Diversity as a Small Business Strategy

Robin Gerrow

Early Implementation of Diversity Policies Help Set the Stage for Future Success

New small businesses and start-ups have their hands full with the basic ABCs of launching. For those with an eye on growth, adding the D of diversity from the start can have a big impact down the road.

In a new study by Dr. Kelly Weeks of Rhodes College, Dr. Myrtle Bell of The University of Texas at Arlington, and Dr. Jennifer Sequeira and Dr. SherRhonda Gibbs of the University of Southern Mississippi, the researchers posit that new small firms benefit as much from employee racial diversity as larger, more established companies. With a dearth of research on smaller organizations, they turned to existing research on large firms to argue their point and come up with practical recommendations for organizations.

“Small businesses make up such a huge part of the United States business landscape, and these companies often don’t succeed,” Weeks said. “Hiring employees from diverse backgrounds can bring much-needed intellectual capital, which will help a firm generate new business, create long-term profits, be more innovative, and be successful for the future. Building an inclusive company culture will ensure that each member of the diverse workforce is valued for their unique knowledge and skills, and will be more likely to remain with the company.”

Diversity has been part of SIOP’s Top 10 Workplace Trends for several years. Not only did it remain on the list for 2018, the issue has taken on a new sense of urgency with news reports of exclusion of underrepresented groups.

Given the large number of people employed by small companies, the research team considered how new small businesses can leverage intellectual capital early on to set themselves up for growth in the future. Acknowledging that small business owners already have a lot on their plate, the researchers first set out to establish why it is important to develop a culture of diversity early.

“Oftentimes, small businesses owners believe that diversity doesn’t affect them, and it is more of a struggle than a benefit,” Weeks said. “We believe that emphasizing diversity early in the life of a business can actually be a competitive advantage in so many ways. Of course, it isn’t just about the number of employees from diverse backgrounds—small companies must work on developing a climate that values diversity as well. Therefore, we set out to describe how and why it is important.”

Their paper, “Making the Case for Diversity as a Strategic Business Tool in Small Firm Survival and Success,” will be published in a forthcoming issue of the Journal of Small Business Strategy, and an earlier version was presented at the 33rd Annual Conference of the Society for Industrial and Organizational Psychology in Chicago, Illinois, in April.

“Recruiting a diverse group of employees can help the companies access a variety of external social networks, which can help with funding, attracting customers and future employees, and building the reputation of the firm across various constituencies,” Weeks continued. “Employees from a variety of backgrounds will also likely create more innovative ideas and come up with interesting ways to solve problems.”

The need for diversity in organizations has been made by numerous researchers and was the subject of an in-depth panel discussion among SIOP members in 2017, “New Directions in Diversity and Inclusion: A Dialogue on What Truly Works.”

While new business owners are working on setting up marketing, production, and accounting practices, Weeks said taking time to establish a few human resource policies will set the organization up for future success.

“Starting with a mission statement that includes inclusivity and communicating this commitment on a regular basis is the first step,” she said. “A culture of inclusivity starts at the top and a small business owner will have a lot of influence over the culture from the beginning. Hiring employees from different racial and socioeconomic backgrounds is the next step. Small business owners are usually nervous about this step but advertising job openings with organizations or outlets frequented by diverse individuals, such as churches, community centers, and ethnic-focused newspapers, is a quick and easy method to attract racially diverse employees.

“As the business grows, the owner should be aware of the objectivity of human resource policies to make sure that they are fair and equitable, and that all employees have a voice in decision making,” she continued. “This will ensure that the culture originally set up will stand the test of time—and growth. Over the long term, the small business owner should incorporate regular diversity training for all employees and an assessment plan for the diversity initiatives to track progress.”

Although the research available is mostly about diversity in large organizations, Weeks said many of the practices and policies can be applied to new, small businesses as well.

“There are definitely cautions in applying research on large organizations to newer, smaller businesses,” she said. “For one, small businesses often lack financial resources, infrastructure, or human resource personnel to spend as much time on diversity and inclusion initiatives. They must rely on inexpensive and convenient sources of recruitment and cannot often afford the same quality of benefits or salaries as larger firms.

“In addition, the small business owner is often worried about survival and is busy putting out daily fires. Therefore, the perception is that there is not enough time to focus on diversity and inclusion efforts. However, we made suggestions that even the smallest firms could start considering. The competitive advantage of the intellectual capital that accompanies a diverse group of employees is invaluable!”

Although the team’s paper focuses on racial diversity, they found that other types of diversity among employees are also important.

“There is evidence that all kinds of diversity help enhance an organization’s success,” Weeks said. “We also advocate for hiring a diverse group of employees who come from a variety of ability levels, genders, sexual orientations, gender identities, religions, and so on.”

Connect with Kelly Weeks by email.