Cultural Diversity In The Workplace:

Almost all major corporates in the world have programmes promoting cultural diversity. What started as a mostly social phenomenon has, over the years, proven to have a lot more of a benefit than was apparent in the beginning. A recent McKinsey study found that culturally diverse companies have a 35% higher likelihood of exceeding the financial performance of their peers.

The study found that in UK companies even a small 10% improvement in diversity levels bumped up EBIT (earnings before interest and tax) by almost 6%. The McKinsey study (amongst others) provides definitive proof, rather than just a causal link, of a correlation between diversity and financial performance.

But why does this happen? How can cultural, ethnic or gender diversity help boost the financial performance of businesses? We already discussed the impact of gender and educational diversity in our earlier pieces here and here. Today, we dive deeper into cultural diversity and see how it can enhance corporate performance.

Having access to a bigger talent pool

Despite so many people entering the workforce every year, there is still a shortage of skilled individuals. By specifically encouraging people of all racial and cultural backgrounds to apply, companies can target a much larger talent pool. This is not just true for just certain countries, talent is now more mobile all over the world.

Reducing conflict and enhancing soft skills

Cultural diversity has been found to have a positive correlation with the enhancement of certain soft skills which are critical to organisational success. These skills enhance the ability of employees to resolve conflicts, negotiate better, understand the intricacies of global marketplaces and be more cognisant of a client’s needs and challenges. Overall, this not only makes for a better front-end sales force but also improves the internal dynamics between various departments.

Positive image

Companies spend hundreds of billions of dollars every year on advertising. These advertisements are meant to portray certain brand values that companies wish to be associated with their products – such as quality, reliability, and trust. In recent years, social and environmental responsibility have also become critical factors in the mind of consumers. Corporates are powerful social citizens also and as such, they are expected to do their part in promoting the values of modern societies. Having a diverse workforce allows companies to walk the talk and build a positive image.

Innovation and market access

Having an ethnically diverse workforce allows companies access to newer markets. Moreover, cultural interactions can create new and improved products, services or business and manufacturing processes. For example, some companies now use a combination of Japanese and Western manufacturing techniques to achieve optimal performance. Similarly, certain banks have benefited by tailoring products to comply with Islamic Banking norms.


Numerous studies have now provided empirical evidence that cultural, ethnic, racial and gender diversity can directly boost financial performance. Not only that, diversity allows companies to shape themselves in the mirror image of the society that they operate in and that can go a long way in creating a meaningful bond with all stakeholders.

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Similar posts:

Here’s What Really Matters in Diversity in Educational Backgrounds, How to Break the Glass Ceiling in 4 Easy Steps, Mind the Gender Pay Gap – The Important Role of Recruitment Firms.


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