Benefits of Diversity on Innovation | Selection Partners | Executive Recruitment, Melbourne

Benefits of Diversity on Innovation

Benefits of Diversity on InnovationDiversity 10.11.17a

In this volatile and complex world, for organisations to continue to prosper beyond 2017, Leaders need to build on their historic skills to embrace innovation and change.  Diversity of leadership encourages new ways of thinking, and challenges old paradigms

New leadership strengths such as courage, collaboration and diversity of thinking are essential.  The global management trend towards collaborative and inclusive leadership are often traits attributed to femininity. This celebration of stereo-typically female characteristics is a stark shift from what we have previously been wired to perceive as weakness in the workplace.

Researcher Rocío Lorenzo and her team recently shared the findings their study which surveyed 171 companies. They looked at the share of revenues of these companies from innovation, ie share from new products or services in the last three years. Then they compared it with how diverse they are. It was a resounding and undeniable linkage that they pondered… Do more innovative companies value diversity more OR is it that more diverse leadership groups are more innovative?
However and this comes up across the research, it can’t just be one woman in the group, there needs to be and it varies on the study, between 20-30% women for diversity to make a tangible impact.

The study shows that companies with the greatest gender diversity (8 out of every 20 managers were female) generated about 34% of their revenues from innovative products and services in the most recent three-year period. That compares with innovation revenues of 25% for companies that have the least gender diversity (only 1 in 20 managers were female). The positive relationship between management diversity and innovation is statistically significant, meaning that companies with higher levels of diversity get more revenue from new products and services.

In another study, the Credit Suisse Research Institute issued a report in which they examined 2,360 companies globally from 2005 to 2011, looking for a relationship between gender diversity on corporate management boards and financial performance. The researchers found that companies with one or more women on the board delivered higher average returns on equity, net debt to equity and better average growth.

Similarly, Catalyst found significantly higher returns in Fortune 500 companies with more women at the top and on their boards of directors. McKinsey found that, in a group of publicly traded European companies, those with gender diversity in leadership experienced higher return on equity, operating profit, and stock price.

The business case for gender diversity is strong but is the appetite from Australian business?

Written by Amy Cato.

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