Diversity can help your business in more ways than you might think
There have been many conversations around diversity in the last few years, and companies are working hard at making their businesses more representative of the communities they serve. It’s clear that improving diversity and inclusion is the right thing to do, but are there other ways it may improve your business? The answer may surprise you.
In the Hiscox 2022 Diversity in Small Business Report, we surveyed 400 businesses with 50 or fewer employees. We asked about the level of gender and racial/ethnic diversity they had, and about changes they’ve made and plan to make. Here’s what we learned.
Diverse businesses have experienced more growth
Those businesses that demonstrated moderate to high levels of racial and ethnic diversity have seen their business grow an average of 72% over the past two years. That’s compared with an average growth rate of 45% for businesses with little diversity.
Sales at businesses with high gender diversity among owners and managers increased an average of 31%, and sales at businesses with high racial and ethnic diversity increased an average of 29%.
This doesn’t appear to be a short term trend either. Of those businesses that experienced growth, 71% say the growth lasted six months or more. Forty-five percent said the growth is still ongoing.
Social awareness leads to an increase in customers
Consumers have become more socially aware in recent years, and have begun to seek out businesses whose values align with their own. Often, this means that businesses with higher levels of gender and racial/ethnic diversity are seeing an increase in their customer base.
Our survey found that over 62% of businesses with moderate to high racial and ethnic diversity have benefited from the increase in social awareness. This benefit has been in the form of an increase in their customer base. According to 71% of these businesses, that increase has persisted for six months or longer.
Diverse businesses are more adaptable, innovative and creative
Our survey found that businesses that have higher levels of diversity also display more creativity and innovation, which can lead to business success.
The average number of new products or services launched by a diverse business over its lifetime was 24. For businesses reporting little diversity, the average number of new products or services launched was just 14, indicating that diversity and innovation go hand-in-hand.
We also found that those businesses that have moderate to high racial and ethnic diversity change their branding an average of six times of the lifetime of the business, compared with four times for those businesses that reported little to no racial and ethnic diversity. This indicates that more diverse businesses are more likely to adapt their branding and positioning to changing times.
There’s still room for improvement
While the call for diversity has been heard in the past two years, 45% of small businesses do not rank the increase of diversity and inclusion as a high priority.
For small businesses in general, and sole proprietors in particular, improving the diversity of their staff can be challenging if not impossible. After all, it’s hard to have a diverse staff of one. But there are other changes small businesses can make. Fifty-one percent of survey respondents said they have made changes over the past two years to promote diversity and inclusion.
Twenty percent of respondents said they publicly expressed support for causes (e.g., on social media), 14% donated to causes that fight for social and racial justice, and 10% highlighted diversity on their website. Companies with employees improved their hiring processes to be more inclusive (19%), improved transparency in compensation (15%) and conducted diversity training (12%).
The Hiscox Diversity Survey was conducted by Wakefield Research among 400 US small business owners, between December 21st, 2021 and January 10th, 2022, using an email invitation and an online survey. Results of any sample are subject to sampling variation. For the interviews conducted in this particular study, the chances are 95 in 100 that a survey result does not vary, plus or minus, by more than 4.9 percentage points for the main sample, and 9.8 percentage points for the oversamples, from the result that would be obtained if interviews had been conducted with all persons in the universe represented by the sample.