Bass Principle #1: To succeed, companies must take advantage of all the talent available.

Companies that don’t successfully hire, retain and promote women or minorities will lose in the increasingly competitive war for the best employees.

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The most diverse companies – those in the top quartile for gender or racial and ethnic diversity – are likely to have financial returns above the median for their industry. Those in the bottom quartile for diversity are less likely to achieve above-average returns. Those facts come from McKinsey & Company research.

There are many reasons for such a disparity, and researchers frequently cite the differing perspectives diverse employees can offer, their ability to relate to a wide variety of customers and the innovation and creativity that diverse individuals bring to the table. But consider a simpler reason why more diverse companies have above-average performance: they’re hiring and retaining the best talent out there, regardless of gender, race, ethnicity or any other factor.

The competition for top talent is fierce. Some U.S. statistics:

Time and again, CEOs cite a lack of talent as the biggest factor keeping their companies from growing. Most companies believe they’re making an effort to recruit from the full talent pool. Your company may have diverse hiring initiatives, and may even be hiring equal numbers of men and women at the entry level. But that’s not enough.

Diversity goals, diverse hiring numbers and even diversity leadership institutes will only take a company part of the way. To truly take advantage of all the available talent, any organization must have an inclusive workplace. That’s far more difficult than creating diversity metrics. But it’s necessary.

Organizations that fail to create an inclusive workplace will fail to retain the diverse employees they invest in recruiting, hiring and training. Turnover is costly: one report predicted turnover cost U.S. employers $600 billion during 2018. Organizations must spend to replace departing employees and train their replacements, they lose valuable organizational knowledge, and departing employees may take hard-won relationships with them. Turnover of diverse employees also makes it more difficult to recruit new diverse talent. When candidates see few people in leadership who look like them, they’re less likely to take a job.

Take a close look at your diversity and inclusion measures. Are you really hiring and retaining the best talent out there? Can you do more?

In the coming weeks, I’ll elaborate on the rest of the Bass Principles for Diversity & Inclusion. Consider whether your organization is following them, and whether you should make substantive changes that will yield different results.

Click here to review the principles:

Hilarie Bass is president of the Bass Institute for Diversity & Inclusion, and a leader in identifying why women leave companies before they reach senior management. She helps organizations of all kinds retain women, elevate them to senior management positions and create a more inclusive workplace. The past president of the American Bar Association, Bass has more than 20 years in senior management, including six as co-president of 2,000-person law firm Greenberg Traurig and eight as head of the firm's 600-attorney litigation practice.