Individual engagement, well-being and productivity

Research shows that inclusive leadership drives better business outcomes, with measurable benefits at the individual, team, and organisational levels.

Inclusive leaders get the best from their people one on one. A robust body of academic evidence shows that a leader’s openness, fairness and participative decision-making foster an increase in individuals’ sense of empowerment and discretionary effort that raise engagement, creativity, well-being, and productivity.¹Fagan, H.A.S., Wells, B., Guenther, S. & Matkin, G.S., 2022. The path to inclusion: A literature review of attributes and impacts of inclusive leaders. Journal of Leadership Education, 21(1), pp.88–113.²Bannay, D.F., Hadi, M.J. & Amanah, A.A., 2020. The impact of inclusive leadership behaviors on innovative workplace behavior with an emphasis on the mediating role of work engagement. Problems and Perspectives in Management, 18(3), p.479.

Team innovation and better quality decisions

Inclusive leadership also enhances group performance. Teams made up of diverse experiences, backgrounds, and perspectives reduce the risk of groupthink and increase the likelihood of identifying risks and opportunities early. Evidence shows that the team-level benefits of inclusive behaviours include more effective integration of diverse perspectives and improved overall team performance.³Randel, A.E., Galvin, B.M., Shore, L.M., Ehrhart, K.H., Chung, B.G., Dean, M.A. & Kedharnath, U., 2018. Inclusive leadership: Realizing positive outcomes through belongingness and being valued for uniqueness. Human Resource Management Review, 28(2), pp.190–203.⁴Korkmaz, A.V., Van Engen, M.L., Knappert, L. & Schalk, R., 2022. About and beyond leading uniqueness and belongingness: A systematic review of inclusive leadership research. Human Resource Management Review, 32(4), 100894. However, simply having diversity, i.e. bringing different people together, does not automatically improve performance, without deliberate action.

The mechanism for unlocking the performance benefit of group diversity teams is building a team culture of psychological safety.⁵Li, T. & Tang, N., 2022. Inclusive leadership and innovative performance: A multi-level mediation model of psychological safety. Frontiers in Psychology, 13, 934831.⁶Nembhard, I.M. & Edmondson, A.C., 2006. Making it safe: The effects of leader inclusiveness and professional status on psychological safety and improvement efforts in health care teams. Journal of Organizational Behavior, 27(7), pp.941–966. Recent research from the Diversity Project⁷The Diversity Project, 2025. Cognitive diversity in asset management The power of diverse thinking:How the best teams make decisions. edmans https://diversityproject.com/wp-content/uploads/2025/06/DP-Cognitive-Diversity-Full-Research-Paper.pdf on cognitive diversity (the mix of different skills, experiences, viewpoints and ways of thinking within a team) indicates that diversity is only a competitive advantage when leaders create the environment where people feel comfortable speaking up, disagreeing and challenging each other constructively.

Cognitive diversity was particularly positively correlated with performance where psychological safety was high, in inclusive environments where team members felt comfortable sharing their perspectives. The link to performance was even stronger when tasks were complex, varied, or novel.

Thus, inclusive leadership, through psychological safety, reduces conformity pressure and enhances cognitive integration. This leads to better strategic decisions, critical for navigating complexity in global markets.

Organisational resilience, return on assets and competitive advantage

Research shows that inclusion is linked to the retention of talent⁸Randel, A.E., Galvin, B.M., Shore, L.M., Ehrhart, K.H., Chung, B.G., Dean, M.A. & Kedharnath, U., 2018. Inclusive leadership: Realizing positive outcomes through belongingness and being valued for uniqueness. Human Resource Management Review, 28(2), pp.190–203.. Retaining high-calibre talent protects institutional knowledge and reduces replacement costs.

A large-scale cross-national study on globally listed firms demonstrated a significant and positive relationship between diversity and inclusion (as measured by the Global D&I Index) and firm performance.⁹Saha, R., Kabir, M.N., Hossain, S.A. & Rabby, S.M., 2024. Impact of diversity and inclusion on firm performance: moderating role of institutional ownership. Journal of Risk and Financial Management, 17(8), 344. These findings suggest that markets may interpret robust inclusion practices as signals of stronger governance, better human capital management and lower long-term risk. And, as mentioned earlier, group level research indicates that competitive advantage is unlocked where inclusive behaviours enable psychological safety, especially for complex tasks.

Implications for business leaders: Closing the gap between perception and reality

Establishing strict causality between diversity and business performance is complex – just as it is for other business relationships, such as linking R&D spending directly to profitability, leadership style to firm performance, or brand reputation to market valuation. Despite this complexity, strategic investment in R&D, leadership development and marketing remain rational business decisions.

Global businesses are operating with increasingly diverse and geographically dispersed workforces. All the evidence suggests that businesses which invest in building strong relationships across differences will be best positioned to adapt to new opportunities and drive growth.

The evidence is clear that diversity alone does not automatically improve performance. What drives performance is inclusion, enacted through inclusive leadership behaviours that enable diverse talent to contribute fully. Yet, data indicate a gap exists between leaders’ perceptions of their own inclusiveness and how others perceive them. For example, Green Park’s research,¹⁰Green Park, Change the Race Ration & Race Equality Matters, 2025. The Race Inclusion Gap. https://changetheraceratio.com/media/pdnfqg3v/green-park-race-inclusion-gap-report.pdf Accessed Feb 2026 indicates that nearly all (98%) leaders believe they lead by example in creating an inclusive workplace, but, fewer than half of Ethnic Minority colleagues agree. Data from Delta¹¹Delta Leadership & Inclusion Consultancy, Delta Lens technical manual (2025) show that while 97% of leaders rated themselves above 70 out of 100 on inclusive behaviours, results from a validated psychometric assessment told a very different story: scores ranged from two to 98 when benchmarked against a comparative norm group, revealing a significant gap between self-perception and independently measured inclusive leadership capability.

Our recommendation for FTSE Boards and leaders of the largest private firms is to shift from asking whether diversity is still relevant, but whether they have created the sufficient conditions for it to translate into measurable commercial value through inclusiveness.

To fully realise the benefits of ethnic and other demographic diversity, businesses should develop inclusion capabilities and track inclusion indicators using validated inclusive leadership metrics – moving beyond simple demographic ratios.

Inclusivity in business is not a ‘nice to have’ – it is essential to optimising productivity, enabling innovation, and sustaining competitive advantage.