In recent times, diversity has caused firms to feel a significant change in their pool of potential candidates as well as working environments. There are several implications such as economic, social and ethical regarding inclusion in the workplace and its effects that need to be talked about.
A lot of studies and economical researches have been conducted to find the impact of gender and ethical diversity on a firm’s financial performance. Some say it causes a boost in a firm’s financial results, while others say that results are inconclusive since there is no direct causation between diversity and a firm’s finances.
One of the biggest reasons why diversity is frowned upon is due to personal prejudice. Personal characteristics such as ethnic background, gender, sexual orientation, and religion, are some examples of features that could be discriminated against.
Diversity however, in theory, can be the answer to discrimination as it leads to a balanced structure in a firm. There are several theoretical arguments for why diversity might positively affect a firm’s performance.
It brings new perspectives together and provides a better understanding to the market which is also diverse due to globalisation. Thus, improving the quality of decision-making. Boards with a more diverse distribution also ensure greater independence and higher quality of corporate governance.
Since employees reflect an organisation’s efficiency and productivity, a larger talent pool of employees, especially at senior positions, could have a positive economic effect. Likewise, diversity might also help boost a company’s image and improve legitimacy, causing a positive effect on firm performance through shareholder value.
However, as per Adams et.al, 2009, one cannot ignore the negative effects that diversity might cause to a firm. The biggest drawback would be reconciliation of different points of view, causing disagreement and conflict.
Moreover, there could be communication problems if executives hold back key information with demographically dissimilar employees, compromising organisational efficiency.
No matter how many studies are conducted, unless there’s an ideal world created with perfect control on all other conditions that could affect a study on diversity (such as political climate, labour market etc.), there is no way to prove direct causation between a diverse workplace and a positive impact on a firm’s financial performance.
Every study will always have their own agenda, limitations and assumptions that they make which will affect conclusions drawn.
Nevertheless, putting aside the economic and financial implications, diversity should be encouraged, as ethically and morally, all humans deserved to be treated equally irrespective of their race, gender and sexual orientation. If someone deserves a job, they should be able to get that job no matter what they look like or who they love.
It is crucial for corporations to understand that along with their financial goals, they have a responsibility towards society to advocate for diversity and equality since they have a platform.
This is not a one-off promotion tactic. Instead of treating diversity as a marketing exercise, firms need to step up and adopt inclusion as part of the culture in their companies.
The world is in desperate need for real change and real change will never happen until people in power support and help marginalised communities find their voice in society.
The business world, all in all, needs to unify to encourage tolerance and admonish discrimination. It might seem like an impossible task but the most crucial step is always the first one.
Photo by Clay Banks