DIRECTOR, Sodexo Engage. Passionate about improving the employee experience at work and beyond through benefits, rewards and recognition.
In recent years, many companies have added diversity, equity and inclusion initiatives to their business strategies. A 2021 survey of HR and business leaders in Europe commissioned by Workday found that 75% have a “dedicated” budget for DE&I, and 90% “execute at least one initiative” for having data “to support a strategic approach to continuous improvement to stimulate”.
While there is still a long way to go, these numbers indicate progress – and this progress should not stagnate, or worse, reverse in the coming months. As much as I would like to remain optimistic, I fear that many companies will put their DE&I initiatives on the back burner because of the state of the world economy. As Ali Hanan, the founder and CEO of diversity, equity and inclusion consultancy Creative Equals, recently explained“DE&I is usually first on the chopping block” in budget cuts.
Pulling back on DE&I would be a mistake, one that would hurt both employees and employers, when it comes to retention and beyond. Instead, organizational leaders should prioritize DE&I. They should take this time to further refine their DE&I strategies and be more focused in this area.
DE&I is absolutely necessary, especially in today’s work environment
Above all, DE&I efforts are always vital from a moral and ethical perspective. Another key reason why DE&I is especially necessary now is that underrepresented groups in the workforce faced many negative impacts during the height of the pandemic and more at risk in the midst of global economic troubles, and they must not suffer further setbacks.
According to PwC’s 2022 Index Women at work, women’s job losses due to the COVID-19 pandemic were relatively greater than men’s. In addition, PwC analyzed data from the UK Office for National Statistics, which found that “the inequalities faced by women from ethnic minorities were exacerbated by the pandemic, with their unemployment rates rising significantly more than for other groups.”
Companies need to change course by continuing to invest in DE&I or by investing in it if they are not already doing so.
Diversity is crucial to business growth
Innovation and growth are two other important reasons why companies should invest in DE&I during difficult economic times.
Studies have shown the extensive ways in which DE&I efforts enrich businesses. Consider Research published in 2020 by McKinsey which found that several companies are “outperforming their peers financially”. Specifically, McKinsey stated that according to its 2019 analysis, “companies in the top quartile of gender diversity in executive teams were 25 percent more likely to experience above-average profitability than peers in the fourth quartile” and that with regard to ethnic and cultural diversity, companies ” in the top quartile in 2019 performed 36 percent better than those in the fourth.” It is clear that gender, ethnic and cultural diversity are absolutely necessary for companies to grow and remain competitive.
Additionally, Research discussed in a 2013 edition of the Harvard Business Review examined companies with “two-dimensional diversity,” which the researchers defined as those “whose leaders exhibit at least three inherent and three acquired diversity traits.” The findings? Employees at these companies “are 45% more likely to report that their company’s market share has grown in the previous year and 70% more likely to report that the company has entered a new market.”
Furthermore, according to a study my company published in 2018, organizations with gender-balanced management scored 14 percentage points higher on employee engagement, 8 points higher on employee retention, 9 points higher on customer retention, and 8 points higher on operational margins.
The numbers speak for themselves. Diversity, equity and inclusion help companies go beyond their previous benchmarks. Companies that want to survive a difficult economic environment can position themselves with well-thought-out DE&I strategies.
DE&I strategies should be embedded in business strategy and based on realistic, measurable KPIs
Companies should not approach DE&I in an informal way, for example by issuing a press release here and there ‘in support of’ diversity. Instead, they should systematically build DE&I into their core corporate cultures and strategies and then take action.
I believe that while many factors go into creating, implementing and maintaining a robust, effective DE&I initiative, two overarching factors are critical.
The first factor is weaving DE&I into corporate culture and strategy at every level. Company leaders, managers and all other employees must be good role models who are respectful and fair to all, foster an inclusive culture and prioritize diversity in the hiring process. C-suite leaders in particular need to lead by example and put inclusiveness at the forefront of their actions. They need to show employees that they take DE&I seriously and treat everyone equally regardless of their background and that they expect inclusive behavior from everyone in the company.
Building and maintaining a DE&I culture will likely require a higher degree of proactivity. For example, when my company hired a new CIO, I only started interviewing candidates on the list that had a significant number of female candidates.
In terms of business strategy, companies should set expectations and goals around DE&I. For example, a company may decide to implement a more inclusive recruiting strategy, including posting new job openings at universities it has not traditionally recruited from. However, that’s where the second factor comes in: Those strategies need to be supported by the company’s stakeholders who define and assign realistic, measurable KPIs and remain accountable.
Sometimes companies set KPIs that are not realistic and/or not measurable. It is therefore not surprising that they subsequently fail to meet those target goals, and the team becomes disheartened. Or they may not assign the right owners to those KPIs, hampering accountability.
KPIs must be managed, defined and tracked. To establish realistic, measurable KPIs, leaders must honestly assess the current state of their industries and determine a pragmatic way to make the most impact. For example, if a particular industry doesn’t currently have many women, one KPI might focus on pipeline development, where the company promises to recruit a certain number of women for internships (however, it’s important to note that talent development is something that will benefit all companies , regardless of industry specifics).
When approached strategically and thoughtfully, DE&I initiatives can protect businesses, workers, communities and the economy. By keeping DE&I at the forefront of corporate efforts, we can create better business results and better lives.