How do Diverse & Inclusive Workspaces Drive Innovation and Growth?

Summary. Diverse and inclusive workplaces foster innovation and drive business growth. A recent study shows that companies with greater diversity outperform th... Read More

For much of business history, organisations focused on just two key stakeholders: customers and financiers (shareholders, banks, and other investors). Over time, businesses learned that success relies on a broader stakeholder approach—customers, financiers, suppliers, the community, and, most importantly, employees. A narrow focus on only customers and financiers limits an organisation's potential to capitalise on available resources and opportunities.

This was the core idea introduced by R. Edward Freeman in 1984 when he helped the business community understand - What makes Capitalism tick? According to Freeman's modern Stakeholder Theory, businesses exist to create value for all stakeholders, allowing them to collectively create something none could achieve alone. Therefore, none of the above-mentioned stakeholders can be looked at in isolation and the job of an entrepreneur/manager then becomes to include every stakeholder in the decision-making process. A business that does not prioritise Diversity and Inclusion is in decline in the long term, even though its topline seems healthy in the short term.

What is Diversity and Inclusion (D&I), and Does it Benefit Organizations?

Diversity refers to the people who are represented in the workforce. It is the state of being different and having variety as an organisation. Diversity could be based on Gender, Age, Ethnicity, or Physical ability. But, most importantly, diversity is celebrated in the way people think.

Inclusion can be explained as the way a workforce experiences the workplace. An organisation could hire diverse talents from varied backgrounds, but the workplace is only inclusive if it allows them to think and voice their opinions openly.

The benefits of Diversity and Inclusion are well-documented. McKinsey & Co.'s reports—Why Diversity Matters (2015), Delivering through Diversity (2018), and Diversity Wins (2020)—consistently show a strong link between diversity and financial performance. Their studies found that companies in the top quartile for gender diversity were 25% more likely to have above-average profitability compared to those in the bottom quartile. This trend has steadily increased, from 15% in 2014 to 21% in 2017 and 25% in 2020, demonstrating that diverse teams and inclusive work environments drive business success.

DEI is also positively associated with seven out of eight measures of future profitability, such as return on assets, return on sales, profits divided by employees, and sales divided by employees, according to research from ‘The value of diversity, equity, and inclusion: Beyond the tick-box approach’.

How do Diversity and Inclusion (D&I) Drive Innovation and Growth?

Research by the World Economic Forum reveals that companies with above-average diversity scores generate 45% of their revenue from product innovation, compared to just 26% for those with below-average diversity. Numerous studies further support this correlation between diversity, innovation, and growth. Another study conducted by the Boston Consulting Group highlights that companies with more diverse management teams have 19% higher revenues due to innovation.

Here are three ways D&I drive success:

Diversity and Inclusion Drive Empathy, a Catalyst for Innovation

Customers expect tailored, innovative solutions to their unique challenges in today's fast-paced business world. Organisations need diverse, global teams that bring fresh perspectives and deep empathy to meet these demands. When teams are comprised of individuals from various cultures, genders, and backgrounds, they possess a broader range of experiences and perspectives that allow them to better empathise with the needs of different customer segments. Such teams, operating within inclusive work environments, are more attuned to people's needs and struggles. This awareness helps individuals ask the right questions, avoid preconceived notions, and foster a learning culture that leads to more thoughtful strategies, innovative products, and strong business synergies—all driving revenue growth. Even the most prominent leaders worldwide motivate younger generations to leverage Empathy when conducting business. According to Satya Nadella, Empathy is at the centre of every innovation. He, one of the world's most passionate proponents of compassionate leadership, said while talking about the value of empathy at Microsoft, "Our core business is connected with the customers' needs, and we will not be able to satisfy them if we don't have a deep sense of empathy."

Diverse Teams and Inclusive Workspaces Are Less Likely to Fall Prey to Groupthink

Groupthink, a term coined by social psychologist Irving Janis in 1972, occurs when highly cohesive groups make faulty decisions under pressure to make the right decisions unanimously as a team.

Here are a few classic symptoms of Groupthink

There is an illusion of Unanimity within the team – When a majority in the group agree with something, the decision is considered Unanimous.
There is self-censorship within the group, and individuals with non-cohesive ideas (doubts and deviations from the group consensus) choose not to debate.
Members protect the group and the leader from information problematic to the group's cohesiveness.
Group members possess stereotypical views about outside agents, and the team cohesively likes or dislikes opinions from people outside the circle.
Members portray acute self-righteousness and ignore concepts like ethics and morality, assuming everything they do is for the greater good.
You may observe an illusion of invulnerability within the team members as well.

Groupthink is a natural human bias that may affect teams of any type and size. Diversity and Inclusion are the most potent solutions to counterbalance its effects. Diversity drives innovation by leveraging unique perspectives shaped by varied experiences and backgrounds. Dissent and fierce conversations before critical decisions are extremely common in inclusive workspaces.

Inclusion Maximises Organisation's Potential

Over 80% of employers and employees in North America agree that fostering a sense of community and creating a supportive workplace are essential to building a strong business. While diversity opens the door to a broader talent pool, inclusion ensures these individuals can thrive. New employees often face challenges fitting in due to their skin colour, age, gender, nationality, ethnicity, or appearance. This sense of exclusion can undermine confidence and limit the potential of even the most talented recruits. Organisations unlock their full potential and boost productivity when employees are treated fairly, respected, and given equal opportunities to voice their opinions.

Conclusion: Growth and Innovation as Byproducts of Diversity and Inclusion

Remarkable Organisations promote the idea of Empathy and the Spirit of Open Conversations by prioritising D&I through employee engagement programs that make their workspace more welcoming and attract better talent. These companies create employee engagements that boost Diversity and Inclusion, paving the way for Growth and Innovation, just like Wipro, a bellwether for D&I in the Indian tech space, did through its Winspire journey.

India is a country of vast diversity, and many of Wipro's employees come from different backgrounds. Since 2008, the company has invested significantly in a multi-faceted approach towards D&I, with a vision to inspire lasting societal change.

Some of Wipro's key initiatives include:

Begin Again – A program designed to help women restart their careers after a break.
WoW MoM – A program aimed at supporting, enabling, and engaging women during and after maternity leave.
Wipro Pride – A global initiative focused on increasing awareness and engagement within the LGBTQ+ community.
Parenting Hub – A community within Wipro that empowers and recognises parents' vital societal roles.
Black Alliance – A U.S.-based initiative dedicated to building a diverse and inclusive workplace for Black employees.

By creating an inclusive environment through such initiatives, Wipro enables its workforce to reach their full potential, fostering growth and innovation across the organisation.

Like Wipro, we see several Multinational Companies like Lenovo, HUL, Microsoft, and others trailblaze towards Diversity and Inclusion. Why? Because 57% of employees and 67% of job seekers consider diversity an essential element of their workplace, and when organisations make employees feel included, 80% rate their employers as progressive and high performing.