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Diversity leadership – the accelerated quest for corporate winners

 According to research, diverse companies tend to achieve higher return on equity and total shareholder returns than their corporate peers

Everyone in business has the same aim – competitive advantage. Established routes to the destination include cost reduction to secure pricing efficiencies, new technology introductions to improve productivity and product innovation.

Now a critical route – diversity leadership – is being explored as a springboard to all of the above as it becomes clear that the creation of an inclusive workforce is a compelling starting point for senior managers looking to contain costs, boost morale, improve output and tap new thinking.

Privately, business strategists concede that, initially, the quest for diversity was neither spontaneous nor voluntary. Employment equity (EE) legislation forced a departure from past practice. However, compulsion is sometimes beneficial. As a child, you might not like being forced to eat your vegetables, but it’s good for you and you ultimately emerge stronger and fitter.

Vigorous, healthy and nimble businesses increasingly appear to be the result of smart diversity management at organisations which ensure high levels of individual and departmental competence while achieving new levels of racial, cultural, language and gender inclusion.

Much of the current literature on the subject is American. In the States the emphasis is on gender equality and workplace inclusion of the fast-growing Hispanic population. However, US conclusions are illuminating.

One specialist in the area, Diversity Inc., notes that 43 public companies on its list of America’s 50 most diverse corporations report profits that are 24% above the S&P 500 average. These firms constitute 7% of the Fortune 500 but account for 22% of its total revenue. Researchers at Catalyst Inc. highlight a similar pattern and say diverse companies tend to achieve higher return on equity and total shareholder returns than their corporate peers.

International commentators highlight numerous diversity benefits, including:

  • More and faster innovation … groups from the same background, same gender, same age range, same race and same cultural and language groups are less likely to challenge boundaries and produce new ideas
  • Improved innovation… new perspectives from different groups generate fresh solutions
  • Better market alignment … a broader demographic within an organisation results in broader appeal by products that resonate with customers
  • Higher morale … people enjoy working for companies that respect them, their cultural and language (resulting in higher retention and improved ability to attract top talent)
  • Higher productivity … inclusive, cohesive teams work well together
  • Better cost management … absenteeism tends to fall along with recruitment expenses while better decision-making and problem-solving help managers avoid expensive false starts
  • Enhanced customer loyalty … trust in the brand rises when a firm is known for diversity and inclusion
  • Staff versatility and improved customer service … familiarity with different cultures through experience in an inclusive workplace helps customer-facing staff deal with consumers from all walks of life
  • Eligibility for government business and contracts with other organisations keen to promote inclusion

Similar benefits are increasingly highlighted by South African executives engaged in diversity management – a discipline that receives growing attention at companies with a positive perspective on the opportunities opened up by greater inclusion.

Locally, a national standard on EE and diversity management has been established by the South African Board for People Practices to promote the development of a competent workforce that is fully representative of our country.

The standard stresses the need for top management to lead, direct and support the policies and practices intended to drive EE and inclusion. The standard also highlights the strategic nature of diversity management.

Achieve a breakthrough here, become a diversity leader and opportunities for sustained corporate growth are clearly substantial.

Simply ticking the boxes for compliance purposes will reduce any company’s credibility internally and externally and seriously affect sustainability.

Today, it is not uncommon for a proven track record in diversity management to be required when selecting competencies for the recruitment of a new CEO.

Already, general discussions around desired leadership qualities consistently focus on a candidate’s learning agility and readiness for change rather than endless transformation.

The groundwork has been laid for the emergence of the acknowledged diversity leader who is simultaneously the corporate kingpin.

In today’s South Africa, if CEOs are not accomplished diversity managers they will have great difficulty in managing the business at all …

*Auguste (Gusti) Coetzer is Director, Executive Search, at TALENT AFRICA, a member of the Signium Group

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