As a small business owner, why should you think about diversity and inclusion?

 

Kevin Kerridge, CEO, Hiscox USA

Regine Fiddler, CMO & Head of Direct, Hiscox USA

Erica Fletcher, Global Head of Diversity and Inclusion, Hiscox

Ken Douzart, Partnership Strategy Delivery Specialist, Hiscox USA

 

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A marketer, accountant, recruiter, analyst and leader; a small business owner really does it all. When you’re struggling to find enough hours in the day to grow your business, initiatives like diversity and inclusion feel less important. New research shows that diversity has very real benefits for small businesses, and directly contributes to their success and growth.

 

When you hear about the benefits of “diversity, equity and inclusion”, it’s often for big corporations. For instance, Mickinsey’s study found that companies with a diverse workforce are 35 per cent more likely to experience greater financial returns than their respective non-diverse counterparts, but the survey only takes public companies into consideration, which typically have a revenue of $100 million or more.

 

The Hiscox Diversity in Small Business Report is unique in that it explores how and why these benefits also translate to small businesses. The results of the Hiscox USA study were compelling, as they demonstrated that highly diverse small businesses were significantly more likely to have grown in the past two years than those with little diversity; 72 per cent of small businesses with moderate-to-high racial and ethnic diversity among managers and owners experienced business growth, compared to only 45 per cent with little-to-no racial and ethnic diversity.

 

Both adaptability and innovation are key pillars supporting their success. According to Federal Reserve research, nearly 200,000 additional businesses failed during the first year of the pandemic. To thrive during an unprecedented global crisis, diverse businesses strategically flexed to the changing environment. Of the diverse small businesses, 85% made changes to their business, such as expanding their customer base or changing their pricing, compared to 57% with little diversity. A similar trend also appeared for innovation, as diverse businesses launched new products and services an average of 24 times, compared to an average of 14 for businesses with little diversity.

 

To understand why diversity can have such a profound effect on adaptability and innovation, it helps to look at what goes wrong in teams that are too similar. Studies show that groups made up of individuals with similar belief systems will often make biased decisions; if you’re all looking at a problem from the same point of view, it’s hard to see all angles and land on the best solution. Consensual validation is also at play, meaning that we consider people who share our own attitudes about the world more favorably, which can lead to conformity. Last, but by no means least, there is in-group bias, which makes us more lenient towards someone who we think is similar to us, even bending our own morals for the sake of people ‘like us’, which inevitably drives poor decision-making.

 

Despite the irrefutable benefits of diversity, equity and inclusion for big businesses, and lesser known advantages for smaller ones, the Hiscox USA study showed that nearly half (46 per cent) of small businesses say improving D&I is only slightly, or not at all important. Every small business owner already embraces diversity when it comes to the variety of tasks they do to run their business, and by welcoming racial, ethnic and gender diversity in their people, they can give their business a substantially higher chance of success.

 

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Find out more about the impact of diversity on your small business here.

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by Lucy Baines, Senior Director of Communications & Public Relations, Hiscox USA