Why Diversity Matters for Businesses

Gerry Valentine July 4, 2015

Diversity has been a hot topic for three decades, yet the numbers are still appalling. Minorities – meaning African-Americans, Asians, and Latinos combined – comprise only 4 percent of Fortune 500 CEOs. Women make up only 4.8 percent. Similar disparities can be found down the corporate ladder and across all sizes of companies. At the same time, numerous studies have demonstrated that diversity increases innovation; this means that most companies are putting themselves at a strategic disadvantage.

I believe the diversity problem persists for three reasons: 1) We are dealing with a problem that is often unconscious, making it harder to address; 2) fostering diversity requires more sophisticated leadership skills; and 3) most companies haven’t yet made the necessary commitment.


For the most part, overt discrimination has become rare. However, we now have a problem that is actually harder to solve – “unconscious bias.” One interesting study that illustrates the problem examined employers’ willingness to interview job candidates based on perceived race. The study took identical resumes and substituted white-sounding names (such as Emily and John) with stereotypically African-American names (such as Lakisha and Jamal). The resumes with white-sounding names received 50 percent more interview callbacks. A similar study on gender bias in the sciences demonstrated that changing the name on a resume from John to Jennifer caused reviewers to rate the candidate as less qualified and to recommend a 14 percent lower salary. Other studies show a similar dynamic with performance appraisals and promotions, and they reveal how very subtle discriminatory behaviors (sometimes called “microaggressions”) produce unwelcoming work environments.

One major driver of unconscious bias is what psychologists call “schemas” – unconscious shortcuts all humans use to organize complex ideas. Schemas make daily life possible because, for example, they allow us to form a generalization of what a cat looks like and thereby recognize a different kind of cat. However, when applied to people, schemas often lead to bias – for instance, when unfavorable media representations of women or minorities lead to prejudice.

Although schemas can be difficult to break, understanding our prejudices is an important first step, and all humans have prejudices. Harvard University has an excellent free online tool that can help people identify their internal prejudices – the Implicit Attribution Test.

“Inclusivity means valuing different types of people specifically because of the different perspectives that they bring, and it involves leveraging those perspectives in order to drive innovation.”


In order to foster diverse work environments, leaders need a combination of skills that include self-awareness of their own biases, the commitment to set standards, and the ability to skillfully manage conflict. The self-awareness to identify their own unconscious biases, combined with the willingness to challenge those biases, provides the foundation to lead by example. I know a male CEO who has made a significant commitment to understanding and combating his own unconscious biases. When he witnessed a male employee looking a female employee up and down during a conversation, he quietly pulled the male employee aside and said, “You don’t look at me like that when we’re talking; why would you look at her like that?” This sent a clear message about how he expects women to be treated at his company.

These leaders also need to understand the difference between diversity and inclusivity. Diversity is simply having different types of people, and it’s often simply a “check-the-box” activity. Inclusivity means valuing different types of people specifically because of the different perspectives that they bring, and it involves leveraging those perspectives in order to drive innovation.

Inclusivity can also trigger “creative abrasion” – increases in conflict from bringing different perspectives together. That is a natural part of the creative process. Leaders need the ability to make sure conflict stays productive so that it drives creativity rather than destructive behavior.


Addressing diversity and inclusivity requires a deeper commitment than most companies have made. Many simply require a few legally-focused diversity trainings, but that is often ineffective and is sometimes even harmful. Recent research suggests that mandatory diversity training that emphasizes legal risk and fails to demonstrate senior leadership engagement often backfires. It generates a perception that the company is just checking a box to protect itself.

A more effective approach is to actually make diversity training optional but to also have very visible senior leader participation. For example, if the CEO or other senior leaders attend all diversity trainings and actively participate, that sends a very clear message. Sometimes companies complain that diversity training isn’t important enough to warrant senior leadership time, which, of course, also sends a very clear message.

Another effective approach is to establish diversity committees (that include senior leaders) in order to develop strategies and set measurable goals – just as you would for any other business activity. Most importantly, companies need to recognize that diversity and inclusivity are longterm goals that require an ongoing commitment.

By the year 2040, the majority of US citizens will be minorities, and, of course, we are already 51 percent female. If we fail to address the diversity challenge, especially at the most senior levels, we will have a situation where companies do not reflect their own customers. We know the problem is already stifling innovation and business growth.

This is a challenge where it is critical for the conscientious business community to demonstrate leadership. Building companies that reflect society and fostering equal access to opportunity fall squarely within the “people” leg of our triple-bottom-line model. By definition, our community is more forward-thinking and thus most able to address this issue. And finally, by harnessing the innovation that diversity brings, we will best position ourselves to use business as a powerful force for good.

Gerry Valentine is founder of Vision Executive Coaching. He works with socially responsible leaders to build companies that can change the world – focusing on business strategy, innovation, and leadership. Gerry has 30 years of leadership experience, an MBA from NYU and a BS from Cornell University. Connect with Gerry at: www.linkedin.com/in/gerryvalentine, Twitter: @gerryval, or email: gerry@VisionExecutiveCoaching.com

Equity and Inclusion / Stakeholder Capitalism
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