Why Diversity Is Important as You Scale Your Business Because diversity only gets harder as businesses scale, it is important to focus on diversity early.

By Julie Kratz

Opinions expressed by Entrepreneur contributors are their own.

The workforce is now employee driven, not employer driven. With 41% of employees globally saying that they are thinking about leaving their current jobs, more people are self-selecting out of the workforce all together. The No. 1 reason is due to toxic workplace cultures with the lack of inclusion and respect cited as primary indicators.

This is a pivot point for diversity. Those leaving traditional corporate settings to start businesses are overrepresented by white men as leaders, a trend that is shifting in recent years. Women and people of color are a fast-growing segment of entrepreneurs, yet still overshadowed by white men in small business ownership.

This lack of diversity is an opportunity for a competitive advantage. Because diversity only gets harder as businesses scale, it is important to focus on diversity early. There are several reasons diversity is important as businesses scale:

  • People gravitate towards people like them
  • The absence of diversity prevents innovation
  • Diversity does not happen quickly

Related: Importance Of Diversity And Inclusion For Business Growth

People gravitate towards people like them

Affinity bias is a big barrier to diversity. The challenge is people tend to attract and hire talent like them. People like people like them. Whether that is race, gender, or other dimensions of diversity, it is problematic, especially in the early start-up to scale up days. There must be an intentional, consistent focus on diversity, otherwise well-intentioned business owners risk hiring people that look and often behave just like them — their own mini-me.

It likely feels easier to work with like-minded people, yet divergent thinking fosters more innovation, better decisions and growth. It is true that the first few hires are likely friends and family or people in like networks. For businesses that intend to grow to hundreds of employees, there is a natural pivot point that happens in scaling from double to triple digits employee sizes.

At 10 employees, if you lack diversity, people with diverse backgrounds are already less likely to apply or accept positions when they do not see themselves reflected in the organization. Being the only person of color, person with a disability, LGBTQ+ person, woman or gender non-binary person is exhausting. The person is often tokenized with unintentional, with harmful behavior directed at them like "you are (dimension of diversity) — what do you think?" or "what would your people think of this" or "we didn't mean to leave you out, we were just trying to make a decision quickly."

All of these microaggressions — harmful, often unintentional statements directed at people with diverse backgrounds — lead to a lack of diversity and inclusion which generally leads to higher turnover rates of women, people of color, those with disabilities and those in the LGBTQ+ community. Yes, decisions can take longer with a diverse team. With time, diverse-led decisions tend to have better outcomes with diverse teams.

Related: Diversity Starts at the Top: Embrace Different Perspectives for Maximum Success

The absence of diversity prevents innovation

When diversity is absent at the decision-making table, teams risk being irrelevant to the customers and communities they wish to serve. Asking "what perspective are we missing?" or "how are we mirroring the community and the consumers we want to serve?" helps teams recognize the lack of diversity as an opportunity. If there are perspectives missing or not leadership is not representing those we want to serve, then there is an opportunity to get better.

As start-ups grow and scale from double to triple digit employees, there is a natural progression that happens with people management. With 50 or fewer employees, generally there is not an HR or formal people development leader, it can fall within the responsibilities of a member of the C-suite (CFO, COO, CMO, etc.). As the organization grows beyond 50 employees, most organizations add an HR or Chief People Officer to the team (generally a woman) to manage hiring and the employee experience. With clear ownership of people, this person must be empowered to have a consistent, intentional focus on diversity or they run the risk of perpetuating the affinity bias for hiring people "like us."

As the organization scales to triple digit employees, there again comes a pivot point. This is the opportunity to hire a diversity officer or add a diversity program manager or diversity recruiter to the team. This person should be empowered to manage diversity programming to facilitate a culture of inclusion and belonging for existing employees while also focusing on growth that is representative of the community and those the organization wishes to serve.

Related: 4 Steps to Bring More Much-Needed Diversity to Startup Culture

Diversity does not happen quickly

Baby steps matter. Most organizations are not as diverse and inclusive as they want to be. If this was easy, diversity would not be such a hot topic. Organizations must make diversity a part of their culture and values long-term to pivot towards real inclusion. It is not a one and done, check the box activity.

Resist the urge to simply hire a diversity person or hire a consultant to manage diversity. Without true empowerment and resources, they will be ineffective. Set the expectation that everyone cares about diversity, and this is a part of everyone's job. And, if people are not on board, there is accountability for non-inclusive behavior. The diversity and inclusion journey are filled with bumbles and stumbles. Be okay with risk and mistakes — the team will learn from it.

This is a long-term commitment, with consistent activity required to shift the culture over time to be more diverse. That commitment pays dividends long-term with higher rates of learning, innovation and business results.

Wavy Line
Julie Kratz

Entrepreneur Leadership Network Contributor

Chief Engagement Officer

Julie Kratz is a highly-acclaimed TEDx speaker and inclusive leadership trainer who led teams and produced results in corporate America. Promoting diversity, inclusion and allyship in the workplace, Julie helps organizations foster more inclusive environments. Meet Julie at NextPivotPoint.com.

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