• Anna Mowris

Diverse Companies are Shown to Produce More Revenue

Updated: Aug 13, 2020

Diversity surrounds you every single day, we are constantly seeking out diversity because we as individuals have a large range of tastes, preferences, ideas, and dreams. This diversity is what shapes and creates our entire world. There is a constant stream of newly opening restaurants, new fashion designers, emerging entertainment options, new books and magazines and so much more. All of these businesses and options exist because we as humans are constantly craving fresh and unique experiences. This diversity is what allows our world to be the beautiful place that it is. Diversity can be boiled down to human curiosity - the antithesis of boredom.

Diversity also serves an important role in nature as well. In nature, biodiversity is key to the functioning of our planet. Each species and component of biodiversity, no matter its size, plays an important role in keeping both our planet and its ecosystems alive and well.

When understanding diversity and how important it is we take notes from researchers and moreover investors. When researchers build models they are seeking to sample diverse regions in order to get the most accurate results. This principle is also utilized in investing, where most people tend to spread their investments into a portfolio that is diversified so that they may hedge any risk of one stock or industry failing. Without this diversity they would be more or less, putting all their eggs in one basket praying to get accurate results or a great return and the gamble of both of these possibilities would be much higher.

What if we were to utilize this same principle and look at diversity from a workplace perspective? How does diversity help to improve a company and help them to better achieve their goals? A study by the Boston Consulting Group found that diversity increases companies’ bottom lines. The study also found that “increasing the diversity of leadership teams leads to more and better innovation and improved financial performance.” The Boston Consulting Group studied 1700 different companies across 8 different countries, with varying industries and company sizes, and found that companies with a more diverse management team have a 19% higher revenue due to innovation. This finding shows us that diversity is not just a metric to be strived for, that it is actually an integral part of a successful business.

Diversity within any space means diversity of minds, ideas, and approaches, so it only makes sense that this would allow teams to find solutions that take into account every angle of a problem, thus making every solution much more well-rounded, much stronger, and more optimized. Therefore, showing us that diversity is key to a company’s bottom line.

Furthermore, the study found that rather than focusing on a specific area of diversity, there is much more value in creating teams that have multiple areas of diversity. So how can companies structure such diverse teams in their workplace? There is no one right answer to this question, but researchers indicate that the initiatives that come from the CEO’s vision coupled with policies such as equal pay, a culture of openness, and inclusion in the workplace all help to create a more diverse and well-rounded environment.

Our financial decisions can either help transform the economy or preserve the status quo. The way we spend, and moreover the way we invest, have a massive impact on policy change and government decisions. As an investor, you have the agency to support firms that put people and their wellbeing above profits, companies that raise the bar through their diversity and inclusion efforts.

Let’s transform our economy into one that aids in the equality of all of our citizens. You can make a small step in doing so by investing in Newday's soon to be released Diversity and Inclusion Portfolio. Our active support will yield benefits for years to come.

This commentary is provided for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any product or service. Unless otherwise stated, all information and opinion contained in this publication were produced by Newday Funds, Inc. (“Newday”) and other sources believed by Newday to be accurate and reliable. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions of the financial markets, general investment strategy, or particular investments or recommendations to clients are subject to change without notice. Investors should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Past performance does not guarantee future performance.

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