Why diverse leadership teams may be the best way to improve workforce effectiveness, optimize company results

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Opportunities to make significant changes to a company’s leadership are generally infrequent. Top leadership is mostly stable with limited opportunities to promote from within or bring in an individual from outside the organization to support diversity, equity and inclusion (DEI) initiatives.

Nevertheless, when these organizational opportunities arise it’s important to include DEI as part of the promotion or hiring process to create balance within the company. “A diverse team of leaders can help you establish and build trust with many different people in your organization,” according to The National Society of Leadership and Success. “Diverse leadership brings a wealth of knowledge and varying perspectives, which can help improve the way your leadership relates to those inside and outside of your organization.”

In addition to creating new opportunities for expanded perspectives, diverse leadership teams have been shown to improve the bottom line and responses to crises.

Build internal, external culture

As more organizations transition to hiring practices that support the company’s internal and external goals surrounding culture building, leaders will become more aware not only of the process, but also of the importance of getting it right. Doing so could be relatively straightforward at some companies and complex at others. It depends on how ingrained DEI programs, employee resource groups and other related initiatives have become at the organization. And how the strategy has been rolled out to the entire organization, team members and leaders, alike. Buy-in must be across the board at every level of the organization.

“There’s widespread agreement on the need to improve diversity and inclusion in the workplace. But it’s not easy to deliver on the promises made. It’s time to adopt a more systematic, coherent approach,” according to the Harvard Business Review. “Give each functional leader and business unit leader formal accountability for achieving two sets of D&I results in their part of the business: diversity results that focus on representation (such as hiring, promotion, and mobility outcomes)….”

Research by McKinsey and Company has shown that diverse executive leadership teams (gender and ethnicity) can dramatically and positively affect the bottom line. Diverse leadership teams are a potentially effective and easy way to boost revenue, compared to generating more sales or increasing income in other ways.

The McKinsey study found executive leadership teams with:

  • gender diversity were 25% more likely to have above-average profitability
  • ethnic diversity were 36% more likely to have above-average profitability

A report published by BCG supports these findings and further demonstrates how diversity in leadership positions can impact innovation, which, of course, can lead to greater sales and revenue.

“The biggest takeaway we found,” the BCG report states, “is a strong and statistically significant correlation between the diversity of management teams and overall innovation. Companies that reported above-average diversity on their management teams also reported innovation revenue that was 19 percentage points higher than that of companies with below-average leadership diversity.”

Leadership diversity and your next crisis

At one point or another, your organization will suffer from a crisis. This could be caused by internal or external factors, but there’s a good chance it will happen. It could be caused by a worldwide pandemic, an employee issue, a falling stock price or a data breach or thousands of other issues large and small. (PwC’s Global Crisis Survey found that 95% of respondents expected a crisis would occur within the next two years.)

One way to help fight that crisis is through leadership diversity. Just as leadership diversity can help improve the balance sheet, it also can help your organization weather a contained or full-on emergency.

“During a crisis, having a diverse stock portfolio will help you be more resilient. Even if some stocks fall, others will rise during the crisis and help you ride it out. The same is true with your team – particularly your executive leadership,” according to TD Madison & Associates. “Having a diverse leadership team will help you navigate times of crisis as you’ll be able to draw from a well of unique backgrounds, experiences, and viewpoints.”

Just as a go-to-market strategy shouldn’t be created in a vacuum without a well-thought-out plan, creating or building upon a diverse leadership structure should be part of a larger organizational DEI strategy. Companies looking to grow ideas, revenue and responses to internal and external issues should take a deeper approach to diversifying the leadership teams at not only the lower levels of the organization, but at the senior and executive levels, as well.


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