Gandhi is quoted as saying “be the change you wish to see in the world.” I take this to heart and live my life by this statement in many respects. Applying this sentiment can be particularly hard in business as we try to fight our confirmation bias and need to surround ourselves with like minded people. The challenge with this thinking is that continuing to think and act like we have always done will give us the same results. This is not the innovation or change we want to see. The solution, however, could be as simple as diversification. Diversification in thinking, ideas and points of view.
Many countries in Europe have instituted laws that require basic diversity to try to help protect companies from the group think mentality. As of the end of 2019, companies in California were required (Senate Bill 826) to have at least 1 woman on their board. For companies with 5 directors, they need at least 2 women, and by the end of 2021, those with 6 or more directors, at least 3 women. When announced in 2018 this bill received the expected resistance but there has since be a slow change in the tide as companies are realizing that this change is good for the bottom line. The bill refers to a 2014 study done by Credit Suisse that found that companies with at least one woman on the board had an average return on equity of 2.1 percent higher than companies with no female directors. Additionally, the price-to-book value of these firms was 0.6 points greater for those with women on their boards in comparison to firms with no women on their boards. In January Goldman Sacks announced it would no longer handle IPOs for companies with all white straight male boards. In the male dominated world of tech, this change will open up diversity and ultimately make these ventures more successful.
In tech we often refer to “manels” as the term for panels at conferences where there are no women. These are no different than the boards without women. Change is coming – sometimes mandated (Senate Bill 826), sometime in protest by those who refuse to sit on a panel without diversity.
For Women’s history month consider these 3 things to support the change that you want to see in the world.
- Make more profit with diverse teams. McKinsey & Company, a global management consulting firm, conducted research which included data sets for 366 public companies across a range of industries in Canada, Latin America, the United Kingdom, and the United States. They found that companies with more diverse teams, in age, sexual orientation, and experience (such as a global mind-set and cultural fluency) are also likely to bring competitive advantage because those companies are better able to attract and retain such diverse talent. They were also top financial performers. Companies in the top quartile for gender, racial and ethnic diversity are 35% more likely to have financial returns above the national median.
- Companies with a soul attract and retain top talent. Diversity and inclusion are key factors in the determination of a company’s soul. To have a soul, the diversity and inclusion must extend to fairness in career discussions and performance management. These workers are not looking for a job, they are embracing an experience and that experience results in higher engagement, longer retention and ultimately over a 10-year period, an 8 X increase over the S&P 500.
- Cognitive diversity means problems are solved faster. Harvard Business Review found diversity in cognitive thinking increased problem solving compared to homogeneous groups. Cognitive diversity cannot be seen. For this trait to be revealed, we need to encourage people to deploy different ways of thinking and encourage employees to try things in multiple ways, without a concern for reprisal. Building teams inclusive of diverse ways of thinking with a sense of psychological safety is key to building a cognitively diverse team.
Diversity is not just gender. It includes cognitive, ethnic, sexual diversity and more. Although it is Women’s History month, I am leveraging this time to reflect and comment on diversity in general. I strongly feel that overall diversity is the change I want to see in the world and I am in good company in this feeling. In the 2020 letter to shareholders, Warren Buffett pushed for diversity in the boardroom, particularly by adding more women.
If you want more details on how to change the world there are stats and data in this article by Josh Beoersin on diversity and inclusion.