A recent BCG study suggests that increasing the diversity of leadership teams leads to more innovation and improved financial performance. In both developing and developed economies, companies with above-average diversity in their leadership teams report a greater payoff from innovation and higher EBIT margins. On average, companies with diverse management teams experience a 19% increase in revenue compared to their less diverse counterparts.
Continued evidence of an improved bottom line means mounting pressure on HR to diversify leadership and improve equity and inclusion. In fact, a recent survey showed 35% of HR leaders say diversity, equity, and inclusion are among their top five priorities. So how can companies effectively diversify leadership teams?
Avoid the identity bias pitfall.
Often the barriers to diversity and inclusion in executive circles are those that one might expect—promotions and hiring decisions are often based on relationships and “identity bias”—the sense that if colleagues are more “like me,” they will fit in better. Instead of looking for employees who will “fit in” with the current company culture, look for talent who can add value to your business. Hire more diverse employees in all roles, not just the C-suite. If you have a diverse pool of front-line or manager-level associates, promote from within. If your senior executive leadership team has no diversity, bringing in diverse high-potential candidates will be challenging. To achieve greater diversity in the senior executive leadership pipeline, identify high-potential leaders early, invest in them, and plan their development for the long term.
Increase emphasis on developing diverse leaders.
BIPOC and women experience slower promotion rates than their peers and suffer a “worse perception of leadership potential,” Gartner reported in its 2021 Leadership Progression and Diversity Survey. HR managers’ top reason for lacking BIPOC and women in leadership roles was “not…
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