Why building diverse teams is essential for your business

The business case for promoting diversity in the workplace keeps getting stronger. Diverse teams give companies a strategic advantage that can enhance decision-making, boost overall performance, increase employee satisfaction and meet community needs.

A recent McKinsey Diversity Matters Even More report backs up the ongoing positive impact of diversity in the workplace. Incorporating insights gleaned from more than 1,200 companies worldwide, the study found companies with more gender and ethnic diversity on boards and executive teams achieved higher financial returns.

For the first time in McKinsey’s diversity series, the report also looked at diversity’s holistic impact on the business environment. New findings revealed that more diverse leadership teams correlated to higher levels of employee and community well-being.

“A ton of research keeps proving that fostering diverse teams with a variety of experiences and perspectives is the way to go for greater business success and sustainability,” says Keisha Rivers, a Vistage speaker and president and chief change officer of The KARS Group LTD in Huntersville, North Carolina. “More collaborative and quicker to identify issues, diverse team members help increase innovation and creativity in organizations by simply contributing their unique insights.”

What makes for a diverse team?

Team members with different backgrounds, talents and experiences can add more value to tackling business challenges or seizing upon new opportunities thanks to their dissimilarities. Physical identifiers like gender, race and age often come to mind first when people think of diversity in the workplace, Rivers says. But the concept means so much more for organizations keen on building diverse teams that can work well enough together toward the same goals.

“Diversity comes in many different dimensions,” says Hanlie Van Wyk, a Vistage speaker and global change consultant for The Kaleidoscope Group in Chicago. “Beyond the primary ones you typically hear discussed in DEI conversations, secondary differentiators can include less obvious ones like education, language, and religion or different workstyle preferences of individuals on a team.”

Working with clients around the world, she has also found that the meaning of diversity varies across regions and countries. In multinational enterprises, cross-cultural differences often come into play when putting together diverse teams, according to Van Wyk. For example, one of Van Wyk’s biopharma clients had teams in Belgium, Japan and the United States. Effectively working together required leadership and team members to understand and appreciate a myriad of workstyles influenced by their respective cultural norms, she says.

Employees can also benefit from a more diverse team environment. More than half of U.S. workers (56%) look favorably on efforts to increase diversity in the workplace, according to a May 2023 Pew Research Center survey.

Embracing diversity can unlock a company’s full potential and position it for long-term success. Here are six reasons why diverse teams are a must-have for any organization.

1. Unlimited innovation and creativity

Different viewpoints, skill sets and experiences make brainstorming easier and more productive. Increased input from a diverse workforce ensures that fewer avenues go unexplored when striking out in new directions or coming up with “a-ha” moments, whether it’s a process or a product.

“At the rate and pace of change today, no one person or group of people has the lock on any given perspective,” says Rivers. “For companies to be agile, they need team members who can think outside the box and that only comes from having a diverse group of people who can generate a variety of ideas.”

2. Understanding diverse markets

In the global marketplace, in-depth knowledge of diverse markets can make or break a company. Employing diverse team members with various cultural backgrounds can provide insider information and invaluable street cred.

One of Van Wyk’s clients, a protein powder maker, taps into the cultural insight of its diverse workforce. During Ramadan, the company markets its products as good nutrition to individuals fasting during this Muslim holy month observance. “Their marketing strategy was driven by having a diverse team that understood what this particular customer base needed,” she says. “In turn, the customers appreciated that there were people in the company who were the same as them.”

3. Enhanced problem-solving

For problems that require a quick simple fix, some research has given the advantage to non-diverse teams that often have faster decision-making capabilities. But for more complex tasks, diverse teams frequently outperform their more homogenous counterparts over time by approaching issues from multiple vantage points for the best quality solution, according to Van Wyk.

Increasing diversity of thought allows diverse teams to innovate groundbreaking ideas and solutions more easily. “Various perspectives can provide a more complete picture of an issue to more easily see what is not typical or already believed as the truth,” says Rivers. “Like the blind men or ‘people’ and the elephant analogy of touching different parts of the animal to better understand the whole, each person contributes their own distinct experiences and sense of the world.”

4. Nurtures an inclusive culture

Being seen, heard, and valued matters in the workplace, no matter how diverse or homogenous a company is. Promoting a culture of belonging and providing a psychologically safe space goes a long way toward boosting employee morale, job satisfaction and retention.

Building a diverse team goes hand in hand with inclusion. Otherwise, Van Wyk says, it can get “pretty messy, and what you get is a revolving door.”
Intentionally creating an atmosphere of shared ownership and community where everyone feels welcomed and respected ensures diverse teams maximize an organization’s full potential and position it for long-term success. The feeling of being accepted and believed needs to happen for each team member for diverse teams to actively move the needle forward for companies, according to Rivers.

“Working toward common goals is so much easier to accomplish when people look around and see they are not the only one who looks like them in the room,” says Rivers. “It can be intimidating to be the only one.”

5. Attracts best of the best

Diverse team building done well serves as a critical recruitment tool for top talent, especially for the majority of individuals making up workforces around the globe: Gen Zs and millennials. Companies with diverse teams draw highly skilled and motivated employees with high expectations of their employers. For some, a diverse workplace is a non-negotiable. A recent Deloitte survey found that 39% of Gen Z and 34% of millennials have turned down employers that do not align with their values.

Younger generations are very mindful of the level of diversity in companies because it “really does matter to them,” Van Wyk says. They research an organization’s DEI initiatives and will ask about them in interviews. Even photos of people — diverse or all the same — on a company’s website can provide clues to how organizations view what it means to have a diverse team.

Companies can strengthen their hiring and recruitment of new staffers at all levels by being more explicit in their diversity branding, Van Wyk adds. Organizations can walk their diversity talk by showing they have programs for career growth for women leaders or by demonstrating they have inclusive policies in the workplace that do not tolerate harassment or discrimination.

“Diversity in a company is an attractive choice for job candidates and can make the difference in choosing between one employer over another,” says Van Wyk.

6. Reflects the customer base

The U.S. workforce now encompasses employees from five generations: traditionalists, baby boomers, Gen X, millennials and Gen Z. Spanning the ages of 16 to 75, these distinct groups bring the unique viewpoints of their peers to the workplace, not to mention shopping habits.

“Not only do we have companies employing five generations of workers but we also have five generations of consumers,” River says.
Cultivating a diverse team that reflects a variety of ages gives companies keener insight into diverse customer needs, wants and desires. How best to reach them continues to evolve. For example, the growing popularity of podcasts among young adults has emerged as a new informational and advertising medium for reaching millions of people.

Indeed, Rivers has grown her consulting services thanks to a podcast. An organization recently reached out to her to invite her to give a talk about the people side of change management. “Fortunately for me, they had someone on their team who was an avid podcast listener and just happened to hear me on it,” she says. “It just goes to show that diverse teams can open up unexpected new ways of interacting.”

A smarter path for doing business right

Sparking innovation. Understanding diverse markets. Creating an inclusive and healthy work environment. Building diverse teams offers companies a path to success and sustainability, especially when carefully aligned with an organization’s mission, vision and values for the long term, Van Wyk says.

“Be intentional, be clear, and be strategic,” she advises. “And don’t treat diversity as a box to tick off.”

An incredible resource, nurturing a diverse team can expand a company’s ability to see countless possibilities they may never have contemplated.

“At its core, innovation is really about perspective and diversity widens the net to capture more ideas,” says Rivers. “You cannot lead where you have not been, and that’s where a diverse team is an invaluable asset.”

Related Resources

The Diversity and Inclusion Resource Center

How to make DEIB a part of your talent strategy

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