Businesses Benefit from Diversity

Newswise — Racial diversity in a company's workforce leads to improved business performance and volume, according to a University of Illinois at Chicago study presented today at the American Sociological Association annual meeting in Montreal.

Cedric Herring, UIC professor of sociology, analyzed data from a national sample of firms and found that diversity produces tangible benefits for a business.

Herring's study, "Does Diversity Pay?: Racial Composition of Firms and the Business Case for Diversity," found that businesses with greater racial diversity reported higher sales revenues, more customers, larger market shares, and greater relative profits compared to firms with a more homogeneous makeup.

"These results suggest that not only is having a diverse workforce a good and socially responsible thing for companies to do, but in addition, organizations that broaden their pool of qualified workers also reap material economic benefits from doing so," Herring said.

The study found that racial diversity improved performance even after controlling for such factors as a firm's legal form of organization, gender composition, size, age, type of work and region.

The study focused on responses in the 1997 National Organizations Survey that were linked to performance measures reported in Dun and Bradstreet's Market Identifiers Plus service.

Among the findings:
• Average sales revenues of organizations with low racial diversity were approximately $3.1 million, compared with $3.9 million for those with medium diversity and $5.7 million for those with high diversity.
• The average number of customers for businesses with high racial diversity was 45,525, versus 38,254 for firms with medium diversity and 23,415 for companies with low diversity.
• Companies with high racial diversity were more likely to report higher-than-average market share (72 percent) and profitability (72 percent), compared to companies with medium diversity (66 percent and 61 percent, respectively) and low diversity (54 percent and 52 percent).

UIC ranks among the nation's top 50 universities in federal research funding and is Chicago's largest university with 25,000 students, 12,000 faculty and staff, 15 colleges and the state's major public medical center. A hallmark of the campus is the Great Cities Commitment, through which UIC faculty, students and staff engage with community, corporate, foundation and government partners in hundreds of programs to improve the quality of life in metropolitan areas around the world.

For more information about UIC, visit http://www.uic.edu