A diverse team of employees serves as a mediator between the social groups and a company, helping it to achieve the target most effectively. The figures obtained by the management consulting firm McKinsey & Company prove that startups that prioritize diversity in the workplace financially outperform their peers:
Companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians. Companies in the top quartile for gender diversity are 15 percent more likely to have financial returns above their respective national industry medians
McKinsey concluded in the findings.
Embrace the demand-driven change
As an entrepreneur, you have to satisfy the needs of your customers. The cases given below illustrate how blindness to consumer demand can result in financial losses. Let’s take the film industry as an example. Yet another new report from McKinsey & Company finds that Hollywood loses 10 billion dollars a year due to the lack of diversity. The explanation for such figures appears on the surface - movies that lack diverse storytelling are unrelatable for a large number of minority groups.
Another example of such a business mistake could be drawn from the beauty industry. For many years, mainstream cosmetics manufacturers have been creating products mainly for white women and only recently started to realize that they never covered the whole target audience ever since. Well, it did cost them a lot of money. A few years ago a global market measurement firm Nielsen published a research report titled “Black Dollars Matter: The Sales Impact Of Black Consumers”. The study revealed that black consumers spend 9 times more on hair and beauty than their white counterparts – producing revenue mainly for the niche brands that target this group. Now, how can any of these worst-case scenarios be applied to startups?
Founding a startup team, a vast majority of entrepreneurs gravitate toward like-minded job applicants with similar backgrounds and worldviews. However, a homogeneous group of employees is less likely to make objective and popular decisions lacking cultural insight, gender knowledge, or relevant life experiences of different groups of people. Here are the reasons why recruiting a diverse workforce is vital for a scalable startup.
1. Inclusiveness creates a safe and thus highly-productive working environment.
Work climate is a significant factor when it comes to collective work and productivity. The research conducted by Google indicated that “psychological safety, more than anything else, was critical to making a teamwork”. Now, what is implied by psychological safety, and how can this be achieved in a startup?
It’s crucial to sustain an environment where every member feels equally respected and, most importantly, heard regardless of their gender, race, or sexual orientation. By doing so, you create a friendly climate for the exchange of views and ideas, some of which may turn out to be a game-changer for your startup.
In the article studying the correlation between psychological safety and team effectiveness, Laura Delizonna, an executive coach and instructor at Stanford University, takes issue similarly, writing:
...psychological safety allows for moderate risk-taking, speaking your mind, creativity, and sticking your neck out without fear of having it cut off — just the types of behavior that lead to market breakthroughs.
2. Innovations and technological development depend on inclusion.
Let’s imagine that you are developing a first voice assistant like Siri or Alexa with a team of white English-speaking men from San Francisco. In this way, the program won’t be able to recognize any voice but a male one speaking American English with a Californian accent. Without thinking about all the potential consumers who might want to use the device, you'll lose up to, let’s say, 75% of the target audience. And it's not just a loss of potential audiences, it's a real startup disaster!
3. Diversity opens doors to international markets.
By considering talent from diverse backgrounds in the global talent pool, you are much more likely to find the most qualified individuals who can improve the social sustainability of your work environment, and help you gain an edge in the highly competitive global marketplace. Lacking cultural insight, companies are likely to make promotional missteps while entering a new market. In this case, geographic and cultural diversity could be a competitive advantage, which can set you apart from the competitors as part of a sound go-to-market strategy.
Here, in Fe/male Switch we value diversity and inclusion. We’re proud to be a female-led startup with a heterogeneous team and we’re happy to admit that women make up the majority of our team! By bringing talents of different backgrounds together, we aim to create the best environment for our gamepreneurs to bulk up their digital skills. Given that one of our users liked our community so much that she decided to join our team, we’re convinced we’re going the right way.
- 2020 Global Startup Outlook, a report by Silicon Valley Bank.
- High-Performing Teams Need Psychological Safety. Here’s How to Create It (24, Aug 2017) by Laura Delizonna.
- What Google Learned From Its Quest to Build the Perfect Team (25, Feb 2016) by Charles Duhigg.
- Why diversity matters (1, Jan 2015) by McKinsey & Company.