GARY RYNHART: Diversity adds to the bottom line

Discrimination in employment has a long history, yet efforts to eradicate it are (relatively) recent. Only in the 1950s were two International Labour Standards on Discrimination agreed: the Equal Remuneration Convention (1951), which is based on the principle of “equal remuneration for men and women for work of equal value” and the Discrimination (Employment and Occupation) Convention (1958), which defines discrimination as any distinction, exclusion or preference made on the basis of race, colour, sex, religion, political opinion, national extraction or social origin.

These labour standards (the fifth- and fourth-most ratified of all 190 ILO standards) have greatly helped put in place anti-discrimination laws across the globe. A study done by Victor Asal and Amy Pate studied laws affecting ethnic minorities in 124 countries between 1950 and 2003. Over that time the proportion of countries with policies discriminating against ethnic minorities fell from 44% to 19%, while the proportion with policies favouring minorities increased from 7% to 25%. Additional supports such as ombudsman offices dealing specifically with discrimination are increasingly being established.

There is legislation and then there is actual practice. Making companies look like the consumers they serve has been a slower process. That seems now to be picking up pace. This story is probably apocryphal, but it is an excellent illustrative example of why diversity matters from a bottom-line perspective.  Ireland has a number of top global drinks, mostly whiskey but liqueurs too. Bailey’s Irish cream and Irish Mist are two world-beaters. 

When Irish Mist decided to expand into the German market in the 1970s the presumably 12 non-German speaking middle-aged white men who made up the board back then did not give too much thought to how the product would be received. To be sure, it had sold well in the UK, US and lots of other places. What could go wrong?

What they failed to realise is that “mist” in German means “shit”, specifically animal dung. Unsurprisingly, the delicious liqueur was not an immediate hit with German drinkers. Today this stuff mostly does not happen because large companies have realised that diversity in its employees and management teams is simply good for business.

A bunch of recent surveys bear this out. Research by Boston Consulting Group in 2018 with 1,700 companies across Austria, Brazil, China, France, Germany, India, Switzerland and the US showed a positive correlation between diversity in management teams and overall innovation. Companies with higher than average diversity on their management teams reported innovation revenue that was 19% higher than companies with lower than average leadership diversity.

Innovation accounted for 45% of total revenue compared to 26% in the low diversity companies. Research by Accenture in 2019 (18,000 employees from companies of different sizes across 27 countries) found that a culture of inclusion is a powerful multiplier of innovation and growth. They calculated that the global GDP would increase by up to $1-trillion by 2028 if the company culture that nurtures innovation was raised by 10%.

The newer generations Y (born after 1980) and Z (born after 2000) are particularly alive to diversity in corporates. Take the decision to make the iconic Colin Kaepernick the “face” of Nike. Kaepernick is an American football player who was sacked by his team after kneeling during the US national anthem in protest at police racism. You would imagine that this decision (in 2018 before George Floyd’s murder) was not taken lightly by Nike management. You would think some argued against this choice, fearing a backlash from customers and shareholders. Yet that was probably a minority view. This was a very deliberate strategy by Nike and Nike’s sales rose, especially in its core Gen Z and Y markets.

So if it’s so obvious, why do companies still walk into controversies? Critically, companies need not just a diverse working environment but also systems to support that diversity in a structured systems-based way. Creating a board of directors that has a good range of diversity is not good enough if there are not systems throughout the company to follow through. They also need to see diversity as a broad concept. It incorporates diversity by gender, ethnicity, race, sexual orientation and disability, but also elements such as geographical diversity, urban/rural diversity, social background, political perspectives and cultural diversity.

The fictional Homer Simpson remarked: “I’m a white male, age 18 to 49. Everyone listens to me, no matter how dumb my suggestions are.” Fine, but not a great approach if you end up trying to sell dung to German drinkers.

• Rynhart is a specialist in employers’ activities with the International Labour Organisation, based in SA. He is author of ‘Colouring the Future: Why the UN Plan to End Poverty and Wars is Working’.