Diversity is not just a handy buzzword for corporations to throw about and feel good about meeting their CSR targets anymore. Hard data shows that companies with a more diverse workforce are performing better than their less-diverse peers, and industry leaders are taking note.
A diverse and inclusive company is a better company. A corporation with a diverse workforce has happier employees, more satisfied customers and higher profits. It’s hard to argue against success.
“Many people think of diversity in terms of gender diversity,” says Hanna Kaustia, Program Director at McKinsey & Company. “But diversity encompasses a variety of things, such as sexual orientation, education, life experiences, language, culture, age, and talents.”
There are many arguments for having a company that more accurately reflects the society in which it operates, but the financial ones may be the most compelling from a corporate standpoint. Study after study has proven the economic benefits of a diverse and inclusive working environment.
“Pretty much everyone believes that the moral and ethical considerations of diversity are the first things to think about, not the business case,” says Kaustia, “but it is the business case that wins them over.”
The energy and maritime sectors in which Wärtsilä operates are a case in point. If you look at only the population of women versus men as an example, neither sector is especially diverse. The International Energy Agency says women are under-represented in the energy sector, ranging from 22% of the workforce in oil and gas to 32% in renewables. The situation is worse in the maritime industry. The International Transport Workers’ Federation estimates that only 2% of the global maritime workforce are women. It is often difficult to break out of such an unbalanced situation.
“One thing to keep in mind is unconscious bias. It is a filter in our brains which help us to make decisions faster. There is a tendency to trust the familiar,” Kaustia continues. “But we need to accept that we have this bias and recognise it. We need to stop, step back, and accept and embrace different points of views. We need to get out of our comfort zone.”
There are concrete, measurable benefits to embracing diversity and inclusiveness. McKinsey’s Delivering through diversity report found that the most gender-diverse firms were 21% more likely to have above-average profitability than the firms with the least gender diversity. The benefits of cultural and ethnic diversity are even more obvious: the most diverse firms were 33% more likely to outperform on profitability.
“More diverse and inclusive companies have higher long-term EBIT and stock returns,” says Kaustia. “More diverse teams are more likely to make better decisions.”
A more diverse and inclusive workforce also makes happier employees who perform better. There is less conflict between groups, improving collaboration and loyalty. Yet another benefit is that a diverse company has a better global image, not only with their own employees but also with customers, contractors, suppliers, local communities and society. This can have benefits in recruiting, as it creates an environment and corporate image which is more attractive to talented job seekers.
“We are seeing an increase in the representation of women, particularly with C-level executives,” Kaustia says. “Yet change is slow. In some sectors, it might take another 100 years to achieve parity at the current rate of change. But we have more CEO commitment and leadership interest in diversity and inclusiveness.”
Kaustia warns that improving gender diversity is more nuanced than simply adding more women to a company’s workforce. For instance, diversity needs to be considered not just in recruiting but also in promotions and retention.
“Sometimes we have to be creative in our recruiting procedures to un-bias the process,” Kaustia says. “One of my favourite examples are the symphony orchestras who have every job applicant play their instrument behind a curtain. Researchers have found that this alone makes it 50% more likely that a woman will advance to the finals.”
Wärtsilä employed 140 nationalities in 2019, up from 136 in 2017.
Source: Wärtsilä 2017 and 2019 Annual Reports