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Types of Workforce Diversity and Why They Matter to Companies

Types of Workforce Diversity and Why They Matter to Companies

The face of today’s workforce has undergone a major facelift from decades ago. From technological advancements to the popularity of work-from-home arrangements that have been propelled by the COVID-19 pandemic, today’s workforce has undoubtedly seen significant developments. At the core of this change is workplace diversity, a practice of inclusion among employees regardless of differences. But while it is tempting for HR professionals and business decision makers to harp on this trend in the name of staying relevant, there is more to diversity than being a buzzword. Let’s take a look at the different types of workforce diversity and why it matters.

 What is workforce diversity?
Workforce diversity refers to the practice of accepting and including all employees regardless of their societal background. It ensures that all members of an organization are given equal benefits and opportunities and that they are assessed based on their skills and how they perform their job responsibilities without considering gender, race, ethnicity, sexual orientation, age, and other factors.The growing awareness towards workforce diversity has led many companies to value inclusion and open their manpower to people from different walks of life. Diversity has also become one of the benchmarks when identifying what it means to be the “best company.”  For example, professional networking site LinkedIn factored in gender diversity into its annual ranking of the world’s top companies. This is part of a new methodology that LinkedIn adopted to keep up with the changing workforce landscape. On the regulatory level, several countries have adopted laws that ensure equal opportunities among employees. In Australia, for example, companies are required to craft measures that would prevent workplace discrimination and make sure that the working environment is free from any form of bullying and sexual harassment.

Importance of workforce diversity

Given the PR glitz hovering above the term “diversity,” it is easy and tempting to dismiss this practice as a fad. But with numerous case studies and empirical research backing it up, diversity is more than just a buzzword; rather, it is a practice that companies can use to their advantage. More importantly, diversity is here to stay. So why should companies pay attention?

Different perspectives and better decision making

Having team members with different cultural backgrounds can widen an organization’s business perspectives. This will allow a company to explore areas that would otherwise be left out had they limited their workforce to certain races, ethnicity, age, or gender.

More innovation

Fresh perspectives drive what many companies are after in a technology-led workforce: innovation. Team members who are up-to-date with their customers’ ever-changing wants and needs are likely to develop products and services that are more relevant and saleable. This ability to adapt is the result of having people with different backgrounds, ideas, and insights. Many startups best exemplify this. These young companies are more open to hiring individuals regardless of race, ethnicity, or gender because they value innovation and the fresh ideas they can bring to the table more than conventions.

Higher profits

Workforce diversity also brings tangible benefits. As a result of higher innovation and better decision-making, companies reap more revenue. A study by McKinsey & Company between 2008 and 2010 found that companies in the U.S., the U.K., France, and Germany with more diverse executive teams reported higher returns on equity than those that practiced diversity at a far less extent, with a particular focus on having more women and foreigners on the senior team of the companies surveyed. Meanwhile, a study by Boston Consulting Group in 2017 found that having a diverse team helps improve a company’s performance, especially among those that rely on innovation and creativity. Specifically, it concluded that companies with above-average diversity on their executive teams saw their innovation revenue up 10 percentage points compared with companies that had below-average diversity within their senior leadership. 

Improved employee morale 

Creating a space that is inclusive for everyone sends a message that a company cares about its employees. A survey by Deloitte involving 1,550 employees in Australia found that inclusivity and diversity lead to increased employee engagement. The research also pointed out that a sense of inclusion is no longer just a motherhood concept but a company asset that can be measured in terms of respect, fairness, and belongingness. Diversity also translates to lower employee turnover. A workplace that promotes diversity creates a happier environment where employees feel valued regardless of their background. Studies show that employees consider the workplace environment when deciding whether to stay in a company longer or not. 

Better company reputation

Admit it or not, having an inclusive space is good PR. Inclusivity and diversity are now used as criteria when assessing a company’s reputation. Organizations that employ a diverse workforce and have programs that support diversity are seen as socially responsible and more human. In turn, companies can use this to attract more talent and build their reputation both externally and internally.

Types of workforce diversity

Workforce diversity comes in different shapes and forms and knowing what they are helps remove the ambiguities. Let’s take a look at the two main types of workforce diversity. External diversity refers to a set of characteristics that a person possesses as influenced by his external environment. This includes socioeconomic status, geographic location, religion, and education. Since these characteristics are a result of external influences, the person has the option to change them over time. On the other hand, internal diversity refers to attributes that a person is born into. That includes race, ethnicity, age, sexual orientation, and gender identity. Now, let us take a deeper dive and look into the more specific types of workforce diversity.


Age is often identified by generation: there are baby boomers (1946-1964), Gen X (1965-1979), Gen Y or millennials (1980 to 1994), and Gen Z (1995 and younger). Unfortunately, many companies consider age as a factor when hiring employees, leaving the senior workforce out of the picture. Some companies also do this unconsciously. For example, they set up career fairs at campuses and universities, meaning they are on the hunt for fresh graduates in the younger age bracket. But age discrimination is not exclusive to seniors or older people. The young ones often get excluded from being considered for a role or a promotion due to their age. Interestingly, the U.S. Bureau of Statistics forecasts that people aged 55 and older will make up about 25% of the American labor force by 2024.

Gender Identity

As of 2019, females accounted for 57.4% of the U.S. workforce, making equal representation ever more important. However, the discussion on gender equality is not just about hiring men and women in the same numbers. To have a tangible impact, companies must also address the elephant in the room: the gender pay gap. The World Economic Forum reported stalled progress toward closing gender pay gaps primarily because the issue is part of a wider societal problem involving bias and inequality. In many cases, pay gaps intersect with other diversity issues. For example, Black women working in the U.S. are paid 20% less than their white counterparts and 37% less than white men, according to

Racial and ethnicity

Race is defined as groups of people who have shared similarities and differences in biological attributes that are considered significant in society. One example of this is skin color. Ethnicity, on the other hand, refers to shared perspectives, distinctions, and cultural practices that differentiate one group of people from another. This includes ancestry, language, and history, among others. Unlike race, differences in ethnicity are not inherited; they are learned and acquired over time. Different ethnic groups are part of one race, resulting in the overlapping between the two. Bias and inequality are possible even within the same race. For example, two Asian employees, one Korean and another Japanese, maybe from the same race but they have widely different cultural backgrounds. Many ethnic groups are also subject to hiring bias due to limited representation in the talent pool. Companies that promote race and ethnic diversity enable employees to be heard and seen, providing a space for fruitful dialogues that can help organizations have fresh perspectives. 

Sexual orientation

Another type of workforce diversity involves the employees’ sexual orientation. According to Web MD, sexual orientation pertains to “a person’s pattern of emotional, romantic, and sexual attraction to people of a particular gender (male or female).” The evolving perspective towards sexuality has given birth to dozen types of sexual orientations, and this number will continue to increase over time. These include asexual, homosexual, pansexual, gay, bisexual, heterosexual, intersex, and lesbian, among others. Like other types of workforce diversity, sexual orientation brings difficult yet important conversations that are key to creating a harmonious and inclusive working environment. Civil rights groups have been at the forefront of the fight against discrimination over sexual orientation. In 2020, the U.S. Supreme Court made a landmark ruling against companies that fire employees for being a member of the LGBT community.

How companies can promote workplace diversity

Embracing diversity in the workplace is more than just a branding issue. Therefore, companies must practice it by putting in place actual programs and solutions with tangible impacts on the employees. One way to do this is by creating a diversity council that will meet up regularly to craft strategies to make the organization more diverse and inclusive. Another solution is putting together mentorship and training programs to ensure that employees have equal access to opportunities within the company. Many organizations also have intra-groups that cater to different backgrounds, such as LGBTQ, Black workers, Asians, and so forth. This does not mean that only employees who fall under such qualifications can join; rather these intra-groups should be open to anyone with the ultimate goal of promoting diversity. Having these employee-led safe spaces help amplify the struggles of minority communities that these diversity classifications belong to. Companies should likewise build awareness about their efforts to become a more diverse and inclusive community to stir employee support and engagement. This can be done by becoming more visible and highlighting related programs on the company website. Events can also be organized to promote diversity such as by inviting employees to share their traditions and cultural practices. Lastly, companies should be more proactive in addressing the gender pay gap. They can start by gathering and analyzing data related to salaries and bonuses per department, gender, race, and ethnic group. Companies should then share their findings to the employees for transparency, before making specific and realistic commitments that will help address any pay inequality. On a granular level, companies can provide training tools to help managers conduct equal performance reviews that prevent unconscious bias, especially those related to behavioral traits and favoritism.


Diversity in the workplace is often a difficult topic to talk about, but an important one, nevertheless. Studies show that a diverse workforce helps contribute to a company’s performance in terms of higher revenue and profits because they increase innovation, encourages more creativity, and open up to fresh perspectives. Workforce diversity also boosts employee morale, which in turn improves the turnover rate. Companies can likewise use diversity and inclusivity for establishing their brand reputation since an inclusive workspace is seen as socially responsible. Diversity comes in many forms: age, gender, race, ethnicity, culture, and sexual orientation, among others. Companies must make a conscious effort to address inequalities by setting up mentorship and training programs for employees. An internal council specifically designed to create diversity strategies will also help promote fairness in the workplace, while employee-led internal organizations will provide a space for more interaction and cultural awareness. Lastly, the most urgent issue that companies need to address when it comes to diversity is pay inequality. This can be done through studies analyzing pay per gender, race, and ethnicity, and results from which should be disclosed for transparency. Ultimately, companies must make a commitment to address pay inequality by setting up specific targets and a timeline.

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