Cultural Diversity in the Workplace

Why It Is So Important

Benefits of Diversity in the Workplace: How diversity promotes profits. Illustration shows Culturally diverse workplace builds trust in your brand with a diverse target market Enhances employee engagement by showing the company understands and respects different cultures Gives company freedom to go after the most talented people, regardless of differences A diverse workplace better understands diverse markets, stimulating innovation

The Balance / Lara Antal

Cultural diversity is when different races, ethnicities, ages, abilities, languages, nationalities, socioeconomic statuses, genders, religions, and/or sexual orientations are well represented within a community. The group is diverse if a wide variety of groups are represented. It's important not only to have cultural diversity in communities but also in the workplace.

What Is Cultural Diversity and Why Does It Matter?

Cultural diversity means that a group contains people of different races, religions, ages, ethnicities, genders, sexual orientations, socioeconomic statuses, nationalities, and more.

Diversity benefits the workplace because people from various backgrounds have different perspectives. Their contribution to the business allows the group to look at problems from all different angles. The results are often innovative.

For diversity to bring strength, it should be valued in the corporate philosophy. More important, it must be integrated into company practices. It takes time and a commitment to celebrate diversity. Workers must be open-minded and non-judgmental in order to truly understand how cultural diversity can impact the workplace and make it better.

If employees and management don't encourage cultural diversity, teams will be weak. Unfortunately, people may have prior misconceptions that may lead to miscommunication and issues between team members of different backgrounds. If not addressed, the workplace will falter. Racism, sexism, ageism, and more should not be tolerated in the workplace.

Benefits of Cultural Diversity in the Workplace

When it works, diversity increases workplace productivity and profits. Each year, DiversityInc selects the 50 most diverse companies. In 2020, it found that employees who felt included in their workplace took 75% less sick days than employees who felt as if they did not belong. They also receive twice as many raises and companies see 50% less turnover.

So how does diversity drive profitability? There are three areas where the business can benefit in particular:

  1. Marketing: Having a diverse workforce builds trust in your brand with a diverse target market.
  2. Operations: Valuing diversity cuts costs by reducing turnover and absenteeism. It also avoids legal expenses by enhancing employee engagement by showing the company understands and respects different cultures. Valuing diversity also gives the company the freedom to go after the most talented people, regardless of differences.
  3. Innovation: Diversity within a product development team is very powerful. When it's in sync with diverse target markets, the team creates new products that satisfy the markets' needs. That's because a diverse workforce better understands diverse markets.

Embracing diversity also cuts down on legal costs. It's illegal for employers to discriminate against employees based on their race, religion, gender, and more. The Equal Employment Opportunity Commission promotes equal opportunity and handles complaints about workplace discrimination.

Federal laws prohibit workplace discrimination in six areas: age, disability, national origin, race, religion, and gender. 

How to Ensure Cultural Diversity in the Workplace

Stereotypes and prejudices create destructive communication. Unfortunately, some people may only see different races, genders, or sexual orientations as a negative rather than a positive. This can and should not be tolerated in the workplace.

You may notice that your team at work is not diverse. By putting an emphasis on hiring individuals from a variety of backgrounds, you can create a culturally diverse workplace. It may take a little while to develop a culturally diverse team, but it'll be worth it to have a workplace that reflects the rest of the world.

And once the team gets to know each other, the diversity among the group will make it more innovative and increase performance.

Wharton Business School consultant Pamela Tudor found the key to managing diversity: Team members must be dedicated to a shared goal. She found that a strong commitment to a common objective overcame any issues.

But it's not that simple. Diverse teams must be supported and celebrated by departments that unite employees around the shared goal. If they're not, employees may leave to find a new job at a more company that puts more emphasis on hiring diverse groups of people. In order to ensure this doesn't happen, management and employees must work together to recognize where their biases or lack of diversity are, and focus on changing them.

Cultural Diversity in Companies

In 2020, Marriott International was No. 1 on DiversityInc's Top 50 Companies for Diversity list. Unfortunately, diversity is still very much lacking on its board. As of June 2020, its 12-member board of directors has one Black man, one Black woman, one Hispanic man, three white women, and six white men.

According to Glassdoor's Best Places to Work 2020, the No. 1 winner was HubSpot, with employee reviews stating that it "works hard to create a truly diverse and inclusive work environment where everyone can feel comfortable bringing their true selves to work."

Fortune and Forbes also put out annual lists of the most diverse companies to work for, with Stryker and SAP taking the top spots, respectively.

Unfortunately, it's not enough to make a list every year. Companies need to practice what they preach and make real changes so that the people who work there feel included as valuable members of a diverse culture. There's always more work that can be done to prioritize cultural diversity in the workplace.

The Power of Diversity

According to the U.S. Census Bureau, the cultural makeup of the U.S. population will shift over the next 30 years in a positive direction. By 2060, the number of non-Hispanic white people will be just 44% as the population drops. This means the U.S. population will no longer be a majority white and we'll see diversity grow through communities and workplaces.

This shift in the composition of the U.S. population will only have a greater impact on the economy, too. According to a 2018 Nielsen report, African Americans spend $1.2 trillion annually. The report found that 38% of African Americans between age 18 to 34 and 41% age 35 or older expect brands to support social causes. Companies should take note and work toward being more culturally diverse in order to show their support of anti-racism and equality, which may appeal to even more consumers.

Another Nielsen report found that by 2023, the buying power of the Latinx population in the U.S. is expected to exceed $1.9 trillion. Nielsen found that this population also makes purchasing decisions with passion, sharing their opinions openly with their social circles. This group may notice companies that pay attention to social causes. And at the same time, this group is also diverse, and companies shouldn't target one nationality with something like a Mexican flag. They need to show their support for the entire Hispanic population.

In 2015, the buying power of the LGBTQ market was $917 billion. This group contributes over $1.7 trillion to the economy. Additionally, one Google Consumer Survey found that 47% of millennials would be more likely to support a brand if they saw an equality-themed ad. The survey also found that 45% of all consumers under 34 would be more likely to do repeat business with an LGBTQ-friendly company.

The Bottom Line

How well the workplace embraces cultural diversity may result in greater profits by attracting consumers who support companies with diversity and inclusion initiatives. Research by McKinsey & Company found that companies with workforces comprising a large percentage of diversity in gender, race, and ethnicity often outperform the national industry median by as much as 35%. Companies that score low diversity percentages are more likely to be ones that do not earn above-average profits.

For a culturally diverse workforce to work as an effective organization, the understanding and celebration of differences must be ingrained and valued in company culture. A well-managed, diverse employee base is key to answering an equally increasing diverse market.