Real Employment Law Advice

How diversity and fairness in business increases your profits

Why should you consider diversity and fairness as an integral part of your business?

This article will discuss how equality and fairness at work increases profits. By way of example diversity in recruiting, such as employing more women and those from ethnic minority backgrounds, particularly at board level, and in management roles, has been proven to increase profits (according to McKinsey & Company’s research). I would also suggest that fairness and diversity principles in all aspects of a business will also ultimately increase profits.

Businesses are best placed to be responsive to the needs of their diverse customers when employees who contribute to the workforce reflect the population that they serve. It is common knowledge that Britain has a diverse population; ambitious firms are using this information as an opportunity to grow and develop for the future.  

The Proof

In 2015, McKinsey (a Consultancy firm) undertook research which showed that by employing staff from diverse ethnic minority backgrounds, and also having women in managerial positions or in the Boardroom of leading companies, in fact increases profits. To date there has now been a range of studies into diversity, fairness, and increased profits.

In 2018 McKinsey carried out further research during their “Delivering through Diversity” study, which found that having gender diversity (Women) in managerial positions increased productivity by more than previously thought.

Previous research showed that companies in the top 25th percentile for gender diversity on their executive teams were 15% more likely to experience above average profits, the latest data shows this probability has increased to 21%. If there are more ethnically and culturally diverse employees at the Board of Directors level, profits were 43% more likely to be above average profits.

Business which have an equal number of men and women on the team outperform male dominated terms when sales and profits are compared [The Impact of Gender Diversity on the Performance of Business Teams: Evidence from a Field Experiment | Gender Action Portal (harvard.edu) ]

What does this mean for businesses?

Businesses will remain competitive and make above average profits if they have a fair, inclusive, discrimination free work environment, and equality of opportunity for all (in recruitment, flexible work arrangements and diverse staff in leadership roles).

Equality and fairness at work may increase employee motivation and engagement thereby increasing profits. These fair and inclusive structures will ultimately positively increase profits in your business.  By way of example the profits of Johnson & Johnson and Coca Cola are increasing, where they consistently apply the principles of diversity and fairness as means of generating long term growth and competitiveness.

Race discrimination and sexual harassment cases have been in the news for a while now, even more so since the death of George Floyd in May 2020, which sparked mass protests across the globe, and the #MeToo movement against sexual harassment which also went global. What is now acceptable to society is changing, due to greater awareness of rights and entitlements to be treated with dignity and fairness, ideally in all spheres of life. On a personal level, we all know if we have not been treated with dignity and respect at work.

The research is clear in respect of the correlation between diversity, and the increase in above average profits, therefore, businesses would do well to consider this information when making future plans.

Furthermore, the success of other diverse companies such as the Marriott Hotels Group, Procter & Gamble or Mastercard serve as examples for motivating other companies to follow suit.  Successful world class companies are implementing equality and fairness principles across all aspects of their businesses in order to make above average profits and ensure their businesses remain successful.

Benefits of diversity and fairness at work

  1. Diverse companies appeal to a diverse work force, increasing the probability of attracting and keeping skilled and talented employees.
  1. Diversity ensures there is a pool of diverse characteristics and skill sets, which will spark innovation and creativity of thought within the business. The exchange of ideas and brainstorming with regards to services, products, and approaches to a work issue can create new services and products, which can help businesses differentiate themselves in their niche sector.  This helps tailor their business to fit the needs of their customers. Thereby generating more success and larger potential profits.
  1. Diversity ensures there is a wider customer base that can be reached.  Ultimately people buy from people who they can relate to, or who best represent them, who understand their customers and their requirements.  Therefore, businesses with diverse staff are widening their potential customer base.
  1. Employees who feel treated fairly at work, will have less absences for sickness and ill health reasons. There will be an increase in motivation and productivity of staff. For example, there may be an increase in motivation as employees know the company will promote internally and develop their staff. There may also be a reduction in employees leaving which will lead to greater benefits in saving time and costs of training staff and stability in the workplace.
  1. A happier workforce will also reduce the likelihood of staff bringing claims at the employment tribunal. A reduction in such claims reduces the risk of paying compensation or any damage to an employer’s reputation as a result of losing an employment tribunal claim.

Action points on increasing profits

  1. Fair recruitment processes, including written reasons for not employing rejected candidates. This will give your company a reputation as a good and fair employer which will attract best potential pool of employees (We can give training on fair processes to HR, managers, and employees).
  1. Training on equal opportunities and eradicating discrimination at work.
  1. Diversity in gender and ethnicity across the business, including from entry level jobs to board level positions.
  1. Promoting on skills and merits within the business.
  1. Equal opportunities for all, ensuring flexibility in work arrangements to enable women and employees who need it, to juggle their work, lives and family successfully. Businesses will benefit as they will keep employees with relevant and required skill sets.

Conclusion

Applying the basic principles of fairness, and diversity is ultimately good for your business. It ensures that you are following good practice and current employment law in practice.  This will ensure that your business not only survives but continues to grow and become increasingly profitable while increasing its good business reputation.

This article was written by Sukhmani Bawa.  If you have any suggestions for future articles, or questions on this area of law, or any other area of employment law, please contact a member of the RELA team or Sukhmani on sukhmani@realemploymentlawadvice.co.uk

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The information contained in this blog post is provided for guidance and is a snapshot of the law at the time it is written. It is provided for your information only and should not be used as a substitute for obtaining legal advice that it specific to your particular circumstances.

The guidance should not be relied upon in any decision making process. It is strongly recommended that you seek advice before taking action.


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