• Two diversity scholars have found that positive outcomes associated with diversity have little to do with money.
  • Instead, innovation, creativity, and teamwork flourish when female and minority employees bring different backgrounds and views to the table.
  • Addressing a company's diversity needs to come from a deep cultural shift.
  • Leaders should be focusing on the kinds of experiences employees are having in the organization.

Two scholars who have been studying diversity for decades say that the business case is a dangerous fallacy, one that lets leaders off the hook and trades human dignity for dollars.

“What we do inside of organizations is exported back into our community. And if the only case for diversity is a bottom-line business case, I think it lets us walk away from the role that organizations play in shaping the broader dynamics in our society,” said David A. Thomas, president of Morehouse College, former dean of Georgetown University’s McDonough School of Business and professor emeritus at Harvard Business School.

His colleague, Harvard Business School professor Robin J. Ely, said companies have long clung to the business case as fact when, in reality, it’s mostly anecdotal. There are no scientific studies that show a direct, causal relationship between workplace diversity and profit.

“It’s a very basic problem of inferring causality from correlation, and I think it’s appealing for lots of reasons,” she said. “People want to believe it. They can make up a narrative in their heads that makes sense of that correlation in a causal way, but it actually doesn’t show that. That isn’t what the research shows.”

Ely and Thomas made their cogent argument in a recent article titled “Getting Serious About Diversity: Enough Already with the Business Case,” which appeared in a recent issue of Harvard Business Review. They spoke about the topic with Katherine Klein, vice dean for the Wharton Social Impact Initiative, during a recent episode of the Dollars and Change podcast. (Listen to the podcast at the top of this page; find more episodes here.)

Seen, heard, and valued

To be clear, the professors emphasize the benefits of a diverse and inclusive workplace. But it takes more than just replacing a few white male employees or board members with women and people of color. That’s too simplistic and doesn’t affect real change — or improve financial performance.

Through their research and direct work with companies, Ely and Thomas have found that positive outcomes associated with diversity have little to do with money. Innovation, creativity, and teamwork flourish when female and minority employees are encouraged to bring their different backgrounds and perspectives to the table. They must be seen, heard, and valued.

Ely and Thomas said leaders should be focusing on the kinds of experiences employees are having in the organization. Do they feel valued and respected? Do they have meaningful relationships and interactions with colleagues and managers? Do they have the power to influence the organization’s core work and work practices? The business case diverts attention away from those things, they said.

“It’s not all about just making money. When people have their heads around the economics of a situation, they leave by the wayside anything that has to do with values,” said Ely, who is founder and faculty chair of the HBS Gender Initiative, which advances cutting-edge research to eradicate gender, race, and other forms of inequality in business and society.

Moving the needle on diversity

Klein asked Ely and Thomas what leaders should be doing to create an authentically inclusive culture, especially if the business case “doesn’t move the needle” on diversity.

Change starts from the top, said Ely. Leaders must be willing to invest time and resources into deeply understanding their workplace culture and shifting it. That kind of root change requires letting go of assumptions, long-held practices, and sacred cows.

Most leaders in predominantly white organizations don’t have high quality, authentic relationships with people who are different from them.

—David A. Thomas

“That’s a pretty big ask, and I think the question is, are leaders up for it?” Ely said. “Do they really want to undertake that? Bottom line, it’s a culture change, it’s a cultural problem. And leaders are responsible for the culture of their organization.”

Thomas has developed a shorthand after years of being asked by executives how to create an inclusive culture. His answer is “leadership, relationships, and alignment.” Take inventory of policies and practices within the organization and remove the ones that inhibit diversity. Stop favoring work processes, methods, and styles used mostly by white men; women and minorities may take different approaches that are just as effective. Expand your personal and professional network to include people who don’t look or sound or believe like you do.

“Most leaders in predominantly white organizations don’t have high quality, authentic relationships with people who are different from them,” Thomas said. “If we don’t work on creating those high-quality kinds of relationships where we can talk about the things that — once we get beyond just our playbook for diversity — are still getting in the way, we won’t make progress.”

The professors said change is hard because leaders are invested in the status quo. In many ways, the status quo enabled their own successes, so change feels threatening. That’s partly why there’s no template for change. Each leader is unique, and each workplace is unique with its own set of challenges.

“It’s the Wharton case for diversity. It’s the UPS case for diversity. It’s the Twitter case for diversity. But it’s not a generic business case for diversity,” Thomas said. “Leaders do need to articulate that because we have to change the practices that are down below and let people know why it’s in our benefit to let go of these sacred cows. That’s what I think is the practical implication for change in leader behavior.”