The 4 Unique Benefits of Diversity in Outsourcing
The workplace is currently undergoing significant and rapid demographic changes. This diversity is caused by the influx of Millennials into the workplace, the impact of an ageing workforce remaining longer and the increasing numbers of women entering the workforce. Those companies that deliver services to the workplace and that can reflect these changes in their client’s cultural diversity landscape, have a distinct competitive advantage.
By understanding the four distinct benefits that embracing diversity can provide, you will be able to position your company to take advantage of a differentiator that can be unique, compelling and impossible to replicate.
Diversity is a term that is misunderstood and misrepresented because too many it remains a threat. To comprehend the benefits of diversity to your organisation, it is helpful to understand that this can be measured along two dimensions (2-D), Inherent and Acquired diversity.
Inherent diversity covers those characteristics that we have by nature and that typically cannot be changed. These dimensions include race, sex, age, where we were born, handicaps and sexual orientation. The dimensions of acquired diversity cover those that originate from culture and experience. These include education, religion, language, personality, values, etc. In practice, however often it is race, gender and age that are considered at the forefront of the diversity debate.
All of the above characteristics promote the perception of diversity in an organisation. It is important to understand the business benefits of diversity both internally and in particular when selecting an outsourcing partner as this will have an impact on the service and entrepreneurial culture of that organisation. Diversity will impact on the success of the outsourcing and the service providers ability to engage in a genuinely collaborative partnership.
Many diversity strategies fail and show poor results. In the outsourcing context, it is of particular importance to understand that where we are operating in countries outside our borders, cultural integration and indigenisation is a critical success factor. The primary license to operate in any Country must be that the workforce reflects the country’s population and cultural outlook.
In the outsourcing context, there are four distinct benefits of diversity;
1. Diversity Improves Performance
When considering sourcing a suitable outsourcing partner, organisations are increasingly assessing the cultural fit between their organisation and potential service providers. A survey among the largest IT outsourcing customers in the USA showed that this issue ranks second regarding importance when selecting a service provider.
Gartner, a leading analyst company, predicts that 30% of all outsourcing contracts will likely end in failure. They identified cultural misfit is the primary reason for this. The cultural fit between the company and its service providers is pivotal to the success of the initiative.
The research is clear; it is part of the human condition that we tend to gravitate towards those of a similar disposition and culture. Increased diversity amplifies the likelihood of a cultural fit between customers and service providers. A Harvard Business Review study tells us that a team with a member who shares a client’s ethnicity is 152% likelier than another team to understand that client.
Change Management is a potential constraint to the success of an outsourcing initiative. The greater the degree of cultural alignment between the two organisations, the less change management will be required. It follows therefore that in a highly diverse environment there are greater chances of cultural integration between the transferring employees and the incoming service provider.
It is a fact that the workplace is becoming more diverse as our clients’ attempt to serve their customers better, innovate and solve tomorrow’s problems. To build the trust and confidence in our clients, it is important that we mirror our client’s efforts. If our client’s workplace is becoming more diverse, then we are more likely to connect and engender trust if we reflect the cultural diversity of the clients we serve.
I am not trying to underplay that one of the greatest benefits of outsourcing. Transformation can only be achieved by driving appropriate cultural change within the transferring employees. Typically non-core service individuals are seen as the poor cousins and consequently under-resourced and receive less investment and training than their core business colleagues.
While a service excellence mindset may be lacking with the in-house team, one should not throw the baby out with the bathwater by attempting to execute wholesale cultural change. Rather we need to engage in an intervention that recognises the cultural makeup of the transferring employees. This can be done while re-engineering how this can be used to improve service excellence or any other desired change objective.
The degree to which the integration of transferring employees is achieved has a direct correlation with the long-term success of the contract.
2. Diversity Minimises Risk
When a client selects a service provider with a diverse workforce they are perhaps unknowingly decreasing the overall contract risks and inferring on the contract three significant benefits;
- Statistics show that a diverse workforce has lower employee turnover and lower absenteeism rates. The Client is therefore likely to experience fewer disruptions in day-to-day service. Higher levels of satisfaction, greater continuity of service and a reduction in the risk of failure will result.
- One of the major stumbling blocks for an outsourced provider is the short time frames and cost related to recruiting staff. It is likely that a service provider will need additional staff other than those transferred from the employer to capacitate a new contract. The resultant recruitment process is expensive, risky and can be threateningly protracted. It is crucial for the provider to be able to tap into the biggest and best pool of talent available. A diverse approach increases the available talent pool with resultant recruitment costs being lower and open job positions being filled quicker.
- Engaging and aligning the transferring employees to achieve transformational change is crucial. The better the staff retention during the transition period the more successful the contract will be. The more diverse the service provider, the more it can include and effectively integrate the transferring employees successfully.
3. Diversity Drives Innovation
Access to innovation and service improvement is one of the leading objectives of the global growth in outsourcing. However, the notion can be hard to prove or quantify, especially when it comes to measuring how diversity affects a firm’s ability to innovate.
New research provides compelling evidence that diversity unlocks innovation and drives market growth. This study, of 1,800 professionals, 40 case studies, and numerous focus groups and interviews, correlated diversity in leadership with improved market outcomes. The survey shows that companies with both inherent and acquired (2-D) dimensions of diversity out-innovate and outperform their more homogeneous competitors.
2-D diversity unlocks innovation by creating an environment where “outside the box” ideas are heard. When minorities form a critical mass and leaders value differences, all employees can find senior people to go to bat for compelling ideas and can persuade those in charge of budgets to deploy resources to develop those ideas.
Diverse contributors inherently understand the unmet needs of their similarly diverse clients. Inherent diversity, however, is only half of the equation. Companies also need to acquire diversity to improve the ‘gene pool’ and reduce the inclination towards group think and establish a culture in which all employees feel free to contribute ideas.
4. Diversity Improves Corporate Social Responsibility
Corporate Social Responsibility (CSR) involves more than organisations merely acting in an ethical and conscientious manner.
The business case for CSR has developed over the last ten years, and much evidence has been collected to support it. Despite the intangible nature of CSR, it has become a hard business metric through initiatives such as the ‘Triple Bottom Line’, which objectively captures and measures an organisation’s wider imprint.
The choice of a service provider to whom a company outsources its staff and non-core services may impact on the company’s CSR. Many clients still include the outsourced FM employees in their CSR accounts for true transparency even though these employees no longer work for the company. The choice of FM provider and their CSR initiatives may, therefore, be significant regarding overall CSR accounts. This is particularly so if such services comprise a relatively significant proportion of the overall company.
The research concludes that companies that create a diverse workplace significantly outperform their counterparts on all fronts, especially financially. So it is our duty of care to our clients as enablers of their business’s to reflect their diversity in our service teams. The overall business case for a diverse culture is strong and is based on objective and measurable research findings which constitute a powerful new dimension of the business case for diversity.
In next week’s post, I will set out the nine steps of how to implement an effective Diversity strategy.
This week’s Question; How does Diversity impact service provision in your organisation? Please leave your comments below…