No one is withholding a secret that organizations and businesses have a Chief Executive Officer (CFO) and a Board of Directors acting as the primary decision maker on behalf of their employees and members. However, it is less known that workplace diversity directly impacts the profits of corporations and institutions. According to a global survey of 21,980 firms from 91 countries, the presence of women in corporate leadership positions improves firm performance. To hammer that information home, the survey completed by the Peterson Institute for International Economics found that diversity among corporate leaders boosts stock values and increases profitability.
Brooke Harrington, an Associate Professor of Economic Sociology at the Copenhagen Business School, has stated, “When you’re doing strategy for a corporation, you want a diverse group of people making decisions, not people from all the same schools and in all the same disciplines.” When a group of concordant people discuss problem solving, “They will converge rapidly on what they think will be the right answer. All converging on a consensus that’s disastrous because they fail to see all the potential outcomes,” said Harrington, whose previous research examined the effects of diversity and decision-making processes on the performance of investment groups.
Making the right decision is important. When members of an organization expect too much adherence to their overall way of thinking, then inevitably those results will lead to Group Think theory, which is a way of decreasing objectivity when dealing with new ideas and possibilities. Group Think has negative symptoms, such as applying direct pressure on dissenters, which tend to eliminate any alternative approach to solve problems and create solutions. When an institution does not maintain a diverse workforce with different people from different disciplines, then they risk losing talent in lieu of conformity. According to Tommy Boone, Professor and Department Chair at the College of St. Scholastica, “Group think leads to failure.” No business begins with a hope to fail. Part of what contributes to a good decision-making process involves a diversity of opinions.
New York City Comptroller Scott Stringer said, via email, “As long-term shareholders, we rely on boards of directors to oversee risk and create sustainable value. Having diverse skills, experience and perspectives in the boardroom is critical to avoid group think.”
Diversity not only benefits the workforce, but diversity in products and services also effects the profitability of a company. Business transactions extend beyond one type of person, and a successful business will cater diversified products and services to sell across all cultural, gender, and sexual-orientation lines.
It’s hard to deny that diversity leads to success. Whether in the boardroom or on the production line, it pays to be diverse. Conformity tends to limit services or ideas from benefiting a full range of people; and this is bad for any business or organization that looks towards their leaders for creativity, change, and future ideas for success. The world is a varied place, and it is beneficial for every business and institution to diversify their organization.