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In the spotlight: diversity and inclusion

Creating value by addressing business challenges with diversity and inclusion

Johannes (Joop) Smits
Director, People and Organisation, PwC Switzerland

Nicola Troppmann
Manager, People and Organisation, PwC Switzerland

Diversity and inclusion (D&I), an important part of the social pillar of ESG, has shot up the public and corporate agenda more quickly than anyone could have foreseen. Strong evidence indicates that a diverse pool of talent and a culture of inclusion can create value and enable companies to outperform. But how do you put theory into practice to achieve an organisation that not only is diverse, but also where this diversity has real business impact?

Introduction

To answer these questions, we need to take a closer look at how D&I fits into the broader context of work and business performance. D&I maturity is a great opportunity for companies to face and respond to reality of the markets we operate and live in. To understand this more clearly, let’s take a deeper look at three dimensions of reality:

1. Social reality is heavily influenced by the current demographic and digital transformation. In the search for talent, you as a business have to respond to changing candidate needs, such as the higher value placed on time and flexibility, the need to combine caring and careers, greater economic wealth and the aging population. 

2. The reality of the markets is that they’re volatile, uncertain, complex and ambiguous. Added to this, the recruitment market has become increasingly transparent, and ‒ largely due to the pandemic – we are facing an evolving ‘new normal’ in terms of hybrid, flexible and remote working models that open various opportunities and challenge previous perceptions.  

3. The demographic reality is that there are currently four generations in the workforce, ranging from the Baby Boomers (1946-64) to Generation Z (1997-2012). Each generation holds diverse priorities, values and beliefs that influence its perceptions of the diversity dimensions of its population, including ethnicity, gender, LGBTQi, education, physical/ mental ability and income.

To address these complex and evolving realities, it’s crucial to welcome, lead and master change on a personal and collective level ‒ and it’s crucial to have a workforce with the cultural and cognitive diversity to flourish and sustain in such a diverse environment.

Strong evidence that companies embracing D&I are more likely to outperform

Diverse leaders are more likely to create an environment of new, creative ideas, and diverse teams are more likely to have some common experience with their end users and thus create better products:

Are you missing millions?

We worked with the 30% Club to review how organisations can address the potential ‘missing millions’ of gender-related insights and opportunities. Our report includes several case studies of large international corporations in different industries that have identified important opportunities for value creation in terms of reputation, revenues and profitability by looking at business challenges through a D&I lens.

Missing millions

Bridging theory and practice

Phase I: Look at your value chain to find where greater diversity is needed (get the right pool of people)

Recognising that your organisation needs greater diversity to respond to the current reality is one thing but working out precisely what kind of diversity is needed is another. A good place to start is by looking at your value chain.

PwC has developed a robust methodology that enables organisations of all sizes and across all industries to find and harness opportunities for realising the business benefits of diversity and inclusion. The approach is based on the recognition that the chief value drivers of any organisation will be found at different parts of the value chain. The trick is to first define what constitutes value for your organisation. For a commercial organisation, this might be profitability or shareholder value; for an NGO, it could be what the community you serve receives as a societal benefit. Then you examine every link of your value chain - from innovation, sourcing, manufacturing and logistics to marketing and sales, consumer use and consumer insight - to find where investment in diversity will yield the greatest value.

Realise the business benefits of diversity and inclusion

Let’s take an example from manufacturing to illustrate what we mean. In this industry, a great deal of value often lies in increasing turnover speed or reducing the rate of incidents and errors. At a major beer company, accidents resulting from alcohol abuse among teams at its breweries was identified as a serious problem. The company was able to reduce incidents across the country by deploying teams combining men and women, as the influence of women on the behaviour of the team as a whole translated into a lower rate of alcohol abuse. If you take a closer look at the various links in your value chain, you might identify areas where greater diversity and inclusion could improve your business performance.

Introducing a model framework for diversity action 

These examples show that the areas where you can leverage D&I for the greatest benefits will vary depending on your organisation and the precise nature and area of your business. An intelligent approach to harnessing the business benefits of D&I therefore has to start with understanding your organisation’s specific value chain. This is the first step in a five-step framework that PwC proposes to guide organisations in both the for-profit and not-for-profit sectors through their diversity journey.

Step 1: Map your value chain and define diversity focus areas based on your business needs

Step 2: Analyse data through a diversity lens to get an accurate, fact-based picture of your current diversity

Step 3: Develop your diversity strategy and plan interventions 

Step 4: Build and implement interventions by starting small, allowing learnings and creating showcases 

Step 5: Track and trace interventions

Phase II: Foster inclusion to unlock the potential of diversity (establish the right mindset)

Phase I helps you identify precisely where diversity can most benefit your organisation by linking value chain needs with the dimensions of diversity that need to be improved. This provides structure to your intention but is not enough on its own You might have the perfect diverse setting in terms of the value chain, customers and the market – in theory addressing the angles needed to outperform the market – but still feel as if the parking brake is on. 

Simply matching diversity to a list of KPIs will not achieve the business impact you’re looking for; a mindset of inclusion is needed to embed diversity within the organisation. 

In concrete terms, this means raising awareness of biases, mental models and cognitive diversity within the organisation. Although cognitive diversity is incredibly important for high-performing teams, its impact is often undervalued because it is invisible. Cognitive diversity inherently impacts our ways of working and the value we create in collaboration. By increasing diversity of all kinds ‒ especially cognitive diversity ‒ you increase the likelihood of different ways of thinking and thus boost the gross collective potential of your workforce. Unlocking this potential is crucial and impacts everyone. It’s not about integrating diverse people into an existing set-up. Inclusion starts with increasing the organisation’s receptivity to diverse contributions, which almost always requires inner work.

Various factors impact receptivity across hierarchical, geographical and segmental levels within organisations. Initiatives to build inclusive cultures, inclusive leadership, mindfulness and reflection and psychological safety are blooming; all of these ideas head in the direction of receptiveness. Nonetheless, you must be aware that most of your workforce has been socialised in a way that is not really an enabler of inclusion. 

For this reason, helping clients establish a mindset of inclusion to unlock potential is an important part of our work. These include: 

  • D&I learning and development offering to build a sound understanding of the business context and D&I tailored to the reality of work. This can address a variety of groups, such as top leadership and senior executives, managers at all levels, HR professionals, members of employee networks or all employees. 
  • Culture change and inclusive leadership development to equip the management team with the skills, knowledge and tools to lead their teams in an inclusive way. This involves providing a theoretical and practical understanding of inclusive leadership in the relevant business sector and triggering behaviour change through case studies, self-reflection, accountability partners and a comprehensive practical toolkit.
  • Organisation-wide D&I capacity building - including top management - with a focus on unconscious bias, inclusive language and how to deal with inappropriate behaviours.

We’ve found that the three keys to success are (1) strengthen your collective D&I literacy through continuous education of employees on biases, existing mental models and cognitive diversity, (2) deeply anchoring competencies within the organisation that enable teams to use their collective potential and (3) ensure executives, leaders and managers are role modelling the right behaviours. We can’t predict the future, but we do recognise that the pace is quickening and the complexity is only growing. There is a constant need for change in a very uncertain and ambiguous environment. 

We have observed that, with the appropriate level of cognitive diversity, improving self-efficacy by educating people on the topics outlined above boosts collective efficacy within teams. It makes teams realise their collective potential and helps individuals thrive. In other words, it helps people to release the parking brake to perform at full speed.

Conclusion

In his 2021 letter to CEOs, BlackRock CEO and chairman Larry Fink put the importance of diversity in business in a nutshell:

“A company that does not seek to benefit from the full spectrum of human talent is weaker for it – less likely to hire the best talent, less likely to reflect the needs of its customers and the communities where it operates and less likely to outperform.”

The call to action is clear: to outperform in an increasingly complex business reality, organisations must harness the full power of diversity. In our work at PwC, we’ve found that this isn’t just a matter of getting a good mix of people and talent: You need to examine your value chain to find out where diversity will have the greatest impact and foster a mindset of inclusion that enables you to embed diversity within the organisation. 

Talk to us if you’re looking for ways to translate the D&I challenge into concrete approaches to harnessing the benefits at key points in your value chain ‒ and to continue reaping the benefits by educating your people to be receptive to diversity and aware of how to harness it to the full extent possible.

Contact us

Johannes (Joop) Smits

Johannes (Joop) Smits

Partner, People and Organisation | Geneva, PwC Switzerland

Tel: +41 58 792 91 64

Nicola Troppmann

Nicola Troppmann

Manager People and Organisation, PwC Switzerland

Tel: +41 58 792 46 08