Today’s start-ups are not just building companies, they’re shaping the future of business. What kind of business do you want to create? Is it one where things look a lot like they have for the past 100+ years? Or is it one where many different kinds of people, all committed to the mission and vision of your company, can thrive while doing their best work? If it’s the latter, then diversity, equity and inclusion (DEI) elements should definitely be integrated in your company’s business strategy, not just your HR priorities. Don’t let the noise of recent legal and social challenges to DEI prevent you from improving your bottom line and enhancing your brand reputation.
Start-ups that prioritize and integrate DEI into their overall business strategy gain significant competitive advantages that propel them ahead in the market. Let’s set aside the moral element of the DEI debate for a moment. Here are three major reasons why embracing DEI is essential for start-up growth and success:
Fuel Creativity and Innovation
Diversity sparks creativity and leads to innovation. Research by McKinsey & Company shows that companies in the top quartile for ethnic/racial and gender diversity are respectively 36% and 25% more likely to have superior financial returns above their industry medians. Diverse teams bring varied perspectives, new ideas, and challenges to the status quo that lead to more innovative solutions and products. But it’s not enough to simply hire for diversity. It’s vital to intentionally create diverse teams and provide ongoing support for teams to learn how to collaborate and communicate to maximize productivity. Allowing people to work on projects across teams and functions can foster a more creative environment that opens up opportunity instead of limiting it.
Enhance Market Reach and Brand Reputation
As start-ups think about ways to grow and expand, capturing new customer segments should be near the top of that list. Start-ups with teams that more closely mirror its customer base are better able to understand the diversity of customers’ needs and preferences, leading to more effective marketing and product development strategies. Companies like Airbnb and Slack have publicly acknowledged the financial benefits of diversifying their workforce to serve the growing diversity in their customer bases and product features. There’s no denying that translates to dollars better spent.
Even consumers now expect businesses to champion diversity. Start-ups that demonstrate a commitment to DEI can build stronger brand reputations and loyalty which has limitless value. The public relations firm Edelman reports that a staggering 64% of consumers choose brands aligned with their values. And Glassdoor reports that 67% of professional job seekers consider diversity when evaluating companies. The topic won’t go away, and new companies can set themselves apart from their peers by proactively integrating DEI into their cultures early on in their development.
Mitigate Risk and Increase Resilience
Diverse teams help start-ups anticipate and adapt to a constantly changing market. Boston Consulting Group recently found that companies with higher management diversity than their peers had revenues 19% higher due to innovation. And McKinsey also reports that companies with diverse management teams are 21% more likely to outperform peers in profitability. Diverse teams bring varied perspectives and experiences, and they can identify blind spots and biases faster, generate a broader range of solutions faster, and anticipate future risks to mitigate sooner.
Additionally, diversity fosters productive decision-making by avoiding groupthink. The software company Cloverpop reported that diverse teams make better decisions 87% of the time. During the 2008 financial crisis, banks with diverse boards were more resilient, as reported by the American Sociological Review. Likewise, companies like Google and Microsoft credit diversity for mitigating everyday cybersecurity risks. Unfortunately, some companies continue to suffer from the poor decisions of their largely homogeneous teams, with social and financial consequences. However, start-ups have the foresight to get ahead of these issues and create a culture where diversity is the norm.
Regardless of whether you believe in the moral elements of the diversity, equity and inclusion debate, it’s undeniable that investing in DEI is strategically imperative for start-up success. In a tight and highly competitive business world, even small advantages have a huge impact. By leveraging diversity to drive innovation, expand market reach and brand reputation, and mitigate risks, start-ups can not only lead in the future of business, but also see real bottom line impact.
Ready to adopt DEI for real competitive advantage? Reach out and let’s chat. Together, we can build businesses that reflect the diversity of our world and shape a future where inclusivity is not just celebrated but embedded in the DNA of success.