Manufacturing

Diversity Or Bust: How U.S. Manufacturing Can Change Its Stripes To Win Its Future

William Krueger / Nov. 11, 2016

In the dog-eat-dog world of global business, any path to a competitive advantage is viewed as the correct one to take. It’s why companies that invested heavily in maintaining their own IT departments and servers are in the process of moving all their operations into the cloud. It’s why Enron pulled the first Enron, why Apple maintains a culture of near-impenetrable secrecy, why Amazon is glad-handing the FAA about delivery drones and why Volkswagen cheated on its emissions tests. Winning is seen as the penultimate good, which makes winning more the ultimate.

U.S. manufacturing is, of course, no different. Once responsible for employing one out of three American workers; today, the industry employs less than one in 10 but makes exponentially more things at a quality and variety that is nothing short of astounding. By chasing the competitive advantages available — online CNC machining, automation, lean, industrial robots, offshoring — American manufacturing companies have managed to increase innovation, productivity, efficiency and their own bottom lines.

These truths we hold to be self-evident. So it should come as something of a surprise that more companies in U.S. manufacturing haven’t jumped on the diversity train. Why, you ask? Because sound data and research from a wide variety of sources show that companies with more diversity in their workforce, on their executive teams and corporate boards are better at innovating and making money.

So, hold onto your hats — the numbers are actually kind of staggering.

On What You're Born With And What You Acquire

Let’s start with an article in the Harvard Business Review from December 2013 that highlights the literal value diversity in executive leadership can bring to a company. Called “How Diversity Can Drive Innovation,” its authors surveyed a nationally representative sample of 1,800 different professionals, conducted numerous focus groups and interviews and delved into 40 case studies.

The study focused on two types of diversity, acquired and inherent. Inherent diversity is the kind most people think of when the word “diversity” is mentioned. It’s the traits a person is born with, nature not nurture. Acquired diversity, however, is based on the lived experiences a person has had. Going to college in another country, growing up poor in Appalachia, serving in the military, joining the Peace Corps — uncommon experiences like these are a valuable form of diversity, and add to a company’s assets, too.

Diversity By The Numbers

What the researchers discovered was this: Companies with executive teams that included at least three acquired and three inherent diversity traits — a combination they call “two-dimensional diversity” — were the most innovative and best performing in the batch. Employees of these companies were 45% more likely to report annual market share growth and 70% more likely to report capturing an entirely new market.

Diversity Or Bust Main

Amazingly, of the companies surveyed, only 22% had the two-dimensional executive diversity that made numbers like these possible. McKinsey & Company released an article that states emerging markets around the world will grow to represent $30 trillion and 4.2 billion people by 2025. If that prediction holds, too few U.S. companies have the diversity of people and viewpoints necessary to properly target and tackle these new consumers and opportunities.

Being able to effectively leverage diverse and underserved markets is tantamount to winning the lottery. Unlike winning the lottery, however, gaining access to and understanding those underserved markets has nothing to do with luck. It comes by having people in power and on the payroll who have that understanding in spades. As the authors of the HBR article put it, “ … when at least one member of a team has traits in common with the end user, the entire team better understands that user.”

Those numbers are just the tip of the iceberg, too.

Another McKinsey & Company report from 2012 found that, across Europe and the United States, companies with more diverse executive boards boasted considerably higher returns on equity and earnings than companies that were more homogenous. The simple act of adding a few more women to an organization’s rank and file has been shown to boost profits from Brazil to Wisconsin. A recent global study of almost 22,000 companies undertaken by The Peterson Institute for International Economics found that companies with boards with more gender diversity — at least one woman to every three men — pulled in earnings that were, at minimum, six points higher than competitors. Deloitte’s Radical Innovation and Growth Global Board Survey from February 2016 states it well in this tasty nugget:

    Diversity is a buzzword these days and rightfully so, not least when dealing with radical innovation. Diversity in cognitive styles (how you organize and process information), diversity in perspectives, diversity in interpretations, diversity in heuristics, and diversity in predictive models, all are evidenced as impacting the creative and innovative process. You need heterogeneity in the right places of the organization, ie. where innovation is anchored and takes place … You need more age-spread, more internationalization, better gender balance, greater cross-cultural understanding, and not least competence diversity to drive your future business.

The kicker?

As was noted above, diversity’s positive effects apply to shockingly few companies around the world — not just here in the U.S. The opportunity, then, is ripe for organizations, regions and whole countries interested in establishing innovation and performance dominance through the simple act of hiring a more diverse workforce and promoting a more diverse executive team. At a time when global competitiveness is getting more and more fierce and technological change is about to remake everything we thought we knew, that’s good news for U.S. manufacturing — if we’re ready to do the work required to make the change.

The Work Of Change

If you’re ready to benefit from the competitive advantages a more diverse company will bring you, there are organizations that can help guide your way. The Manufacturing Institute has been tackling diversity issues for a while now as a means of overcoming the looming skills gap. To that end, their primary focus has been on pulling more veterans and more women into manufacturing.

Whether you’re a manager, HR personnel, executive or CNC machine shop owner, their veteran hiring and retaining resource guide can help you attract, hire and retain veterans — a diverse group of individuals with remarkably wide skillsets and ranges of experience. The Manufacturing Institute also has resources through their STEP Ahead program that can help you get more women into your workforce.

Diversity Or Bust Women

The Manufacturing Diversity Institute (MDI) also provides resources for companies in need of an inclusion boost. Their efforts are aimed at manufacturing companies, state and local governments, schools, even churches — any organization interested in ensuring underserved populations participate more fully in our nation’s manufacturing sector. They offer organizational development, outreach, education and entrepreneurship training. If you’re serious about ensuring your company’s health over the coming years, they can help.

Besides looking to these organizations and others like them, though, there are small but significant steps you can start taking all by yourself to start building diversity within your organizations right now. Whether you’re running a CNC machine shop or a Fortune 500 company, here are a handful of suggestions:

  1. Talk about it. Communicate with your staff, your board, your shareholders and your employees about all the data that points to why a more diverse company will yield greater returns. Selling the idea before implementing the effort can cut down on friction later.
  2. Get trained. Targeted training can help you adjust how you think, behave and make decisions. Besides helping you uncover your implicit biases, this type of targeted awareness training can also give you ideas and strategies to make your workplace more inclusive.
  3. Get inclusive with your culture. Just hiring or promoting people from diverse populations won’t yield all the potential benefits unless you also actively promote a culture of inclusion that celebrates and lifts up all people and differences in perspective.
  4. Do it. Your company’s bottom line needs this. Your shareholders need this. U.S. manufacturing needs this. You need this. Don’t wait until the perfect African-American, female candidate approaches you for a job. Go find her. Then do everything you can to keep her at your company. The sooner we welcome diverse people and thinkers onto our corporate boards, our executive teams and across our payrolls, the sooner we can innovate and perform our way to the front of the global manufacturing pack.

Diversity paves a clear path to competitive advantage, and the sooner it’s embraced and nurtured the better. From inspiring innovation to capturing new and greater market share, the differences between us can yield powerful and positive results. In order for that to happen, however, those differences must first be present. It’s time to stop shying away. So long as we change our stripes — becoming a more complex “we” in the process — we have nothing to fear in our future.