Businesses that take diversity and inclusion seriously tend to outperform those that don’t. They are often more innovative, better able to attract and retain talent, and more in tune with the needs of a diverse, complex employee base and market both up and down the value chain.

In fact, a McKinsey report from 2019 shows that companies in the top quarter for racial/ethnic diversity are 36% more likely to surpass peers, while those in the same bracket for gender diversity are 25% more likely to do the same. In the South African context, broad-based black economic empowerment (BBBEE) compliance and lip-service are not enough; companies need to embed diversity into their business models, culture and daily activities.

An example of how a lack of true diversity can hurt a business comes from the sort of tone-deaf marketing campaigns we have seen from some multinationals in South Africa. The furious backlash to these campaigns shows that consumers are no longer willing to tolerate brands that are not in tune with the lived realities of the majority.

Such campaigns would be far less likely to be signed off in a company that had a diverse team and a culture where all voices are valued, across all levels of the organisation. Inclusivity requires the senior levels of the organisations to listen and take seriously the views and opinions of those considered junior. Yet such public outcries are just the visible tip of the iceberg and will persist until every business leader makes the conscious decision to change. Change begins with embracing that something is not right. An example was Patagonia’s response to the Black Lives Matter movement. Stepping up to the plate, they owned their shortcomings and committed to change.

Here are five reasons why companies that are not embracing diversity and inclusion are not performing as well as companies that are.

  1. Higher employee turnover

Organisations where people from all backgrounds do not feel supported, appreciated or included may struggle to attract and retain top talent. High-performing people will not stay in an environment where they are not valued. This is not just about meeting employment equity targets—it’s about respecting the diverse experiences and cultures around the table.

  1. Lower employee engagement

A report on found that companies that had higher-than-average gender diversity and employee engagement had 46% to 58% better financial performance than companies that were below the median. Exclusion, on the other hand, hampers collaboration and makes people feel disconnected from their work.

  1. Lagging in innovation

A Harvard Business Review study in 2018 found that companies with higher than average diversity had up to 19% higher innovation revenues than their peers. Bringing people from different genders, races, backgrounds, ages and countries together and listening to them sparks innovative thinking because of the diversity of perspectives.

  1. Worse market reputation

Companies that do not truly nurture inclusivity and diversity will find that it harms their brand and reputation with regulators, consumers, employees and other stakeholders. Consider a stat from Glassdoor that shows that two-thirds of job seekers said that a diverse workforce is an important factor when evaluating companies and job offers.

  1. Compliance issues

B-BBEE and employment equity are the law in South Africa. In fact, government is taking a tougher line on employment equity with the recently gazetted new Employment Equity Amendment Bill. Companies that take a half-hearted approach to employment equity and B-BBEE compliance will fall behind the curve, putting business with corporate customers and government in danger or risking other penalties.

The case for diversity is stronger than ever

Whether you call it transformation, inclusion, B-BBEE, or diversity, building a workforce and enterprise that represents the full spectrum of our society—including dimensions of race, gender, and disability—and the South African experience matters more than ever. This is not a matter of compliance, helping to close the inequalities in our wider society, or even of doing the right thing—it is about building a business that can thrive in a complex and fast-changing world. Compliance is never a good enough reason to pursue inclusion and diversity. In fact, companies should pursue cultures that foster cultures of belonging.


[Photo by fauxels from Pexels]