Data & Diversity: The Competitive Advantage of DEI
December 2021— With the debate over equity and addressing systemic inequalities dominating the public discourse, private enterprises increasingly find themselves taking a stand, whether that be through public campaigns or reassessing leadership teams.
A more diverse workforce, and subsequently, a more diverse leadership team is an asset not just for the
wider economy but individual companies themselves. While the disparities are clear, whether that be in
institutional access to capital or even in emergency relief programs such as PPP, minority and black owned businesses and entrepreneurs have found themselves lacking in support. While many companies may, on paper, promote the values of diversity and inclusion, the data shows that 72% of Fortune 500 companies’ leadership remains white men.
In Florida, a state known for its diverse and multiethnic makeup, Hispanics make up over a quarter of the population at 26.4% according to the 2020 census. Black Americans make up another 16.9%. In South Florida’s tri-county region, those numbers become even more acute with 69% of Miami Dade identifying as Hispanic, 31% in Broward, and another 23% in Palm Beach. For Black Americans those numbers are likewise sizable, at 17%, 30% and 19% in the respective counties.
When populations are as large and mixed as these, diversity becomes a business imperative necessary to implement, whether that be to make the most of potential expansion opportunities, hiring innovative new talent or for potential partnerships.
“In addition to the moral and ethical reasons for embracing diversity, equity and inclusion, there is a strong business case for DEI. Having a diverse and inclusive workforce and leadership team helps businesses to succeed. Studies have shown diversity drives innovation and profitability. Focusing on DEI can also help companies attract and retain top talent. And consumers are increasingly looking to do business with companies who recognize the importance of these issues and intentionally embrace DEI as part of their corporate culture and business strategy,” explained Blain Heckaman, CEO of Miami-based CPA and advisory firm Kaufman Rossin.
The numbers line up. In a study released by McKinsey looking at companies from both the U.S. and U.K. through 2014 to 2019, diverse businesses outperformed and outcompeted those that were less diverse, whether that be along gender or ethnic and cultural metrics. The top quartile of gender diverse companies outperformed those with fewer women executives by 48%. For ethnic and cultural diversity, the top quartile outperformed the bottom by 36%. Further qualifying the data, more ethnically diverse organizations were increasingly likely to outperform less diverse competitors. A third of the companies included in the data had no female representation at all, and from 2014 to 2019, the diverse makeup of organizations rose to only 13%, or a seven point increase from 2014.
“Future-focused companies need diversity – in thought, experience and background in addition to diversity in age, gender, race, ethnicity and other areas – on their leadership teams and in their workforce,” Trip Tripathy, principal of business consulting services for Kaufman Rossin told Invest:. “Business leaders should ask themselves how the makeup of their leadership team compares with their customer base, products, geographies, communities and industry overall. Do they have the right skill sets, experience, and competencies as well as a variety of perspectives and background experience represented on their board?”
As companies lag on proactive implementation of diversity and inclusion strategies, they miss on potential investing opportunities, as investors increasingly look for sustainable and proactive environmental, social and governance (ESG) opportunities. Meredith Tucker, Entrepreneurial Services Principal for Kaufman Rossin explained the ongoing shift even as many organizations may lag in their commitments to diversity, and in turn, become more likely to lose out on investment or new consumers. “Consumers are increasingly looking for businesses to put their money where their mouths are when it comes to DEI and other environmental, social and governance-related issues,” Tucker told Invest:. “That means taking a hard look at everything from where and how you source your products to whether you have inclusivity in your recruiting processes and your leadership team.”
Compounding that shift is the generational curveball many businesses are beginning to notice in the wake of the Great Resignation, namely that newer, younger, more diverse generations are coming into their own.
“Statistics show that post-millennials are the most diverse generation ever. At the same time, growth in the number of minority-owned businesses in the U.S. has far outpaced that of businesses overall. As the business landscape continues to evolve and companies increasingly look to younger generations as their next set of customers, it becomes increasingly important for all businesses to show their commitment to DEI,” Heckaman said.
While the data is clear when it comes to the success of more diverse organizations and the apparent commitment of the business community towards DEI efforts, it begs the question why has the creation of a more diverse workforce taken so long to develop? The answer may simply be inertia and discomfort, with Tucker recalling Kaufman Rossin’s own initial and very intentional steps to shift the narrative and engage in difficult conversations with the 21-day YWCA Social Justice Challenge, in which participants engage with articles, videos, and personal reflections to better understand the racial dynamics of their communities.“
Learning and listening is a crucial first step. If you want to be a catalyst for change, you first need to understand the issues. At Kaufman Rossin, we recognized that we needed to do more to educate ourselves, our employees and our community about social justice and racial equity, and so we joined forces with the YWCA to sponsor, champion and participate in the 21-Day Racial Equity and Social Justice Challenge in summer of 2020 and again in spring of 2021. Both times, it was an eye-opening experience for all who participated and spurred valuable, honest conversation within our firm. It gave us a deeper understanding of the issues so we could become true advocates and allies,” Tucker said.
The firm is one that went beyond the bare minimum however, with Tax Principal Maria Toledo explaining in no uncertain terms what it took to develop Kaufman Rossin’s focus on diversity, telling Invest:, “Every industry faces different challenges in regards to DEI. In the case of the accounting industry, we know that there is a lot more work to be done to attract, retain and promote diverse talent. Our firm engaged an outside consultant to help us develop our diversity and inclusion strategy, build a framework, and implement programs to help us to foster an inclusive culture that encourages different perspectives and enables all our employees to thrive professionally and personally, regardless of their backgrounds.
When asked why it was that Kaufman Rossin embarked on its own reassessment, Heckaman said that, “A true commitment to diversity, equity and inclusion needs to start at the top. Leaders need to set the tone and champion DEI efforts.” The culture has paid off, with Kaufman Rossin being recognized by the South Florida Business Journal as one of the top advisory firms in the state, a top 100 spot from Accounting Today and by Inside Public Accounting (IPA) among its list of Top 100 firms at no. 57 nationally and first in Florida – with a net revenue of $92.5 million for the year ending May 31, 2021.
Addressing the firm’s success, Heckaman told Invest:, “It is a marathon, not a sprint, and you need to show employees that you are committed for the long-term. Our focus on diversity and inclusion ties directly to Kaufman Rossin’s core values of integrity, fairness, social responsibility and joy at work. Creating an environment where diverse perspectives are shared and all employees have the ability to thrive enriches our firm culture and enables us to provide a better experience, not only for our employees, but also for our clients.