Benefits of Racial & Ethnic Diversity in the Workplace

Instructor: Artem Cheprasov
What is racial and ethnic diversity, and how does ethnic and racial diversity impact the workplace? Moreover, why is there such an impact? In this lesson, we seek to answer these questions.

Racial & Ethnic Diversity

Imagine that you own a big business. All else equal, do you believe that racial and ethnic diversity would help or hurt your business compared to a competitor that was more homogenous with respect to its workforce?

If you answered that racial and ethnic diversity would help, you're right. Racial and ethnic diversity in the workplace refers to a heterogeneous workforce with respect to physical, social, and cultural qualities.

In this lesson, we go over the benefits of this diversity.

By the Numbers

Before we go over why racial and ethnic diversity is great for a workforce, let's actually focus on providing some facts behind what this type of diversity can bring about.

Research from different studies on thousands of companies conducted around the world has come to the following general conclusions:

  • Ethnic diversity within the executive branch of a company can boost profitability by around 30% in countries around the world!
  • More specifically in the U.S., earnings rise a bit less than 1% for every 10% increase in racial and ethnic diversity in senior executive roles.
  • Globally, companies with little to no racial diversity are statistically less likely to post above-average returns even when compared to companies with average amounts of racial diversity let alone the most diverse organizations.
  • In the U.S., racial and ethnic diversity appears to have a greater positive impact on profits than gender diversity. This is not to imply, by any means, one is more important than the other. Rather, this could be simply because pushes for gender-based diversity in the workplace have been around for longer and its beneficial financial impact has already been maximized in some companies as a result.

Why This May Be the Case

So the research makes it clear that one way or another, racial and ethnic diversity improves a company's bottom line. But why? Well, the answer lies in the less obvious and tangible benefits that such diversity provides.

Ideas

Ethnic and racial diversity brings about new ways of thinking and ideas. This improves idea generation and innovation. Those two benefits can clearly improve company income.

Thinking

Such diversity has also been shown to help all company employees think in more objective and factual ways, which helps focus energy on the more important things.

Efficiency and Productivity

On that note, this type of diversity has also been linked to improved efficiency and productivity. This could be because different people of different backgrounds bring novel skill-sets that allow for team members to work more efficiently at accomplishing a task.

More Connections

Furthermore, we can imagine how people of different racial and ethnic backgrounds can help the company connect its brand, services, and products to new or niche markets it otherwise would've had trouble breaking into.

In terms of big business, this could mean setting up local or regional headquarters targeting a foreign market and hiring employees living in that market already. Those employees will understand the nuances of their home country, racial group, or ethnic group that can help the big business adapt to and thrive in a new environment.

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