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D&I in Small Business

By Evan Scarbrough, CPA
February 1, 2020
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Diversity and inclusivity programs require time and resources, but they can help small businesses thrive and grow.

 

As businesses recognize the importance of having a diverse workplace and inclusive work culture, so, too, do these organizations enjoy greater employee equity in the company (i.e., highly engaged, motivated, and productive employees and teams). A 2016 McKinsey and Company study found that companies in the top quarter for gender or racial and ethnic diversity were more likely to have financial returns above their national industry medians. While this doesn’t guarantee that if you have a diverse workplace you’ll have good results, it does indicate that it either correlates to or is a driver of productivity and profitability.

 

Small businesses stand to gain from diversity and inclusion (D&I) initiatives just as large companies do. Because D&I incorporates the knowledge and experience of more demographics, it leads to more creative thinking and innovative ideas. Diverse teams are more capable than homogenous groups of making decisions and troubleshooting ideas than those made up of like individuals.

 

EMPLOYEES ON BOARD

 

Top talent is the lifeblood of a successful small business, and, according to talent-management company Clear Company, individuals are on board: 57% of employees think their companies should be more diverse. So not only does D&I increase performance, but having a diverse workforce helps to maintain and recruit top talent as well. According to Clear Company, glassdoor.com, and Guidant Financial/lendingclub.com, the differences are considerable:

 

  • Racially diverse teams outperform nondiverse teams by 35%.
  • Teams comprised of an equal number of men and women earn 41% more revenue.
  • Workplace diversity is an important factor for 67% of job seekers when considering employment opportunities.
  • Sixty-four percent of Millennial vs. 33% of Baby Boomer small business owners are people of color.
  • 80% of Millennial small businesses are profitable, 3% higher than the U.S. average and their Boomer counterparts.

 

The reality for those behind the curve is: Even if your organization hasn’t yet become more diverse and inclusive, your competitors have, and they’re thriving because of it.

 

Small businesses (with fewer than 10 employees) or those located in areas where the employee pool is relatively homogeneous (like Michigan’s thumb region, where more than 97% of employees are Caucasian) may think that they can’t achieve diversity. All businesses should look beyond one or two types of diversity (usually gender and race), but especially those businesses in these conditions. Employees are part of several delineators of diversity such as race, ethnicity, gender, sexual orientation, age, and ability, among others. Further, in our modern culture we have learned that many of these delineators form more of a continuum than a yes or no designation. Thus, companies need to think of diversity not just in terms of black and white, but various shades of gray over a multitude of areas. Employers should also be mindful that diversity can also be achieved via consultants and subcontractors.

 

ASSESSING YOUR ORGANIZATION

 

Here are some questions to ask to determine if your small business is diverse based on nonracial factors:

 

  1. Do both men and women have equal chances to advance?
  2. Is your business inclusive of LGBTQ individuals?
  3. Did all your employees go to the same elementary, high school, and/or college?
  4. Do your employees represent different political parties and varied stances on issues?
  5. Do all the employees belong to the same religious group? If so, are you open to nonbelievers and those from other religions joining the company?
  6. Are all employees college educated (or not)?
  7. Have employees worked in different types of entities and roles (military, government, not-for-profit, and corporate)?
  8. Do you have employees who are neurodiverse or who have physical disabilities?

 

When your team is diverse, it can present untapped opportunities for a small business to use professional and personal networks of employees to generate future customers. Further, D&I creates greater brand recognition toward your company, thus enabling small businesses to thrive and potentially even grow.

 

Many of the same principles in creating and maintaining an ethical culture can be applied to creating and maintaining a diverse and inclusive small business workplace.

 

  1. “Tone at the top” is essential for small business D&I, as it sets the course for the whole organization and helps steer the ship toward the goal.
  2. Communicate D&I expectations. In other words, training is key. Teach staff the reasons behind the change and what you expect. This could be done by formalized sessions or through mentors.
  3. Include staff in the process, which helps to create equity in the process.
  4. Reward staff actions that show good D&I practices, and discuss inappropriate D&I behaviors.
  5. Let employees be their authentic selves and celebrate their differences and similarities. Companies can do this with programs that allow employees to lead and put into focus things that matter to them, which could include items such as but not limited to: employee-led charitable causes (like volunteering for Habitat for Humanity), green initiatives, lunch and learns, or even an athletic team/league.
  6. Slow and steady. This is a process, not an instant fix. Actions you take may have unintended results. By going slowly, you allow yourself time to reflect and correct these problems before they become larger issues.
  7. Once you become an inclusive workplace, try to become diverse. Before the hiring process, identify any biases (both implicit and explicit) in order to limit their impact.
  8. If your business has low turnover, you can develop diversity. Look at your supplier and subcontractor pool, and see if you can increase diversity by using different vendor(s). Encourage employees to seek different interests or skills. For example, if the majority of your staff doesn’t have a high school diploma, provide an incentive for them to get their general education diploma (GED).

 

Instant change or perfection isn’t attainable. Especially for a small business that may already be utilizing all available resources to stay competitive, this is a process that requires time, dedication, and consistency (similar to creating an ethical culture). Allowing for differences and embracing the uniqueness of your employees and their experiences are ultimately what will help set this tone culturally.

 

Evan Scarbrough, CPA, is an auditor for the City of Detroit, Mich., and an adjunct professor of accounting at Oakland Community College. He also is a member of IMA’s Ann Arbor Chapter. You can reach him at eascarbro@gmail.com.
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