The business case for companies having diverse leadership teams is compelling. According to a 2018 McKinsey report, there is a statistically significant correlation between a more diverse leadership team and financial outperformance. McKinsey's findings emerge from a data set of over 1,000 companies covering 12 countries and using two measures of financial performance—profitability (measured as average EBIT—earnings before interest and taxes—margin) and value creation (measured as economic profit margin). While large companies make up the bulk of the research, these companies were once small. As such, as a business leader with a desire to grow, there is financial justification for building a diverse leadership team to foster your company's growth. However, one of the biggest challenges in building and maintaining a diverse team stems from leadership blind spots.
We all have blind spots. Our views are often obstructed by our own personal biases and a lack of understanding on what diversity truly means, combined with the reality that our culture does not always value a diverse work environment. It's apparent that many business leaders have not truly internalized the business case for diversity. If they did, we would see more diverse leadership teams.
Since diversity matters tremendously to business performance, here are five steps you can take to overcome blind spots in leadership and build a team that helps you achieve strong financial performance—and potentially outperform your competitors. In my time as a partner at Next Street, a mission-advisory firm revolutionizing how its clients provide more capital, customers, and services to small businesses and entrepreneurs, we have followed these steps to achieve our diversity goals.
1. Recognize your own leadership blind spots.
You might indeed be open-minded. But, since everyone has blind spots, it’s important to recognize which ones you might have, particularly as it relates to diversity.
In order for employees to uphold diversity as a value, leadership teams must commit to practicing the value on a consistent basis.
Let's be honest—talking about (and acting upon) diversity issues are difficult in general, and the task is especially hard in the workplace. As such, if you can pinpoint upfront what leadership blind spots you have, and ask your leadership team to do the same, you will be one step closer to figuring out how to surround yourself with the right people and processes that can prevent these blind spots from impeding your diversity efforts.
2. Examine what diversity means to your company, and why you are pursuing it.
Once you identify your blind spots, you are ready to define what form(s) of diversity you want to address and incorporate into your business.
You should also determine why your company has chosen to pursue diversity efforts, and in what form. The 2018 McKinsey report states that companies in the top-quartile for ethnic/cultural diversity on executive teams were 33 percent more likely to have industry-leading profitability, and that companies in the top-quartile for gender diversity on executive teams were 21 percent more likely to outperform on profitability and 27 percent more likely to have superior value creation.
The strong business justification for diversity along gender and racial/culture lines gives leadership teams the data to build buy-in amongst employees.
3. Make fostering diversity a core company value.
After you have determined how you will define diversity and why it matters to your organization, you must commit to fostering diversity as a core company value.
While you can use your own language to articulate exactly what the value says, the leadership team's decision to make diversity a core value signals its importance to the employee base.
Now, in order for employees to uphold diversity as a value, leadership teams must commit to practicing the value on a consistent basis.
4. Practice your diversity values.
One way for your company to practice its value on diversity is train your leadership team on the subject matter. For example, if your company chooses to focus on ethnic or racial diversity, I would urge you to consider attending an anti-racism training.
While traditional diversity trainings also present a viable option, very few companies understand that diversity practices and solutions are really the offspring of anti-racism efforts. Crossroads, one of the leading training institutions on issues of race, defines racism as “race prejudice plus the misuse of power by systems and institutions." Unless you understand how racism shows up in your company, it will be very challenging to drive forward any diversity efforts focused on race.
5. Measure your progress and hold yourself accountable.
It's easy to get excited about diversity efforts, especially after attending a training. However, the challenges of implementing diversity in the workplace are often ongoing and sometimes difficult to overcome.
Progress will show up when you can measure how your organization has experienced positive change after addressing you and your team's leadership blind spots and creating a more diverse team.
You should constantly ask yourself:
- What are my leadership blind spots, and how have they changed?
- What do I foresee as the challenges of diversity in the workplace?
- How will I measure our company's progress?
- What people and processes do I need to put in place in order to execute and monitor our diversity efforts?
- What will I do if, and when, my diversity efforts do not go as planned?
By following these five steps, you can help overcome your team's leadership blind spots and reap the benefits of diversity in the workplace.
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