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The Positive Financial Externalities of Diversity

By now, you probably understand that introducing diversity into the corporate work sphere is the right thing to do by most people’s ethical and moral standards. However, businesses across the country that have embraced these initiatives have seen improvements in their financials as well. When employees of all races, genders, and ethnicities are treated fairly, morale is boosted, and this translates to greater productivity across the firm. There have been several studies done to prove the positive financial externalities of these initiatives related to diversity far outweigh the effort and resources required for implementation. In this blog, you will see how firms nationwide are becoming increasingly more diverse and reaping the benefits of such initiatives.

Sales Revenue Increases 15x Among Companies With High Racial Diversity

When compared to companies with lower levels of diversity, companies with high racial diversity saw 15 times more sales revenue. 1 According to studies performed by the American Sociological Association, workplace diversity is among the most important predictors of business success as it results in revenue and profits. 1 With statistics such as these, it is difficult to understand why diversity is not implemented on a larger scale in businesses throughout the country.

Companies Employing an Equal Number of Men and Women Manage to Produce Up to 41% Higher Revenue

Gender diversity in the workplace is just as vital to company success as racial diversity. Studies show that companies with an equal number of men and women also produce significantly more revenue than their counterparts who face issues related to gender diversity. 2 When men and women in the workplace are both treated equally, fairly, and offered the same opportunities, they perform better. This performance naturally lends itself to better financial performance on the company’s bottom line.

Highly Inclusive Companies Are More Likely to Hit Their Financial Target Goals by up to 120%

Hitting financial goals is important to all firms - regardless of the industry. Businesses that are traded publicly on the stock market or have received a significant amount of funding from private investors are even more incentivized to reach their financial goals on a monthly, quarterly, and most importantly, annual basis - beating objectives by up to 120%. 3 When companies work to create an inclusive professional environment, employees feel empowered to do everything they can to achieve goals for the betterment of the firm. An inclusive environment breeds effective teamwork and productivity. The statistics certainly show that implementing these sorts of initiatives can only lead to happy shareholders and investors.

Diverse Companies Enjoy 2.3 Times Higher Cash Flow per Employee

Managing cash flow is a vital aspect of effective business management. Six in ten small businesses struggle with cash flow on a continual basis. 4 In a study performed over a three-year period, it was noted that companies with a highly inclusive and diverse culture noticed over 2 times more cash flow per employee. 5 This statistic closely coincides with the above facts pertaining to increased diversity being linked to higher sales and profits. When profits increase substantially and expenses remain largely constant, cash flow becomes a nonexistent issue for businesses of all sizes.

85% Of CEOs With Diverse and Inclusive Cultures Notice Increased Profits

Statistics only tell one side of the story when it comes to company performance. There are a few variables that may only offer a specific perspective, as opposed to the whole picture. However, it is difficult to dispute the fact that 85% of CEOs with diverse and inclusive cultures are seeing and reaping the benefits of their progress initiatives. 6 When compared to other brands in their industries, CEOs of companies that exhibit higher racial and gender diversity than their competitors are much more likely to notice increased profits in the short and long term. When leaders of top organizations are raving about the positive impacts that diversity has had on their business, it is important to take note.

For some time, diversity and inclusion have been issues that have only been addressed by very forward-thinking companies. This is largely because the benefits of diversity have never really been quantified. Many upper-level managers realize that it is the right thing to do, but if it does not produce value for the organization, getting company buy-in to implement such initiatives is incredibly difficult, if not outright impossible. Luckily, several studies have been done to prove the tangible results that a diverse and inclusive culture can provide to businesses - and the impact can be massive. When attempting to introduce diversity initiatives within an organization, consider the above facts to help you garner widespread support in implementing such an endeavor.

Mr. Hough currently serves in a dual capacity with Blaylock Van as the Chief Operating Officer (COO) and a member of the Public Finance Team. Prior to rejoining Blaylock Van, Mr. Hough was CCO at IFS Securities and is the Founding Member of Taurus Compliance Consulting, LLC. Mr. Hough has also served as CEO of Jumpstart Securities (formerly FundAmerica Securities) as well as President and CEO of Capital & Credit International, Inc. Mr. Hough began his career at FINRA’s District 7 office.

**Disclaimer**

This article was prepared exclusively for Blaylock Van, LLC. Links are solely intended for convenience and are not intended to be advertisement whatsoever. Linked sites are not under the control of Blaylock Van, LLC and Blaylock Van, LLC is not responsible for the content of any linked site or any link contained in this article. Blaylock Van, LLC does not endorse companies, or their products or services, to which it links. If you decide to access any of the third-party sites linked to this site or article, you do this entirely at your own risk. This document is confidential and has been prepared for informational purposes only. This document is not to be construed as a recommendation, an offer to sell or a solicitation of an offer to buy any securities. Any dissemination, distribution or reproduction of this document is strictly prohibited without the consent of Blaylock Van, LLC. The information herein is obtained from sources deemed reliable, but its accuracy and completeness cannot be guaranteed, and is subject to change without notice.

Bibliography

[1] ScienceDaily. 2009. Diversity Linked To Increased Sales Revenue And Profits, More Customers. [online] Available at: <https://www.sciencedaily.com/releases/2009/03/090331091252.htm>

[2] Bureau of Labor Statistics, “Persons with a Disability: Labor Force Characteristics–2011,” press release, July 8, 2012, available at http://www.bls.gov/news.release/pdf/disabl.pdf

[3] Gartner. 2021. Human Resources Leadership | Gartner. [online] Available at: <https://www.cebglobal.com/human-resources/diversity-inclusion/diversity-and- inclusion/diversity-white- paper.html?referrerTitle=Creating%20Competitive%20Advantage%20Through%20Workf orce%20Diversity&referrerContentType=indexpage&referrerURL=https%3A%2F%2Fww w.cebglobal.com%2Fhuman-resources%2Fdiversity-inclusion%2Fdiversity-and- inclusion%2Fdiversity-white-paper.html&referrerComponentName=External%20List%20- %20Temporary&pageRequestId=3072fd8c-fb0f-4e72-81ad-2f958195250d>

[4] Hardekopf, B., 2019. Why Small Businesses Are Struggling With Cash Flow. [online] Forbes. Available at: <https://www.forbes.com/sites/billhardekopf/2019/02/06/why-small- businesses-are-struggling-with-cash-flow/?sh=43a3b7b21e0a>

[5] Petersen, B., 2016. The state of US workplace diversity in 14 statistics | ArchPoint Consulting. [online] ArchPoint Consulting. Available at: <https://archpointgroup.com/the- state-of-us-workplace-diversity-in-14-statistics/>

[6] A leadership agenda to take on tomorrow. n.d. PwC 24th Annual Global CEO Survey. [online] Available at: <http://www.pwc.com/gx/en/ceo-agenda/ceosurvey/2015/key- findings/diversity.html>

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