Why DEI Matters: A Deep Dive into Diversity, Equity, and Inclusion

Why DEI?

Diversity, Equity, and Inclusion (DEI) is an absolute imperative for organizational success and social progress. As I have indicated in other blogs, considering current and future demographic and cultural trends, DEI is ever more crucial for organizations to thrive. In this article, I will provide more in-depth exploration of the research indicating the value of DEI not only to help drive business success but to apply as a strategic framework for our communities and societies to thrive.

Defining Diversity, Equity, and Inclusion (DEI)

First of all, let’s get clear on what these terms mean. In Diversity, Equity, & Inclusion for Trainers: Fostering DEI in the Workplace, I define DEI in the following ways:

Diversity

Diversity refers to the many dimensions of identity that make us who we are and shape our identity “lenses”—our beliefs, values, world views, perceptions—which influence our communications, behaviors, and relationships. Diversity includes characteristics like race, skin color, ethnicity, gender, national origin, sexual orientation, religion, physical or mental ability or disability, socioeconomic background, academic background, profession, family and relationship status, language, habits and activities, and personality traits.

Equity

Equity promotes fairness by creating a level playing field for everyone. This means providing opportunities for people to advance in their careers, to receive fair compensation and credit for their work, and to have equal opportunities to provide input into decisions that impact them. It’s not about giving unearned advantages to people. It’s actually recognizing that some people already have unearned advantages simply by being part of a group that has held power and privilege in our society. When we are intentional, we ensure that we provide opportunities for growth, training, mentoring, and career advancement for people who perhaps have not been given those opportunities.

Inclusion

Inclusion is the practice of creating an environment where everyone feels fully valued and respected for their individuality. Inclusive environments ensure that every person is able to participate fully in organizational life, and has equal opportunities to leverage their talents, skills, and potential.

The Value of DEI in the Workplace

DEI as a strategic imperative for organizational success has long been a subject of research and discussion amongst executives. Although there has been recent pushback to DEI efforts, these arguments are often based on misinformation and political polarization.

DEI leads to better financial performance

Over the course of the last ten years, research has shown a steady increase in the positive financial impact organizations experience when they prioritize DEI. According to a 2023 report by McKinsey & Company, companies in the upper quartile for gender and ethnic diversity in executive positions are almost 40 percent more likely to financially outperform those in the bottom quartile. And the gap between the top and bottom quartile has steadily increased every year, indicating a continuing trend that will propel some organizations forward and leave some lagging further and further behind.

DEI is also linked to better performance for nonprofit organizations in terms of expanding donor networks and building stronger relationships with communities to support their missions.

DEI is important for the recruitment and retention of top talent

To begin with, it is imperative to acknowledge the demographic and societal shifts across the US and around the world that prompt organizations to rethink their recruitment strategies and redesign their workplace cultures to attract and retain top talent. By 2030, the largest component of population growth in the US will not be related to natural births but to immigration. Declining population growth rates indicate a significant need for immigrants to fill the demand in the labor force.

Moreover, the next generation of workers is more racially and ethnically diverse than ever before. Nearly 30 percent of Gen Z identify as LGBTQ+ and also more likely to embrace a broader spectrum of sexual orientation and gender fluidity. Younger workers expect their employers to have concrete commitments to DEI and are more likely to leave their job if they do not feel the work culture is aligned with their individual development and personal well-being needs as well as their values around environmental sustainability and social justice.

Finally, research shows that organizations that promote and support DEI are 2.6 times more likely to increase employee engagement and improve retention, among many other benefits.

DEI fosters creativity and innovation

As Idina Sterling, author of Equity by Design, states, “the real opposite of inclusion isn’t exclusion — it’s conformity.”

Research overwhelmingly indicates that diverse teams outperform homogeneous teams in terms of creativity and complex problem solving for innovative results. However, the key is not just throwing a bunch of different identities together. Diverse teams are most effective when they have high levels of psychological safety, when all voices are valued and members are provided adequate opportunities to share their opinions, ideas, and skills.

DEI is connected to employee engagement, trust, and wellbeing

Gallup has discovered that specific experiences related to diversity, equity and inclusion have a significant impact on employee engagement, wellbeing, and positive perceptions of their team members and employer.

DEI efforts also contribute to employee health and well-being. When people feel valued and supported, they experience lower levels of psychological and physical stress. They spend less time having to code-switch or ruminating on how their identities may lead to stereotypes that negatively impact their performance or opportunities for advancement. They have the ability to engage in high levels of cognitive functioning and are also more likely to give discretionary effort and opt into opportunities for professional development.

DEI is linked to consumer and employee trust

Organizations that have greater representation of diversity are able to empathize with and meet the needs of diverse populations.

Furthermore, consumers (particularly those in the 18-34 age range) increasingly expect brands to “walk the walk” when it comes to social responsibility issues, including racial equity and social justice, environmental sustainability, gun reform, women’s reproductive rights, and LGBTQ+ issues.

One study found that two-thirds of consumers say a brand’s public statements in support of key societal issues positively impact their perception of the company, but if the brand’s public statement isn’t followed by action (e.g., supporting a related non-profit, volunteering, financial support, etc.), almost 40 percent of respondents say that impacts their view of the brand negatively. Hence, the cost of not following through on commitments to social action can have a significant impact on an organization’s brand and bottom line.

How to Foster a Culture of DEI

In considering what is needed to cultivate a culture that is truly diverse, equitable and inclusive, I propose the four A’s – Acknowledgement, Affirmation, Alignment, and Accountability.

Acknowledgment

Organizations and leaders can start by acknowledging the historical and ongoing patterns that have led to ongoing inequality, marginalization, and oppression in our society. Acknowledgment means naming the impact of systemic othering (e.g. racism, sexism, xenophobia, homophobia) that has consistently given unfair advantages to those in the dominant identity groups, mainly White cisgender men. This does not mean that individuals who identify as White, or male, or cisgender, or heterosexual, haven’t suffered or experienced hardship. However, there are certain realities that leaders must acknowledge in order to address and overcome ongoing inequality.

In their book The Upswing, Robert Putnam and Shaylyn Romney Garrett share research indicating that our society has regressed when it comes to overcoming disparities by almost every measure (income, wealth, home ownership, education, and outlook for the future). Racially and ethnically minoritized Americans are at their lowest level of equity since the 1970s. Moreover, hate speech and hate crimes are on the rise, primarily targeting Black and Hispanic people, not to mention anti-homophobic and transphobic political attacks and legislation that is fueling a rise in violence against LGBTQIA+ communities.

By acknowledging these disturbing trends, leaders can show themselves not as part of the problem but as co-owners of the solution in addressing systemic biases and injustices that impede opportunities for all to thrive in our organizations and society.

Affirmation

Affirmation refers to the consistent action of offering appreciation, credit, and rewards to people for their contributions. Recent research by Gallup found that employees who believe they get substantial and authentic recognition for the work they do are four times more likely to believe the workplace is inclusive and seven times more likely to believe it is equitable. The results are even more significant for women and Black and Hispanic employees.

Affirmation is also about the daily micro-validations that leaders can provide to their employees to show they value them. The simple act of listening with the intent to empathize and learn builds trust and psychological safety in teams. Research conducted by Josh Bersin found that listening to employees and acting on their feedback is the top driver of organizational excellence, leading to higher innovation, adaptability, a sense of belonging, the ability to respond to customers, and employee retention.

Alignment

Alignment refers to making DEI part of the organization’s strategic framework, not a one-off activity or a process buried in HR. DEI should be easily and consistently articulated as a central component of the organization’s ability to achieve its mission and goals.

Whether it’s through a specific DEI Strategy or embedded into the organizational strategy (or ideally both), DEI needs to be seen as integral to organizational success and just part of the way we do things here.

Accountability for DEI Efforts

Leadership and accountability is a critical element to sustainable DEI, yet it is often lacking in most organizations. In fact, fewer than 12% of companies recognize senior leaders for DEI goals, and 75% of companies don’t include DEI in their leadership development or overall learning and development curriculum. This is a glaring gap when it comes to embedding DEI into the organizational culture.

At the organizational level, it is important to determine clear metrics for DEI performance. Most organizations focus too narrowly on measuring only diversity representation, with little effort evaluating how inclusive the organizational culture is or how equitable people feel the organization’s policies and processes are. DEI-specific assessments can be a valuable tool for gathering this data and measuring progress over time.

Leaders and managers should have well-defined DEI goals included as a performance metric, with clearly articulated competencies and observable behaviors to evaluate performance. For example, with several of our clients, we have outlined a set of leadership competencies and behavioral indicators to include in performance evaluations for all supervisors. These competencies and behaviors were identified based on the client’s organizational goals and DEI priorities.

Summary

In short, DEI continues to be a crucial component to any organization’s success and sustainability and will play an even more important role as the next generation enters the workforce and advances into positions of leadership. In fact, organizations that do not prioritize DEI and engage in active and visible commitment are increasingly lagging behind and will face significant challenges in terms of recruiting and retaining talent and connecting to external constituencies and consumers.

Organizations need to take steps now to lay the foundation for DEI and to integrate the principles of DEI into their structure and culture. By focusing on the four A’s – acknowledgment, affirmation, alignment, and accountability, organizations will be well positioned to see significant progress for diversity, equity, and inclusion.

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