How are you losing business today by skipping diversity and inclusion in business operations and how to fix it

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Photo of a wooden staircase in a bamboo forest by PublicDomainPictures from Pixabay.

(10 min read)

I’ve been beating the drum of the business value of diversity and inclusion (D&I) in tech since 2015. Many moons later, still every time I engage in this discussion with business leaders, they invariably default to either the diversity of their workforce or the McKinsey reports correlating the gender and ethnic makeup of their leadership teams to increased financial returns such as higher earnings before interest and taxes (EBIT).

In my experience, it’s hard to use correlation to convince the skeptics or to support D&I champions. On the flip side, through my professional and personal path, I’ve witnessed innumerable instances where D&I has played a crucial role in the success and failure of initiatives and organizations.

How did I come to witness all that evidence? I’ve been a unicorn all my life. I became an emigrant before I was a year old and I’ve had the opportunity to live in 6 countries and 3 continents. As a woman, my professional path is “atypical” by Anglo-Western standards. I studied engineering and computational chemistry, which are considered typically male occupations. Beyond academia, I’ve worked for chemical and tech companies. I don’t have children. I still remember talking to colleagues in December 2015 about the need to put in place a strategy to retain women in tech as half of the young women who go into tech drop out by the age of 35 [source]. To my surprise, often my puzzled interlocutors would ask me if “diversity and inclusion was an American thing”.

Fortunately, nowadays there is much more awareness about diversity and inclusion in business, including the tech sector. Also, there are some companies that are getting tangible value out of understanding the value of developing solutions for underserved populations. As I’ve written in the past, people with disabilities and their families constitute a market the size of China ($8 trillion/year). Closer to home, the UK’s 12 million people with disabilities have a spending power of £120 billion as per AbilityNet, a British charity focused on the digital inclusion of people with disabilities.  

But how to go beyond preaching to the converted? Moreover, how to engage with organizations that don’t have the budget for a Head of D&I?

What business leaders want to know about the value of D&I

Early June this year, I launched a survey asking business owners, managing directors, CXOs, and board members their top question about the business value of diversity and inclusion. In return for answering the survey, I offered respondents to email them my answer to their question.

I categorized the 50 answers I received into four buckets. Even in such a small sample, still we can trace a roadmap for how organizations approach D&I at workplaces

  • Stage #1: What’s the value of diversity and inclusion? This category aggregated the respondents that asked for proof that D&I delivers value.
  • Stage #2: Where do we start from? Other respondents appeared to see the value of D&I but they were at loss about how to get the ball rolling.
  • Stage #3: How can we ensure we do it right? A group of respondents manifested their concern about missing key aspects of their workplace D&I strategy.
  • Stage #4: We’re good! This category groups those business leaders that replied with comments such as “we don’t need it”, “we’re good”, “that doesn’t apply to my business” or “we hire for skills”. This resonates with some of the feedback I receive when discussing the topic with sole traders, start-up founders, and in general small and medium companies.

An additional insight from the survey was that, consistently, the responses looked at D&I as a topic exclusively related to the workplace: Employees’ wellbeing and best practices for hiring, promoting, and chairing internal meetings.

Workplace diversity and inclusion is hard

I jumped into to occasion to discuss this topic with members of the women in tech online community Ada’s List. Last July, I hosted a roundtable to discuss the value of D&I in business operations. Among the attendees, three outstanding women in tech:

I introduced the topic by sharing the key results of the survey and my thesis that the business value of D&I goes beyond the workplace. Sales, marketing, product development, customer services, and supply chain all can benefit from applying a D&I lens.

As it goes with this topic, we started the discussion with the value diverse teams provide when creating innovative solutions. It was refreshing to hear Genevieve and Fionnuala candidly acknowledge how hard is to manage diverse teams. Yes, they bring unparalleled value to the business but, if you want to really get the most out of them, you need to purposely design strategies, initiatives, processes, and ceremonies that proactively address the friction that comes with having different skills, experiences, and viewpoints. As an example, they mentioned daily stand-ups as a ritual to ensure everybody gets heard and knows what others are doing.

In summary, there is no free meal in the universe. Diverse teams are absolutely an asset for organizations but getting them to deliver on their potential takes conscious effort. Inclusion doesn’t happen because you want it. You need to make it work.

The value of D&I in business operations

And what about the value of D&I in business operations? Sometimes it’s easier to see how the lack of it negatively impacts the bottom line. I launched the challenge to the attendees to share a story about an instance where the failure to apply a diversity and inclusion perspective had a damaging effect on a business.

I was surprised by how easy this exercise was, starting by myself.

D&I in sales

I shared a vivid example from my time as a Ph.D. student in Quebec, Canada. The research facility where I worked had secured a grant to replace our old X-ray diffractometer, a device costing slightly less than 1 million Canadian dollars. The Head of the research center was a French-Canadian professor that I’ll call Robert Ouellet. It’s important to notice that the organizational structure of the facility was very hierarchical. Doctoral students were expected to address professors by their professional titles and use formal French registers – as other Latin languages, French has both formal and familiar registers.

One day at the team coffee break, Professor Ouellet shared an update on the bidding process. He had requested via email a quote from one of the US largest providers of X-ray machines. The account manager had replied to him with the greeting “Hi Bob”. Professor Ouellet’s reaction? To discard the bidder immediately. He told us, “I’m not Bob, I’m professor Ouellet. If this company doesn’t know that in Quebec we address professors differently than in the US, I’m not interested in doing business with them”. And there you go; one salutation vaporized a $1 million opportunity.

D&I in services

Recently, Genevieve worked with a provider of marketing material for her start-up Agriledger. One of their key wins is a project sponsored by the World Bank for the intervention of the alleviation of poverty for the bottom 40% of Haitian society. The Agriledger blockchain solution has successfully enabled Haitian farmers to increase their earnings per avocado and mango by 750%.

In spite of the fact that 95% of Haiti’s population is Black, the marketing agency chose to portray White people as the farmers in the material featuring the project. This prompted Genevieve to question the agency’s ability to capture her vision and ultimately was one of the key reasons she decided to break ties with them.

D&I in product

Fionnuala recently used a sleep improvement app rolled out by the NHS (National Health Service in the UK). Among other capabilities, the app delivers advice to get better sleep.

Typically women report poorer quality and more disrupted sleep than men and scientific studies show that there are ethnic differences in sleep health with White individuals reporting the best quality of sleep. Hence, Fionnuala was puzzled by the developers’ choice of two white male avatars for both the sleep expert and the patient in the app. It gets more interesting. The company developing the app was surprised when Fionnuala gave them feedback about the default gender for a medical issue that disproportionately impacts women (“Gosh, we hadn’t noticed that…”). 

Her concerns? She wondered if anybody had cared to check who were the main potential customers. Maybe they simply assumed the “average White man” would fit everybody?

D&I in market research

A content creation platform approached Lilias to perform market research into how to increase the number of female visitors to their website. Their users were mainly men and they wanted to attract more women.

Lilias’ assignment was to get those insights from interviewing a list of users of the platform provided by the company. Interestingly, less than 10% of members in that list were women! Lilias challenged the company on the key learnings about women’s preferences they expected to gain by asking men. Ultimately, she negotiated a new assignment where she was able to select the poll of interviewees herself.

These examples illustrate how companies’ approach to D&I in business operations is critical to extending their market presence.

What’s the size of the problem?

It’s clear that companies are missing out on business value by limiting the scope of their D&I efforts to the workplace. The failures in the previous section can be tracked down to ignoring the impact of diversity and inclusion in business operations practices. They also highlight that the issues and learnings are transferable to any business size, independently of the turnover and number of employees.

Unfortunately, so far, the D&I discourse has been crafted to appeal the corporations with HR departments that have aggressive hiring targets and employee retention KPIs. They also have dedicated budgets for D&I initiatives led by specialists. Moreover, their exec teams need to demonstrate to their boards and investors the progress towards diversity targets.

So, if the message is only for large companies, how many businesses are left out of the D&I conversation? Actually, the majority of private companies.

From the breakdown of private businesses in the UK at the start of 2020 split by the number of businesses, employees, and turnover, two important points emerge:

  • SMEs (businesses with less than 250 employees) account for 99.9% of businesses, 60.6% of the employment, and 52.2% of the turnover of all the businesses in the UK.
  • 95.8% of businesses registered in the UK have less than 10 employees, account for 33% of employment (roughly as much as businesses with 500+ employees), and 21.4% of turnover.

In summary, our message about D&I is not addressing the pain points of more than 95% of businesses in the UK.

What do you do if you are an SME that doesn’t expect – and maybe doesn’t even seek – exponential growth? Or a sole trader as 79% of business in the UK?

To address that gap, I’ve created my consultancy focused on D&I in business operations. Our mission is to help SMEs to leverage the value of diversity and inclusion in sales, marketing, product development, customer service, and supply chain to increase their market share, reduce attrition, and become more sustainable.

I started operating in June and I’m delighted to report that we’re already providing value to businesses as small as 2 people.

“We worked with Patricia to understand how to improve our website’s attraction to a more diverse and inclusive audience and to ensure that we weren’t alienating potential customers with images or language they might find confusing or offensive. Patricia’s overview and recommendations were comprehensive and, most importantly, actionable. It was an incredibly useful exercise for our business.”

                                                                                                        Suzanne Noble, nestful.io

However, as I started this entrepreneurial journey, I couldn’t resist pulling some data to understand how to maximize the odds to succeed. Whilst White women receive more funding than Non-White women, it’s still well below the support White men receive.

Building a D&I business scaffold

From the breakdown of private businesses in the UK at the start of 2020, I calculated the turnover/employment ratio and plotted it against the number of employees per business.

Key insights from those numbers are

  • Overall, the turnover per employee increases with the number of employees up to 100-199 employees. Then it starts to decrease and evens out for business with more than 250 employees.
  • Zero or 1 employee businesses have a turnover per employee equivalent to less than half of any larger business. This is disheartening since 79% of UK businesses belong to this category.
  • Businesses with 2-4 employees have a turnover/employee ratio higher than those with 5 to 19 employees and only marginally inferior to those with 20 to 59 employees.
  • Businesses with 100 to 250 employees have the highest turnover per employment ratio.
Chart of Turnover/Employment per business size (£ thousands) in the UK. Numeric table replicating the figure at the end of the article.

Then, I searched for data for female entrepreneurs. It was not easy to find data disaggregated by gender. Even Twitter couldn’t help.

Finally, my online research paid off and I found the UENI’s 2020 Report on Gender and Small Business published by Guillermina Correa in July 2021 based on a sample size of 22,257 SMEs. Below, some highlights of their research

  • The number of UK businesses currently owned by women is 32.37%.
  • From a sample of 5,106 business owners, women are more likely to run a business as a one-person company (37.7%) than 2-3 employees (27.14%) and 4+ employees (23.44%). 

Aggregating all the data above, the current status of SMEs’ female entrepreneurs doesn’t look bright. Women are more likely to run a one-person business (37.7%), which are the SMEs with the lowest turnover per employee. On the bright side, should women scale their business to 2-4 employees, their turnover by employee has the potential to increase by 250%!

Whilst this may be exciting in paper, the reality is that there are reasons why women wouldn’t want to lead larger businesses. Less flexibility, financial limitations, or the business vision are only a few examples.

An ecosystem for female entrepreneurs that integrates D&I business practices

What if female SMEs entrepreneurs could reap the benefits of larger businesses without losing their vision of a small business? What would be the ripple effect if leaders embrace D&I in business operations?

I turned to nature for answers. Biomimicry is a practice that learns from and mimics the strategies found in nature to solve human design challenges.

Bamboo is a grass that has been cultivated in Asia for thousands of years. The bamboo industry is highly sustainable and very versatile. Some uses of bamboo are as raw material for food, beverage, fuel, kitchenware, furniture, fabric, construction, weaponry, and even musical instruments.

However, not all bamboo is the same. The difference arises from the length of their rhizomes – stems of the plant that run underground horizontally and enable its lateral propagation. Rhizomes store starches, proteins, and other nutrients, which are useful for the plant to form new shoots or when the plant dies in winter.

Clumping bamboo spreads slowly through short rhizomes. On the other hand, running bamboo has long rhizomes and some kinds can grow up to 91 cm (35 in) per day. There are running bamboo species so resilient that to kill them you need to burn the whole plot because if even a few plants survive, they’ll grow again.

What can we learn from running bamboo to support SMEs female entrepreneurs and increase the adoption of best practices that leverage diversity and inclusion in business operations? A community!

I envision a sisterhood of female entrepreneurs interested in exploring synergies in their business operations with diversity and inclusion at the core. What does that mean in practice? A collective of women that

  • Strive to incorporate diversity and inclusion best practices in sales, marketing, product development, services, and supply chain.
  • Explore partnerships and synergies that build a bigger pie for all.
  • Leverage the purchasing power of a cooperative.

How does this vision resonate with you? Interested in learning more? Would you like to help me shape that vision? If the answer to any of those questions is yes, please get in touch at patricia@patriciagestoso.com

Thanks to Fionnuala, Genevieve, and Lilias for their permission to reproduce part of our discussion.

Below breakdown of private businesses in the UK at the start of 2020 split by number of businesses, employees, turnover, as well as turnover per employee.

Employees per business Number of businessesEmployment (thousands)Turnover (£ millions)Turnover per
Employment (£ thousands)
All businesses5,980,52027,7324,346,969157
     
0-14,706,4805,274341,42065
2-4756,7802,117345,231163
5-9261,4401,771244,228138
10-19138,0201,894248,205131
20-4973,8252,246397,457177
50-9923,8351,645283,237172
100-19910,2351,426312,018219
200-2492,07046498,434212
250-4993,9901,379259,580188
500+3,8459,5171,817,159191
SMEs5,972,68516,8372,270,230 135

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