Diversification in Tech: The Key to a Better ROI

As I discussed a few weeks ago, diversification within the STEM (science, technology, engineering, and mathematics) sector is a major issue. Although the majority of the workforce is comprised of women, very few women have tech jobs. And a similar issue is posed with minorities. Diversification within the tech industry is a slow-going revolution. Which strikes me as odd given the numerous proven benefits of diversification within tech companies, benefits such as;

Returns on Investments:

Everyone wants higher ROIs, regardless of what it is that you’re doing. Diversification has proven benefits in multiple ways when it comes to ROI. Within Fortune 500 companies alone, those who had three or more women directors saw the following benefits;

  • At least 53% increase in return on equity compared to those who had fewer than three women directors.
  • At least 42% increase in return on sales when compared to companies who had fewer women directors.
  • At least 66% increase on invested capital return in contrast to those companies who had less than three women directors.

Less Capital

On average, women who ran start-ups successfully started their companies with 1/8th of the funding as the start-ups that were run by men. Less start-up capital means fewer investors that have a stakehold in your company, and fewer paychecks are being written to non-employees, which keeps more residuals in the company’s pockets. However, it would only be fair to point out that 93% of investor money goes to male run start-ups leaving women with the mouse’s share of the money (7%.)

While there is no definitive explanation as to why women were able to successful start a start-up with less capital, it shows the tenacity of female entrepreneurs and certainly demonstrates how they could be an asset to any company.

Higher Revenues

Even with less start-up capital, women were able to produce higher revenue and a better ROIs on average than male-run companies. On average women-run companies (similar to companies with female executives) had a 35% higher ROI. While women run venture-backed companies earned 12% more income on average than venture-backed companies run by men. Again, while there is no definitive reason for this large jump in income, it’s worth taking note of when it comes to the benefits diversification plays in a business.

Cumulative Intelligence

When all male businesses were tested on their cumulative intelligence (or their average collective intelligence as a team) they scored lower than those who had women on staff. As I argued a few weeks ago, different genders, races, and cultures all have a different perspective and unique knowledge they can offer the team as a whole. Thus, bringing up the cumulative intelligence score. Diversity is also a key competent to innovation and ingenuity when it comes to the performing team as a whole.

Women within Fortune 500 and Fortune 1,000

Women CEOs within Fortune 1,000 companies were compared to men within S&P 500 on how well they could increase ROI and grow the business as a whole. On average, the women of Fortune 1000 produced 226% more return on equity than the men of S&P 500. While there is no definitive reason as to why this is, Karen Ruben offered this for reasoning; “Most think it has to do with how hard women have to work to become CEO at such big companies in the first place.”

To Further the Argument for Diversity

According to the calculations from McKinsey, if more women were funded within the tech sector, by 2025 $12 trillion (yes, with a ‘t’) could be added to the global GPD by 2025- just a few years from now. However, as much as $28 trillion could be added if the movement to diversify the workforce within tech were taken seriously.

What Can Be Done?

If a real effort is to be made, “Tech companies must take the lead to publicize what they're doing and how they’re doing in diversifying their workforce.” Says Craig Newmark from Recode. With an additional layer of transparency, we can see what- if anything- is being done to better the diversity within tech. But we need more than just transparency, we need a revolution, "If we’re going to solve the toughest problems facing our communities nationally and globally, we must foster a culture of greater diversity and level the playing field for talented women in tech," says Allyson Kapin from WomenWhoTech. There is more to this issue than talent, culture, big organizational mangers, and pipelines alone- everything needs to change before we can see true diversity.

What are your thoughts on the way companies handle diversification? What do you think needs to be done about it, if anything? Let me know your thoughts below!

Views: 130

Comment by Alok Jain on March 16, 2017 at 4:05am
Comment by Jackye Clayton on April 13, 2017 at 2:56pm

This article brings up some great points!

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