The Business Case for Diversity
What affect will the changes have upon my business?
The following information demonstrates that the business benefits of a diverse workforce are clear.If your business is located in Birmingham, it needs to be attractive and non discriminatory to all types of individual, regardless of age, faith, ethnicity or sexual orientation.By ignoring the demographic change in your local area, your business runs the risk of automatically closing its door on a potential pool of talented and skilled individuals.
The changing nature of Birmingham’s population will have a significant impact upon the way a local business will need to operate and be managed. In order to remain competitive, firms within Birmingham need to make their businesses attractive to workers from all ethnic backgrounds, faiths, and age groups. This could mean altering policies relating to employee recruitment and retention. It could also mean the need for your business to become more involved within the local community.
As the following will demonstrate, the reasons for employing an age and ethnically diverse range of employees in your business are not simply ethical - they make perfect business sense and will have a positive impact on your firm’s market share, employee base, attractiveness to investors and ultimately, profitability.
Market Base
Your market base will change
“It stands to reason that businesses with a diverse workforce are more likely to attract a more diverse customer base and to provide a better, more tailored service to them. The development of new technologies and the need to provide services seven days a week have put additional demands on business. Organisations that embrace diverse working patterns will be able to meet the 24/7 demands of their customers.”
(Acas, 2006)
The business case for ethnic and age diversity in the workplace is a strong one. It has been proven that both a business and its customers stand to gain from employing a diverse workforce and by being aware of the demographic profile of its core markets.
Birmingham Professional DiverCity (2006) have found that customers are becoming more sophisticated and selective. If you have a diverse workforce you are better placed to understand diverse customer needs. Mirroring customer profiles is a powerful business tool.
It's a simple fact that many people feel more 'at home' if they can see people within organisations who resemble themselves or their communities. Knowing what Birmingham's ethnic profile is like, mirroring that profile may lead to attracting more customers to your business.
People are organisations' biggest assets and their varied knowledge of communities, culture, etiquette and potential new markets can be invaluable.
The more difference that you have within an organisation, the more potential there is for people to have different, but equally valuable contributions to make. While different viewpoints and value systems can cause challenges or sometimes conflict, any organisation can benefit from people questioning and challenging how and why things are done.
Increasingly, organisations want their suppliers to mirror their own organisation's values and beliefs. Many global organisations and public sector bodies insist on only doing business with suppliers who can prove evidence of policy's and tangible activities that support the principles of equality and diversity.
Employee Base
Your employee base will change
To remain competitive, a business is reliant upon the people who deliver its core product or service to its customers. As such, your business needs to be able to attract the best people. Any business that is or is seen to be unattractive or discriminatory to any particular demographic group is immediately placing itself at a disadvantage and closing itself off from a potential pool of talent.
As Acas (2006) point out, the failure to use human potential to the full will become more damaging as labour markets become more competitive and mobile. The imperative for employers to treat and reward all their staff fairly will become more and more difficult to resist. The benefits are there to be reaped.
Employees want (and need) to be able to balance their work and home lives. And the costs for businesses that do not meet these needs are striking. According to the CBI, sickness absence costs UK employers about £10 billion a year and 30% of this absence may be related to stress. In a recent survey over a fifth of senior women in UK organisations said they would change jobs for more flexible working arrangements. Typical recruitment costs of replacing an individual have been estimated at £4,000. Lloyds TSB, for example, estimates that it costs in the region of £50,000 to replace a senior woman manager.
But businesses benefit in other ways from taking action on diversity and equality, according to Government research, not just in terms of better recruitment and retention - but also better information and planning, better staff morale and performance.”
If discrimination and unfair treatment can be reduced, that can have a knock-on effect on grievances and relations in general within the organisation. That, in turn, can reduce absenteeism and labour turnover by enhancing employees’ attachment to the organisation and have a positive effect on labour productivity.
Birmingham Professional DiverCity (2006) state that:
“Research undertaken across all ethnic groups with local graduates shows that career development, equality and being valued as an individual are the key considerations (other than salary) when choosing an employer.”
They continue by advising employers to cast their nets widely, thus potentially attracting both more and a wider group of applicants and reducing the risk of 'missing out' on the best candidate. DiverCity advise the use monitoring processes that will inform you as to whether people from black and minority ethnic groups want to work for you. Following open, transparent and objective competency-based selection processes will help to ensure that you get the best candidate.
A publicly positive approach to managing and valuing diversity can help you to attain/retain status as an employer of choice. Create the potential to cut recruitment costs because if you have a great reputation you will find that many applicants will apply to you on-spec, negating the need for expensive recruitment campaigns.”
If people feel valued within the workplace and they feel that they have career development opportunities, equality of opportunity and the opportunity to be valued as an individual they are more likely to want to work for your organisation. Motivated and satisfied people are more likely to be productive than one's that feel undervalued or under-utilised.
Lower staff turnover means less 'down-time' and less time and money spent on recruiting people to replace the leaver.
Sources of Investment
Your potential sources of investment will increase
The share price of any business is heavily reliant upon a firm’s reputation. As with potential employees, every individual should be treated as a potential investor. By making sure that your business is attractive and open to all demographic groups, you will open it up to more potential sources of investment.
Potential for profit
Your potential for profit will increase
A diverse firm can also ultimately deliver the most significant of business objectives: increased profitability.
Acas state that:
“Businesses that take a positive approach to diversity generally are likely to do better than their competitors. Research shows that organisations with high quality HR systems - in which equality plays its part - deliver better products and services and ultimately better shareholder value.”
They continue by suggesting that a diverse team will also bring different talents to the workplace - these enhance the ability of a business to innovate and thus maintain a competitive edge. A recent survey of financial analysts by Ernst and Young showed that innovation was rated one of the top ten (non-financial) variables crucial to the success of a business.
In this communications age, where information spreads quickly it has become increasingly apparent just how damaging a negative public image can be to a business. Clearly a business that is well known to be putting the principles of equality and diversity into practice, both in the workforce and in the products and services it offers to customers, is more likely to project a positive public image in the community. And one that will act as a driver to success.
Birmingham Professional DiverCity state that “many international, particularly American organisations, now want to know what you, as a potential supplier of services are doing in relation to diversity issues. They want your business to demonstrate the same level of commitment that they do.”
According to Race for Opportunity:
BME groups in the UK represent a growing marketplace for goods and services. Official research by the Bank of England stated that the total annual income of BME individuals after tax was £15billion in 1997, amounting to a 45% of the BME population in the UK is under 25 years old, compared to only a third of the white population. They have a faster growing rate of spending.
Research by the Institute of Practitioners in Advertising shows that young Asian and Black men are bigger spenders - with expenditure totalling £32billion per year.
Ethnic minorities are responsible for 9% of new business start ups in the UK - as such, doing business with BME groups will become an increasingly common occurrence within the domestic market.
One in ten UK businesses are BME owned. It is estimated that there are 15,000 businesses in greater London alone.
South Asians run a quarter of all the UK's small businesses.
SWOT
In order to illustrate the business case, a strengths, weaknesses, opportunities and threats (SWOT) analysis of demographic change in Birmingham has been provided to outline why you and your firm should be aware of the developments.
Strengths, Weaknesses, Opportunities and Threats Analysis of Demographic Change in Birmingham
Strengths
Birmingham is a cosmopolitan city, which consists of a broad range of ethnic, religious, and age groups.
Weaknesses
Birmingham Chamber of Commerce’s Quarterly Economic Survey (QES) for the second quarter of 2006 showed that approximately half of all business in the city experienced difficulties in recruiting staff they needed.
Opportunities
Innovation - an age and ethnically diverse workforce can provide ideas for products and services which an ethnically homogenous employee base could miss.
Possibility of identifying new markets - a diverse workforce can provide natural links to market opportunities abroad, through linguistic skills, cultural knowledge and knowledge of foreign markets.
Become more attractive as an employer to a greater number of potential employees - if your business is regarded as a desirable place to work by all, you will incur fewer difficulties in attracting talented people and, as such, incur lower recruitment costs.
Markets - a cosmopolitan workforce which is diverse in both age, faith and ethnicity workforce can provide a greater understanding of markets that may be segmented on the basis of these factors.
Integrated workforce - a happy, integrated workforce is likely to be more productive.
Reputation - if your business is regarded as a diverse, ethical and intelligent employer, you will become more attractive to potential customers and investors.
Increased return on investment in staff - by valuing all of your staff, regardless of age group, religion and ethnic background, any investment in training you offer your employee base is more likely to be rewarded with greater loyalty and ultimately a greater return on that investment.
By making your business attractive to older workers, you can improve the retention of the knowledge and experience of older staff
The business benefits of a mixed-age workforce are now widely recognised. There is clear evidence that both staff turnover and absenteeism are reduced and that motivation and commitment are improved in organisations employing people of all ages.
If you are regarded as a diverse and ethical employer, you increase your potential for winning public sector contracts.
Threats
If they are not doing so already, your competitors will tackle their mounting recruitment crises by headhunting your top talent.
Lack of integration and tension between age, religious and ethnic groups within your workforce could mean poor productivity at work.
An inability to take advantage of the opportunities detailed above. If you choose not to, the chances are that one of your competitors is making efforts to be regarded as a business which takes diversity seriously. A firm based in Birmingham cannot afford to neglect the impact that demographic change will have upon its competitiveness.