Diversity

Diverse Companies Earn More Profits

By Murad Ali, HR Manager

Diversity of large organizations is synonymous with increasing profits. Diversity is not a “feel good” program but is a major contributor to competing in a global world. Companies that engage in diversity run more efficiently, have higher sales revenues, and increase their market share.

Work forces that are diverse have significant advantages over non-diverse work forces. A study by Huckfeldt Herring shows precisely why this is. Homogeneous workforces of one particular ethnic, racial, or religious background doesn’t function as well as others.

According to Huckfeldt Herring’s study, “Does Diversity Pay?: Racial Composition of Firms and the Business Case for Diversity,” found that companies with racial diversity had higher sales revenues, a stronger customer base, higher profit margins and larger market shares (Huckfieldt, 1983).

Herring states, “These results suggest that not only is having a diverse workforce a good and socially responsible thing for companies to do, but in addition, organizations that broaden their pool of qualified workers also reap material economic benefits from doing so,”.

According to the study the average sales revenues of companies with low diversity earned on average $3.1 million, medium diversity earned $3.9 million, and high diversity $5.7 million dollars. Similarly high diversity companies had an average customer base of 45,000 when compared to low diversity companies with 23,000. Likewise market share of high diversity companies was 72% when compared with 52% of low diversity of employees.

Thus it becomes easy to see that diversity is more than a “feel good” program but has a unique and worthwhile place in building strong business positions. Customers preferences become a major concern when developing a business. Companies must have large customer’s bases in order to succeed. When a company hires people of different backgrounds they are able to attract a more diverse and larger customer base.

A company cannot develop a large and diverse customer base unless these customers feel comfortable dealing with company employees. For example, in the Casino environment where I work African American customers feel comfortable around African American employees, Caucasian around Caucasian, Hispanic around Hispanic, etc. Thus diversity fosters diversity.

Murad Ali is a two time book author, a human resource manager, and a Ph.D. candidate. For more articles written by Murad please visit http://www.thenewbusinessworld.blogspot.com