How Diversity in the Workplace Can Improve How Tech Companies Do Business

Oct 03, 2017
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Working together to complete a puzzle

As many in the industry are well aware, employees at technology companies are overwhelmingly male, white (and, to a lesser extent, of Asian descent), and young. Companies often defend against accusations of insularity by arguing that the issue is primarily pipeline: too few women and people of color — particularly black and Hispanic individuals — pursue degrees in STEM (science, technology, engineering, and mathematics) fields, so they don’t apply for positions at tech companies.

Dive a little deeper, though, and the numbers start to not add up: though black and Hispanic people now comprise 14 percent of computer science and engineering graduates, they’re only five percent of the technology workforce, according to data from Code2040. Clearly, the disparity isn’t as large as tech companies allege. An increasing number of women and nonwhite students are earning STEM degrees, but this increase isn’t reflected at major companies. Furthermore, when women and nonwhite individuals are hired at technology companies, they frequently report experiencing feelings of isolation and hostility; an oft-cited statistic claims that women leave the technology industry at twice the rate of men. Another overlooked demographic? Older individuals, who are often told they don’t have the right skills or “attitude” to work in tech, even if they have experience in the industry.

On that note, many technology companies prioritize “fitting in” with company culture as an important consideration when it comes to new hires, but people who aren’t young, male, and white are frequently labeled as being a “poor fit” without further explanation. Technology companies desperately need to change this pattern, not only because it’s the right thing to do, but also because companies with diverse workforces have proven to be more profitable.

Diversity Brings Financial Advantages

McKinsey & Company’s 2015 report “Diversity Matters” (based on a survey of 366 public companies in Canada, Latin America, the United Kingdom, and the United States) showed that companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above industry medians. Survey results also established a statistically significant relationship between more diverse leadership teams and better financial performance. In the United States, for example, earnings rise 0.8 percent for every 10 percent increase in diversity on a senior executive team. Conversely, companies in the bottom quartile for racial and gender diversity are less likely to achieve financial returns above average for their industry.

The report discussed gender, too: when women comprise at least 22% of a senior executive team at a U.S.-based company, every 10 percent increase in gender diversity corresponds to a 0.3 percent increase in earnings margins. And in the U.K., the relationship between gender diversity and financial performance was found to be even more significant: earnings increase by 3.5 percent for every 10 percent increase in gender diversity on a senior executive team.

A Necessity in a Global Marketplace

Successful technology companies are now by definition global businesses, serving increasingly diverse marketplaces with different languages and customs. To succeed in this diverse market terrain, companies need a diverse workforce that can more effectively provide products and services to reach wide audiences. Foreign language skills are highly prized in a global economy and a workforce with language diversity will better be able to serve customers. Employing representatives from a wide variety of cultures, ethnicities, and age groups creates a corporate environment with broad perspectives — one that resonates with all customers.

Having individuals from diverse backgrounds on your team enables every employee to learn more from their colleagues, resulting in a more creative and innovative workforce. More homogeneous organizations, on the other hand, often suffer from innovation-crippling tunnel vision.

Changes in the Workforce

By 2040, people of color will comprise the majority of the population in the United States; black and Hispanic Americans will make up nearly 40 percent of the population. Technology companies need to attract and employ more women and nonwhite applicants if they want to stay ahead of demographic shifts — and if they want to avoid being labeled as regressive.

The good news is that many in the industry acknowledge this problem, and over the past few years, technology companies have committed to increasing diversity, spending millions of dollars on their efforts. Still, progress has been slow, and it’s clear by now that building a more diverse workforce in tech won’t be easy. But companies that do will reap fantastic rewards.