The importance of diversity, equity, and inclusion for businesses
The importance of diversity, equity, and inclusion (DEI) in businesses has been highlighted amidst the ongoing pandemic, racial tensions, and social injustice issues. Companies must demonstrate a serious commitment to DEI and ensure their actions benefit all, especially marginalized groups, to eliminate systemic racism, bias, and other forms of discrimination.
But does the investment result in tangible return? Can DEI initiatives improve profits? Is it a moral or business imperative? While some leaders view DEI as a moral obligation, others see it as a chance to tap into new markets and talent. However, regardless of the motivation, grasping the importance of DEI is vital. In this article, we'll examine the highlights of DEI investment, potential rewards, and how it can lead to a more equitable and prosperous future.
The Business Case for DEI & Why Investing in DEI Matters
Promoting diversity, equity, and inclusion (DEI) is not only a moral imperative, but it also delivers significant benefits to businesses. By fostering an inclusive and diverse work environment, companies can tap into a wider pool of talent, drive innovation, and improve overall performance. However, some business leaders may still be sceptical about the return on investment (ROI) of DEI initiatives.
The ROI of DEI is undeniable, with numerous studies demonstrating that diverse companies consistently outperform their less diverse counterparts. These advantages manifest in various ways, such as:
- Companies with more diverse workforces perform better financially
- Diverse companies are more innovative and better at problem-solving
- Diverse companies have higher employee engagement and lower turnover rates
- Diverse companies are more attractive to job seekers
- Diverse companies have better decision-making processes
- Diverse companies have higher customer satisfaction rates
- Diverse companies have better reputations and stronger brands
- Companies in the top quartile for racial and ethnic diversity are 35% more likely to have financial returns above their respective national industry medians.
- Gender-diverse companies are 15% more likely to outperform their peers and ethnically diverse companies are 35% more likely to do the same.
- Diverse and inclusive teams have been shown to make better decisions up to 87% of the time.
- Companies with more diverse management teams have 19% higher revenue due to innovation.
- Inclusive companies are 1.7 times more likely to be innovation leaders in their market.
- Diverse companies are 70% more likely to capture new markets.
- Companies with higher gender and racial diversity have higher employee engagement and lower turnover rates.
- Inclusive companies have a 2.3 times higher cash flow per employee over a three-year period.
- Companies with diverse boards have higher earnings per share compared to those without.
- Inclusive companies have a 22% lower turnover rate compared to non-inclusive companies.
At its core, DEI encompasses creating spaces that are inclusive and hospitable to everyone, regardless of their background. This involves establishing cultures where employees feel valued, respected, and where differing perspectives are not only welcomed but sought after.
Unfortunately, the cost of failing to invest in DEI can be high. It can lead to a toxic workplace, low employee morale, lost business opportunities, and increased turnover rates.
In short, DEI is no longer just a feel-good initiative, but a must-have for businesses to thrive.
Measuring DEI success
How can measuring the ROI of DEI initiatives be approached and what metrics should be used?
Measuring the ROI of DEI initiatives can be approached through a variety of methods. One approach is to conduct a cost-benefit analysis, which involves identifying the costs associated with implementing DEI initiatives and comparing them to the benefits that result from increased diversity, equity, and inclusion. This analysis can help organizations determine the financial impact of their DEI initiatives and whether they are worth the investment.
Another approach is to use metrics such as employee engagement, retention rates, and productivity to measure the impact of DEI initiatives. By tracking these metrics over time, organizations can determine whether their DEI initiatives are having a positive impact on their workforce and bottom line. For example, if employee engagement and retention rates increase after implementing DEI initiatives, this can be a sign that the initiatives are delivering ROI.
Metrics related to diversity, such as the representation of underrepresented groups in leadership positions and the diversity of new hires, can also be used to measure the impact of DEI initiatives. By tracking these metrics, organizations can determine whether their initiatives are leading to a more diverse workforce and whether this diversity is translating into better business outcomes.
Finally, organizations can also use external benchmarks and industry standards to measure the ROI of their DEI initiatives. For example, they can compare their diversity metrics to those of other companies in their industry or use industry-specific standards to assess the impact of their DEI initiatives. This can help organizations determine whether they are on track to achieving their DEI goals and whether their initiatives are delivering ROI.
inclusio offers deep metric collection and insights including the diversity profile of the workforce, benchmarking, and the employee experience at the organisation including engagement, retention and beyond.
What are some successful examples of DEI initiatives being implemented in organizations and what was the ROI?
One successful example of a DEI initiative being implemented in an organization is the case of Intel. In 2015, the company pledged $300 million to increase diversity and inclusion in their workforce. They set specific goals, such as increasing the number of women and underrepresented minorities in their workforce and leadership positions by 2020. As a result of their efforts, they exceeded their goals, with women and underrepresented minorities making up 27.8% and 15.3% of their U.S. workforce, respectively, in 2020. Additionally, they saw a positive impact on their bottom line, with a 2019 study showing that their diversity and inclusion efforts contributed to a $1.2 billion increase in revenue.
Another example is the case of Salesforce, which implemented a program called Trailhead, aimed at increasing diversity in their workforce. The program provides free online training in technology skills to anyone, regardless of their background or experience. As a result of this initiative, Salesforce was able to increase the number of underrepresented minorities in their workforce by 18% in just one year. Additionally, they saw a positive impact on their business, with a 2018 study showing that companies with diverse teams are more innovative and have higher revenue.
A third example is the case of Unilever, which implemented a program called the Unstereotype Alliance, aimed at eliminating harmful stereotypes in advertising and media. The program involves partnering with other companies and organizations to promote diversity and inclusion in advertising and media. As a result of this initiative, Unilever saw a positive impact on their brand reputation, with a 2018 study showing that consumers are more likely to buy from companies that promote diversity and inclusion. Additionally, they saw a positive impact on their bottom line, with a 2017 study showing that their brands with more diverse teams grew 50% faster than those with less diverse teams.
How can leaders effectively communicate and integrate DEI initiatives into their organization's overall strategy and culture?
Leaders can effectively communicate and integrate DEI initiatives into their organization's overall strategy and culture by first acknowledging the importance of DEI in achieving their business goals. This means creating a clear and compelling business case for DEI, highlighting the benefits of a diverse and inclusive workforce and the risks of not prioritizing DEI. Leaders should also communicate their commitment to DEI through regular messaging and actions that demonstrate their support for DEI initiatives.
Another key step is to involve employees at all levels in the DEI process. This means soliciting feedback from employees on their experiences and ideas for improving DEI, and involving them in the development and implementation of DEI initiatives. Leaders should also ensure that DEI is integrated into all aspects of the organization's operations, from recruitment and hiring to performance management and leadership development.
Leaders should also invest in training and development programs that help employees understand the importance of DEI and develop the skills and knowledge needed to create a more inclusive workplace. This includes training on unconscious bias, cultural competence, and inclusive leadership. By investing in these programs, leaders can create a culture where DEI is valued and prioritized, and employees are empowered to contribute to DEI initiatives.
Finally, leaders should measure and track the impact of their DEI initiatives to ensure they are delivering ROI. This means setting clear goals and metrics for DEI, and regularly monitoring progress towards these goals. Leaders should also hold themselves and their teams accountable for achieving these goals, and make adjustments to their DEI strategy as needed based on data and feedback from employees.
In summary, leaders can effectively communicate and integrate DEI initiatives into their organization's overall strategy and culture by creating a compelling business case for DEI, involving employees at all levels in the DEI process, integrating DEI into all aspects of the organization's operations, investing in training and development programs, and measuring and tracking the impact of their DEI initiatives.
Final thoughts on the ROI of investing in DEI
Is DEI investment worth it for companies? The answer is a resounding YES! However, while many studies have demonstrated the positive impact of DEI initiatives on organizational performance, it is essential to recognize that DEI is not a quick fix or a one-size-fits-all solution. Success requires a commitment to the cause, not just a temporary fad. DEI must be integrated into all operations, including hiring, promotion, training, and product development.
Company leaders must step up to build a more equitable and inclusive future. Change takes time, constant review, evaluation, and improvement, but the payoff is a more engaged, productive, and diverse workforce and clientele base.
To truly reap the benefits of DEI, organizations must commit to ongoing efforts to identify and mitigate bias, foster inclusive cultures, and promote diversity at all levels. Ultimately, investing in DEI is not just about achieving financial returns, but about creating a more equitable and just society.
As we move forward, let us continue to challenge ourselves and our organizations to prioritize DEI as a strategic imperative, and to measure success not just in financial terms, but in the positive impact we can have on the world around us.
About the Author:
Sandra is an Organisational Psychologist and NLP Master Practitioner. Over 17 years she has championed and driven diversity and inclusion practice across industry and is considered a leading expert. In 2014, she was involved in establishing the EU Diversity Charter Ireland. In 2020 Sandra was a member of the Expert Advisory Group for Ireland’s Citizens Assembly.
