Is There a Business Case for Diversity?
Does having a diverse workforce make good business sense? One body of research suggests that a max-mix of genders and races actually has a negative impact on group dynamics and communication. Now comes a study that says diversity means higher sales and customer numbers and greater profitability.
In the April issue of the American Sociological Review, sociologist Cedric Herring from the University of Illinois Institute of Government and Public Affairs found that companies reporting the highest levels of racial diversity brought in nearly 15 times more sales revenue on average than those with the lowest levels of racial diversity. Gender diversity accounted for a difference of $599.1 million in average sales revenue.
Herring found racial diversity to be a better determinant of sales revenue and customer numbers than company size, the company’s age, and the number of employees at any given work location.
Other findings:
- Companies with the highest levels of gender diversity reported an average of 15,000 more customers than organizations with the lowest levels of gender diversity.
- Racial diversity is among the most important predictors of a company’s competitive positioning relative to other firms in its industry. As racial and gender diversity levels increased in a company’s workforce, its profits relative to those of its competitors also increased.
Herring analyzed data from the National Organizations Survey, reviewing a subset of 506 United States-based for-profit businesses that provided information about workforce diversity, sales revenue, customer numbers, market share and profitability between 1996 and 1997.