How Diverse Teams Drive Innovation in the Workplace? (+ Statistics)

There's no arguing diversity in the workplace takes work, dedication, and perseverance. However, what innovative organizations often learn throughout this work is that hiring and retaining an inclusive, diverse workforce can significantly impact individuals, teams, and organizations.

But understanding the impacts is just the first step. From there, it takes continued leadership and accountability to move the dial by identifying ongoing opportunities to build an inclusive environment plan and executing the right strategies for a positive company culture where employees feel safe, supported, and engaged.

Statistics show that companies with more diverse management teams earn 19% more from innovation, making up 45% of their total revenue compared to 26% for less diverse teams (BCG Innovation and Diversity Survey: Diversity drives innovation and innovation drives diversity).

This article will highlight the importance of workplace diversity and how diverse teams drive innovation.

What is Workplace Diversity?

In simple terms, diversity in the workplace is about hiring and retaining a workforce that involves the representation of people from various backgrounds. Since organizations bring together individuals for a common purpose, it is no surprise that workplace diversity covers many areas, including but not limited to every race and ethnicity, representation on the basis of gender identity, sexual orientation, and representation of people with disabilities, including neurodiversity.

Why Does Diversity in the Workplace Take Effort?

With individuals coming from different life experiences, viewpoints, opinions, and ideas fueled by background, culture, ethnicity, and education, naturally, diverse teams will incur more disagreements than homogeneous (i.e., non-diverse) ones.

These differences can result in authentic disagreements, but the small differences can also pile up over time and create interpersonal conflict, which can erode trust, psychological safety, and team cohesion.

You may wonder why organizations would take on the challenge of creating a diverse workforce if it could result in more disagreements and disputes. The answer is simple - because it's good for employees, customers, leadership, and business performance.

Compositional vs. Informational Diversity: A Dynamic Duo

Diversity isn't a one-size-fits-all concept. It can be broken down into:

• Compositional Diversity: The visible aspects like race, gender, and age.
• Informational Diversity: The invisible yet crucial differences in skills, experiences, and networks.

Research says that teams rich in both types are a powerhouse of high morale and superior decision-making. These teams don't just function; they flourish.

7 Ways Diversity in the Workplace Drives Innovation

Disagreements are not always bad, especially those that are productive and constructive. Researches suggest that when diversity is also balanced with inclusion and psychological safety, the chances of having creative thinking and creative problem-solving skyrocket.

Here are seven of the top ways diversity drives innovation:

1. Diverse teams are more creative

Creativity and innovation are two sides of the same coin, but let's briefly discuss how diversity in the workplace drives creativity. According to an article from Deloitte, “Diverse teams are best suited to generate creative ideas because team members see consumer needs, and potential solutions to meet those needs, from a range of perspectives.”

In the report "The diversity and inclusion revolution: Eight powerful truths," Deloitte highlights that diverse teams are well-equipped to generate creative ideas due to their ability to perceive consumer needs and devise solutions from a variety of perspectives.

2. A diverse workforce provides insight into new markets

A diverse team brings to light new perspectives, especially when employees reflect the people they serve, aka your clientele. When employees come from various ages, life experiences, backgrounds, genders, races, ethnicities, and countries, they can connect with and provide unique insight into the needs of respective market that would otherwise be closed off to the organization and its leadership.

3. Multicultural work teams improve customer and client relations

Researches suggest that clients are naturally more likely to trust, relate to, and work with those who represent, reflect, and understand them. These findings suggest that when professionals share or deeply understand their clients' cultural backgrounds, it can lead to more effective communication, increased trust, and better overall outcomes.​

4. Diverse leadership teams make better business decisions

The power of diversity in business decision-making cannot be understated. For instance, a study by Cloverpop stated that “diverse teams outperformed individual decision-makers up to 87% of the time.”

In the same Cloverpop's research analyzed 600 business decisions made by 200 teams across various companies and industries, finding that diverse teams made better decisions 87% of the time compared to individuals.

5. Transparency about diversity and inclusion attracts top talent

Competing for top talent in most industries right now is fierce, and one of the surefire ways to give your organization a competitive advantage is to first put in the work to become a more diverse and inclusive workplace. Then, as an added benefit, you'll see the positive impact this can have on your employer brand.

Just take the following two statistics, for instance:

• “Two-thirds of the workforce (67%) consider diversity and inclusion when deciding where to work.” (Glassdoor)
• “57% of employees think their company should be more diverse.” (Glassdoor)

6. Employees stay longer and are more engaged in diverse workplaces

Glassdoor found that “76% of job seekers and employees said a diverse workforce was essential when evaluating companies and job offers.” Such a significant impact cannot be ignored, as we know employee turnover is costly, both financially and in terms of team performance.

On the flip side, data from Deloitte contextualizes those results by saying, “If just 10% more of employees felt included, the company's work attendance would increase by almost one day per year per employee, and in a similar organization of 10,000 people, increased inclusion would lead to an additional 70 employees per year choosing to stay with their employer.”

7. Diverse organizations excel in financial performance

Here are findings from McKinsey & Company's "Diversity Wins: How Inclusion Matters" report:

• “Companies in the top quartile for gender diversity on executive teams were 25 % more likely to have above-average profitability than companies in the fourth quartile.”
• “Companies with more than 30 % women on their executive teams are significantly more likely to outperform those with between 10 and 30 % women, and these in turn are more likely to outperform those with fewer or no women executives.”
• “The likelihood of outperformance continues to be higher for diversity in ethnicity than for gender. In 2019, top-quartile companies outperformed those in the fourth one by 36% in profitability, slightly up from 33% in 2017 and 35% in 2014.”

How Do You Lead a Diverse Team?

If the statistics and results above excite you and what could be for your team and organization, then it is essential that you also seek to hone your inclusive leadership skills.

To improve your inclusive leadership skills and help your organization in their diversity, belonging, and inclusion efforts, consider enrolling in the "Diversity, Equity, and Inclusion (DEI) for Leaders" program by Niagara Institute.