Diversity and business performance – is there a link?

Why Design Council commissioned the research

Diversity and inclusion underpin Design Council’s values, delivery and research. Design is about understanding the needs of diverse populations, individuals and businesses and so there is an argument that a diverse design workforce is better able to do so. One of the ways we put this into practice at Design Council is by aiming for a 50:50 gender split on Built Environment Expert panels as part of our Design Review services.

In our research, we consistently find there is a diversity challenge in design. In our recently-released Design Economy 2018 research we found that the design economy is 78% male, which is a higher figure than for the wider UK workforce (53% male) and has not improved since the last edition of the Design Economy in 2015.

Overall, women form the minority in six of the eight design subsectors included in the design economy, with product and industrial design being the most male-dominated (95%) followed by digital design (85%) and architecture and built environment (80%). This is despite women making up 63% of all students studying creative arts and design courses at university, and 38% of students studying architecture, building and planning. Even when employed in design, women typically earn less and are less likely than men to be in senior roles.

The design economy employs a slightly higher proportion of people from Black, Asian and Minority Ethnic (BAME) groups than are employed in the wider UK economy (13% compared with 11%), however there is some indication that BAME designers are less likely to be in senior roles. More research is needed to understand the extent of barriers to BAME designers’ progression and the mechanisms by which these might operate.

Design Council believes strongly that there is a moral imperative to addressing these inequalities, but we are also interested in the economic angle. To what extent might these inequalities be holding the design economy back from achieving its full value to the UK economy? An important guiding principle of design is the strength of multi-disciplinary teams, whereby cognitive diversity (having a mix of people with different learning, thinking and information processing styles) is harnessed as a resource for innovation. Taking this one step further we have theorised that a diversity of experiences and backgrounds could also foster innovation. We therefore commissioned a brief exploratory evidence review project considering the relationship between diversity and business performance, undertaken for us by RF Associates. This included reviewing grey literature, some academic material and existent systematic reviews. Publications were included if published within the last five years (since 2013) and we defined diversity focused on gender and ethnicity (following the weight of the existing literature). We sought to find out if diversity impacts business performance, and if so, how?

A mixed picture of evidence

The existing evidence base considering diversity and its link to business performance is complex, wide ranging and inconclusive.

One of the main reasons for this is that a range of definitions and research approaches are used, making it difficult to get a handle on the sum of the evidence collected. Studies are conducted at a range of scales from board/senior management level, whole business units to individual teams. Studies demonstrate the complex range of positive impacts as much as the difficulty of measuring those impacts. For example, in a 2013 systematic review, Urwin et al identify that:

"there is immense variety in the range of potential business outcomes that studies attempt to relate to differing levels of diversity. Studies of gender representation at board level use indicators such as stock price performance relative to industry averages; the team-level studies are more concerned with various indicators of problem solving (variously defined) and when we come to consider the literature on HR Performance, there are a range of intermediate outcomes such as workforce satisfaction and commitment. Case-study evidence often focuses on diversity initiatives to reduce staff turnover and/or improve staff engagement.” (Urwin et al, 2013, p.vii). 

In what ways does diversity influence business performance?

Studies included in the review found a range of positive impacts of diversity, ranging from the value of heterogeneous opinions for innovation to the effect of a diverse workforce on the outward reputation of a business. Studies included primary research with senior staff, as well as larger surveys of employees.

In her review of the literature Rohwerder summarises the benefits of diversity as wide ranging and many:

“Benefits of diversity and inclusion are found to include: reduced costs; improved resourcing of talented personnel; better products and services; enhanced corporate image; improved creativity and problem-solving; better decision making; innovation; greater flexibility; increased productivity; improved organisational performance and efficiency; enhanced trust in relationships, satisfaction and commitment within the workforce; and improved customer relations and service delivery.” (Rohwerder, 2017, p.2)

An interesting aspect of these benefits is the indirect relationship between a diverse workforce and increased sales. A diverse workforce (or the communication of this as a priority through the presence of diversity and inclusion policies) creates a more positive or ‘ethical’ corporate image and reputation, which in turn attracts customers and sales (Ozbilgin & Tatli, 2011, in Rohwerder, 2017).

Other evidence considers the extent to which a more diverse workforce offers unique and valuable strengths. A paper by Terjesen, Couto & Francisco, in the Journal of Management and Governance highlights three theories about how greater gender diversity contributes to better board effectiveness and performance.

• Agency theory, which focuses on the uniqueness of women’s behaviour on boards, including their ability to offer ‘a fresh perspective on complex issues…[which] can help correct informational biases in strategy formulation and problem solving’ (Francoeur et al, 2008, p.84)
• Resource dependency theory, which suggests female directors bring unique and valuable resources and networks; may understand some markets better than their male counterparts and are more likely to have non-business backgrounds with a portfolio of experience
• Gender role theory, which focuses on how normative roles expected of women, such as sympathy and flexibility, are assets for influence in the boardroom. (Terjeson et al, 2015, p.451-452)

In terms of creativity and innovation, Slater et al, in their 2008 paper in the Harvard Business Review find evidence that ‘diverse teams can boost performance because they are more likely to have access to the breadth of information necessary to solve complex problems’ (Leonard, Levine, & Joshi, 2004 in Slater et al, 2008, p.203).

As articulated by De Dreu and West, ‘the mere fact that an individual is different from most people around him promotes more open and divergent, perhaps even rebellious, thinking in that person. Such a person is more prone to question traditions, rule and boundaries - and to search for answers where others may not think to. Minority opinions stimulate creativity and divergent thought, which, through participation, manifest as innovation (De Dreu & West, 2001 in Slater et al, 2008, p.204).

On the other hand, there is the suggestion in some of the literature that diversity can have a negative impact on organisational activity, with this evidence focusing particularly on a team or group level. In a review completed by Rohwerder in May 2017, the negatives are summarised as including:

“…diversity leading to process losses through task conflict and decreased social integration; as well as the acknowledgement that increased diversity can lead to lower commitment, lower satisfaction, more perceived discrimination, misunderstanding and other negative behavioural and attitudinal outcomes." (Rohwerder, 2017, p.8)

Essentially, this literature suggests that the full benefits of diversity may not be leveraged if increased diversity creates conflicts which are not managed. If women and minorities are in a group environment where they are regarded with some scepticism and marginalised in discussions and negotiations, they may find it ‘difficult to engage productively in the work of the group, and any potentially valuable cognitive heterogeneity that they bring to the group can dissipate’ (Eagly, 2016, p.205 in Rohwerder, 2017, p.9). Other literature finds that the effects of diversity in teams can change over time, with more diverse groups being initially less effective and cooperative, but with time becoming more effective at identifying problems and generating solutions than less diverse work groups (Rohwerder, 2017, p.9).

Of course, this is not an argument against working towards greater diversity, but for appreciating that in order to leverage the benefits of diversity, more is required than just increasing the number of people from different backgrounds in the workforce or the senior management team.

From diversity to inclusion

Whether diversity is a benefit is therefore dependent on how it is managed. The literature in recent years has moved away from talking simply about diversity, towards engagement, inclusion and belonging. It is these related concepts that are considered to be important alongside well supported diversity policies and approaches – creating a culture of inclusion or a ‘diversity mindset’, whereby group members develop knowledge about the ways in which diversity can have positive or negative effects on team processes and performances (Eagly, 2016, p. 210).

In a systematic review for the then Department for Business, Innovation and Skills, Urwin et al warn ‘there is no single approach that all businesses can adopt to ensure equality and diversity are beneficial. To be effective, equality and diversity need to be embedded in the business strategy, not treated as an ad-hoc addition.” (Urwin et al, 2013, p.vii).

The most recent evidence stresses the need to go beyond diversity, and even beyond inclusion, to ‘belonging’. As the authors of a 2018 survey for LinkedIn put it:

Diversity is being invited to the party, inclusion is being asked to dance, and belonging is dancing like no one’s watching.

LinkedIn (2018) Global Recruiting Trends Report

What next?

A consequence of the recent government requirements that compel all employers with over 250 or more employees to report gender pay gap information could create more opportunities to study these themes. This will allow evidence to be gathered and analysed by researchers regarding gender diversity and its correlation with businesses performance.

In the meantime, Design Council will continue to look at how the diversity challenge of the Design Economy can be addressed. A follow-on qualitative research project will look at the experiences of design businesses managing diverse teams for business performance and innovation. Through our policy activities we will continue to advocate for introducing measures that improve access to design occupations, including exploring how women, ethnic minorities and those from less privileged backgrounds enter leadership positions. There are lessons to be learnt from what other sectors such as engineering are doing to widen recruitment and design training amongst women and those from different social backgrounds.

Sources

Sources used in this article are a limited selection from the full bibliography and evidence review. If you would like to see the full list of literature reviewed, or the full report, please get in touch with the contact at the bottom of the page.

• Linked in. (2018). Global Recruiting Trends Report
• Rohwerder, B. (2017). Diversity and inclusion within organisations. K4D Helpdesk Report. Brighton, UK: Institute of Development Studies.
• Slater S.F., Wiegand R.A. and Zwirlein T.J., (2008). The Business Case for Commitment to Diversity, Business Horizons 2008, 51, pp 201-209.
• Terjesen S., Couto E.B., and Francisco P.M. (2015). Does the presence of independent and female directors impact firm performance? A multi-country study of board diversity. Journal of Management and Governance 20 pp 447- 483
• Urwin, P., Parry. E, Dodds, I., Karuk, V., and David, A. (2013) The business case for equality and diversity, A survey of the academic literature (Department for Business, Innovation and Skills, BIS Occasional Paper No.4)