Why diversity matters to your tech company

PALO ALTO, Calif. — As the push for diversity in tech continues, a growing number of companies and leaders are confronting the topic for the first time.

Those that are new to diversity and inclusion often are unsure how to approach it — how to talk about the subject internally and externally, how to rank it among competing priorities and how to allocate appropriate resources. Before answering these questions, it’s helpful to identify why diversity and inclusion matters to you and your company specifically.

Diversity efforts are most successful when they’re driven by a commitment from company leaders. And meaningful commitment requires leaders to understand why diversity matters. At Paradigm, we spend a lot of time brainstorming with CEOs and other company leaders about what is or should be driving their diversity and inclusion efforts. Here are five themes that have emerged from those conversations: 

Diverse teams are smarter and more creative 

Study after study in fields like organizational science, psychology and education indicate that diversity offers significant benefits for teams focused on creativity and innovation. According to Scott E. Page, professor of complex systems, political science and economics at the University of Michigan: "Diverse groups of people bring to organizations more and different ways of seeing a problem and, thus, faster/better ways of solving it."

At Intel, CEO Brian Krzanich has said: "A fully diverse and inclusive workplace is fundamental to our ability to innovate and deliver business results." A number of leaders we’ve spoken to are motivated by this research in their efforts to build the strongest, most innovative teams. 

Diverse companies perform better

Given that diverse teams are smarter and more creative than homogeneous ones, it is unsurprising that a wealth of research shows a strong correlation between diverse organizations and positive financial outcomes. In a 2011 study of diversity in the top firms in Standard & Poor's Composite 1500 list, researchers found “female representation in top management leads to an increase of $42 million in firm value.”

And in a 2003 study looking at 177 banks across the U.S., researchers found that for banks focused on innovation, racial diversity was clearly tied to better financial performance. Research also links gender representation at the executive and board level with better company performance.  

We’ve spoken with a few leaders that are hesitant to rely on the reasons above because, as they point out, some of the most successful and innovative companies are not very diverse. Just as the example of a smoker who lives to be 100 does not disprove that smoking is bad for one’s health, anecdotes of companies that have succeeded in spite of homogeneity are not a counterpoint to the overwhelming evidence that diversity makes teams smarter and is linked to positive business outcomes.  

Companies are losing out on great talent 

Failing to attract and hire employees from underrepresented backgrounds leads companies to miss out on incredible talent. In a recent blog post describing a partnership with Code2040, Slack Engineering Chief of Staff Nolan Caudill acknowledged: "Like almost every tech company, our own upbringings, biases and life experiences result in referral networks that are very homogeneous, and we know we are missing out on great candidates based on these shortcomings."

At Paradigm, we've collected data that demonstrate biased hiring practices can significantly affect the ways in which candidates from underrepresented backgrounds are evaluated in the recruiting process. Many tech companies pride themselves on creating environments where "the best idea wins." By attracting diverse candidates and designing interviewing processes that ensure a level playing field, companies have a better chance of ensuring the best idea is at the table. 

Diverse companies can better serve a diverse user base 

When the employees of an organization better represent their users and desired users, they will build more effectively for those groups. When YouTube’s almost entirely right-handed developer team built the iOS app without considering how left-handed people would use it, for example, 5% to 10% of videos were uploaded upside down as a result. This factor may be especially relevant for leaders of consumer tech companies.

When Tracy Chou of Pinterest shared the company’s demographic information last year, she explained: "We only stand to improve the quality and impact of our products if the people building them are representative of the user base and reflect the same diversity of demography, culture, life experiences and interests that makes our community so vibrant."

Walker & Company CEO Tristan Walker recently observed: "If more black people were building features or striking partnerships at Twitter, perhaps they’d have a great idea" for more effectively engaging black users.  

It’s the right thing to do 

While diversity and inclusion efforts are most often driven by business rationales, we’ve spoken with a few CEOs who are motivated primarily by a belief that cultivating an inclusive tech community is simply the right thing to do.

Some of these leaders have noted that the tech industry is creating vast opportunity and that by excluding certain groups from that opportunity the industry is perpetuating and exacerbating existing social inequality. Others have emphasized a concern that by failing to involve particular communities in the process of creating of new technology, we as a society lose out on the benefits of those community members’ ideas. 

For company leaders beginning to consider diversity and inclusion, understanding these rationales and identifying one that resonates for you and your organization can be a helpful first step.

But it’s only a first step. After deciding that diversity matters and articulating its importance, leaders must create a strategy for building a more diverse, inclusive company and an accountability plan to ensure that strategy is effective.

Joelle Emerson is co-founder and CEO of Paradigm, a strategy firm that helps tech companies build more diverse and inclusive organizations. Before launching Paradigm, Emerson practiced law as a Skadden Fellow at Equal Rights Advocates, where she represented women in employment discrimination and sexual harassment cases.