Don’t offer promotions without taking into account how people want to work. We already noted earlier that work-from-home benefits and is preferred by minority workers. If you place location-based and in-person-based requirements on that promotion, you’re more likely to get a no.
  2. Help people understand what career progression looks like at your company. And not just that, help them understand what reasonable timelines look like. Quite often, the issue isn’t that promotion and career advancement don’t exist at the company. It’s that the company has created barriers to advancement, whether intentional or unintentional. This is why Coqual’s Being Black in Corporate America study found that many black workers left early-career jobs; they couldn’t advance because nobody was helping them or they were being actively left out of growth opportunities.

Beyond that, if you went on a hiring spree and brought in a large number of workers from diverse backgrounds, make a plan for promoting from within. While you shouldn’t promote specifically based on ethnic or gender background, supporting these new hires for growth and training them in leadership skills will make them invaluable when it comes time to promote.

Acquired Diversity Completely Changes the Game for Workplace Innovation

Acquired diversity in the workplace means that individuals with different experiences, skills, and perspectives are brought together to create a more dynamic and inclusive work environment. While the importance of having a diverse workplace has been widely discussed, the implementation of strategies to foster acquired diversity can be challenging. In this paper, we will discuss the top three strategies organizations can use to create a workplace that fosters acquired diversity.

Toki Toguri

Toki Toguri is the Co-founder and Customer Success Director for Diverst, providing diversity engagement and collaboration tools for the workplace that go beyond the hiring of diverse talent. She operates at the cutting edge of DEI technology, enabling outsized ERG growth, program success, and the attainment of client results through improved employee engagement and management facilitation.