How to Effectively Build Diverse Leadership Teams

Diverse teams have been proven to generate better business results. A workforce comprising employees from different backgrounds presents a variety of experiences, perspectives, and skills. This results in more innovation, especially if your organization has diverse leadership. How can businesses build diverse leadership teams in a structured and manageable way?

Defining Diverse Leadership Teams

A diverse leadership team is one consisting of people with a wide range of ethnic backgrounds, identities, and experiences. Study after study has shown that diverse teams produce better results. Moreover, when diversity is present at the management level, it results in improved performance. 

Creating diverse leadership creates a work culture that includes people of different backgrounds, experiences, and cultures. Diversity also involves factors such as race, age, gender, sexual orientation, socioeconomic background, physical attributes, disability, and religion. Organizations that build an inclusive culture from the senior management level often benefit from an outlook based on these different points of view and perspectives. 

Despite Rising Numbers, Minorities Are Underrepresented in the Workplace 

The population in the U.S.  is growing more diverse with each decade, and it is projected that by 2060, only 179 million people in the U.S. will be non-Hispanic white. The census also projects bi-racial and multi-racial people to be the fastest-growing ethnic group over the next few decades. 

However, there is a disparity between the growth in population diversity and their participation in leadership roles. 

• Women are still experiencing workplace bias, with the gender pay gap persisting in 2022. In the U.S., women earn 83 percent of wages paid to men for the same job. 
• Women are also less likely to be hired for managerial positions than men are.
• As of 2022, only six Fortune 500 companies have a CEO who identifies as a person of color. 
• Only 79 Fortune 500 companies release full Diversity, Equity and Inclusion (DEI) annual reports as of 2022.  

Why Diverse Companies Perform Better

Companies with a highly diverse workforce produce more cash flow than companies with a more homogeneous workforce — as much as 2.5 times more per employee. Here are 4 reasons why diversity improves company performance: 

1. Diverse Leadership Bridges Diverse Communication Styles

Effective communication is a cornerstone of a successful business. Still, it can be challenging to communicate clearly, especially with a diverse workforce. Each culture has its own style of communication and management. Having diverse leadership can bridge the gap, solving misunderstandings and issues that can otherwise be lost in translation. 

2. Improved Company Outlook 

When your company has a diverse group of decision makers, there is a higher level of cultural intelligence. That means management is better able to understand situations from different perspectives. A diverse leadership team can protect a brand from PR mishaps and increase the cultural awareness of the company as a whole. 

3. Increased Employee Retention

It’s important for minority populations to be represented in leadership positions to empower employee development within an organization. Having managers and leaders from diverse backgrounds is also important for mentorship opportunities, thus increasing employee retention. 

4. Better Representation 

An inclusive leadership team helps develop an organizational culture that promotes Diversity, Equity, and Inclusion. When the leadership is diverse, it shows the company values the contributions of all backgrounds when making decisions.  

Challenges of Leading Diverse Leadership Teams

Despite its benefits, building a culture of diversity that starts with the top leadership does have some challenges. Here’s what business leaders need to look out for: 

Overcoming Unconscious Bias 

According to our study, Repairing the Broken Rung, most hiring managers have an unconscious bias against women and racial minorities for leadership positions. The study shows that male and female managers associate leadership potential with men three times more than women. Also, white men are more likely to be associated with leadership potential than Black men and those of other races. 

The study goes on to show the disparity in racial representation in high-potential programs, where the percentage of white employees in those programs is almost equal to that of other races combined. The study shows that there are twice as many men as women in leadership positions. 

Relying on Management to Identify Good Candidates

The traditional process for identifying high-potential employees relies heavily on the existing management team doing the selection process. According to Pinsight research, 88% of companies rely on managers to identify high-potential candidates. This situation may taint the selection process with unconscious or conscious bias and will include a very limited perspective of candidates in the workforce. Unfortunately, only a small percentage of companies use objective methods to determine an employee’s potential.

Slower Decision Making

Diverse teams process information differently than non-diverse teams. These teams present multiple points of view and tend to consider several aspects of the issue, therefore slowing down the decision process. When you present a problem to a diverse team, be sure to allow time for their consideration. 

How to Build Diverse Leadership Teams the Right Way

A corporate leadership that benefits from Diversity, Inclusion, and Equality empowers your company. However, as we saw before, detecting potential leaders objectively with DEI in mind can be challenging. These five tips can help you achieve your A-team:

1. Revamp Your Culture to Focus on Diversity and Inclusiveness

Diversity should permeate every aspect of your company, so consider DEI when creating company policies. Assess your current company culture and ask yourself if it meets the requirements for Diversity, Equality, and Inclusion. Evaluate if there is any policy or process that carries bias or unwitting discrimination. That way, you ensure fairness and objectivity when promoting from within. 

2. Expand Recruitment on a Global Scale

One way to increase the pool of diverse leadership is to look for candidates beyond geographical borders. That way, you can ensure you get the best candidate for the job regardless of location, as well as providing a variety of cultures and perspectives. 

Recruitment should be as impartial as possible, especially for leadership positions. Hiring C-Suite professionals requires measuring objectively to choose according to capability without bias.

A personality assessment tool can help measure the candidates’ personalities, motivations, and skills. Assessments should be scalable, standardized, and provide accurate data for talent hiring. Other tips include: 

• Offer workplace policies that support work-life balance
• Widen your pool to include remote workers if possible 
• Avoid unconscious bias

3. Invest in Leadership Development

Empower employees to develop their careers and try to promote from within. Be aware of potential bias and create pathways for underrepresented groups to have the same opportunities for advancement. Discover development solutions Pinsight offers.

4.Rework Your Communication Strategy

When preparing your company’s communications, try to be as inclusive and neutral as possible. Be aware of potential misunderstandings due to cultural differences and choose respectful language. Consider the language you use when posting jobs, avoiding adjectives typically associated with men, for example. 

Encourage feedback and input from your employees to get different perspectives. 

5. A DEI Culture Starts From the Top

Create a culture of diversity that empowers leadership and develops skills. Implement policies and activities that create awareness of diversity and equality among your current leadership team. By starting the change from the top down, your employees will feel represented, communication will improve, and the company will benefit from a variety of different perspectives and innovations. A diverse leadership team is a winning situation for the whole organization.

This article was written by Dean Mathews is the founder and CEO of OnTheClock, an employee time tracking app. Read more about him below.