The value of diversity, equity, and inclusion (DEI) for organizations is being challenged. Concurrently, the McKinsey Diversity study, Diversity Matters Even More, found that regarding profitability, companies that have the most gender and ethnic diversity in their leadership teams (in the top quartile) are 39 percent more likely to outperform their peers who have the least diversity (in the bottom quartile). Another recent study of decision-making found that inclusive teams make better business decisions 87 percent of the time. Decisions made and executed by diverse teams also delivered 60 percent better results, maximizing business performance substantially.
How can these results be explained, considering the “diversity backlash”? Much depends on how you view diversity and measure its outcomes. In today’s global economy, leadership accountability requires the inclusion of cross-cultural competence for business continuity and success.
A lack of cultural diversity competence is a danger to any organization. In a prior column, I provided a simple way you can test your cultural diversity competence: https://trainingmag.com/savingmillionswith-critical-incident-analysis/
Leading a culturally diverse organization requires the ability to see (interpret) the same situation from all the diverse perspectives in the organization. If a leader is certain their perspective is the only valid perspective, the leader likely will fail and blame the failure on the “others” in the organization. This myopic view will prevent leaders from the benefits of others’ insights and innovations.
CASE STUDY
At a meeting of the vice presidents of Sales for a global airline alliance, the American VP wanted the alliance to impose a fee on international travelers who were checking in a second piece of luggage and were flying in Economy Class, which previously allowed a second piece of luggage at no charge.
The American VP told their peers this change should be announced immediately and implemented at the beginning of the next quarter. Two of the VPs in the meeting—one from Japan and the other from France—immediately challenged the plan, asking for research proving this change would not cause a loss of revenue. The American said the alliance should implement the change first and then measure the results. In fact, the American said, “We should run it up the flagpole and see who salutes.” This created confusion and had to be explained.
The cultural nuances were lost on these VPs until a cross-cultural consultant who was invited to observe the meeting asked, “What would happen if the change resulted in reduced revenue”?
The American VP said there was no need to study this in advance since they could rescind the decision if it caused a loss of revenue.
The French delegate said if there were any drop in revenue, they would immediately be fired since they decided to go forward without doing extensive due diligence in advance, which is common in France. The Americans saw this as “analysis paralysis.”
The Japanese delegate said if the new fees lost revenue, they would “lose face” and would be expected to resign. Japanese often say that American decision-making is “ready, shoot, aim,” while Americans respond by saying Japanese decision-making is “ready, aim, aim, aim, aim, shoot.”
The cultural diversity consultant explained that in the U.S., failure often is viewed as a learning opportunity, essential for innovation. On the flip side, in Japan and France, failure is stigmatized and risk taking is avoided.
Once these differences were revealed, the American VP decided to table the baggage increase until each VP could get “buy-in” from their respective leadership. This resulted in additional confusion since in American English, to “table” something means to delay the discussion, while in British English, to “table” means to discuss the item immediately. They finally agreed to wait until the next meeting to make their decision while communicating via e-mail. They also agreed to have the cross-cultural consultant review all pertinent e-mails and attend the next meeting.
APPLICATION
Understanding the importance of DEI will always add value to any organization if leaders are willing to see their business decisions (hiring, promotions, selling, alliances, acquisitions, etc.) from the perspective of all parties regardless of the nature of the diversity (culture, race, class, gender, and other dimensions of diversity).
At the recent Asia Inclusive Leadership Forum 2024, the leaders from across Asia concluded that “crosscultural competence is not just about understanding different traditions or customs, it is about adapting leadership styles, fostering open communication, and creating psychologically safe environments where everyone feels valued.” While Americans may think of Asia as one similar culture, the Asian leaders concluded that “in a region as culturally diverse as Asia, businesses that prioritize cross-cultural competence are better positioned for success.”
In our culturally diverse workplace and marketplace, ignoring diversity will result in misunderstandings, loss of time, frustration, and less productivity. Leaders must learn how to examine their assumptions and support inclusive workplaces where all employees can thrive.
Please send any questions or examples of how DEI adds to productivity, profitability, or employee retention to me at: Neal@NealGoodmanGroup.com
Understanding the importance of DEI will always add value to any organization if leaders are willing to see their business decisions from the perspective of all parties regardless of the nature of the diversity.
