The business case for implementing DEI (diversity, equity and inclusion)
Businesses that establish diversity, equity and inclusion principles outperform their peers
Studies show, by providing an inclusive environment for employees and managers who have diverse internal, external and organizational characteristics, companies set the stage for innovation and business growth.
Diversity — a buzzword that has taken the nation by storm. Its use and importance have been amplified by the killings of George Floyd, Ahmad Aubrey and Breonna Taylor.
Many people say that diversity is the solution to the divisiveness we have seen in our society over the last few centuries.
But is it that simple? And is there more of a reason to lean into diversity than social justice?
Studies from the Harvard Business Review, Boston Consulting Group, McKinsey and Clear Company show diversity has a strong correlation with organizational performance.
The chart above is from McKinsey’s most recent report, “Diversity Wins: How inclusion matters.” It shows (blue bars) that organizations with diversity of gender are 25% more likely to be more profitable than their peers. It also shows that organizations with diversity of ethnicity (green bars) are 36% more likely to be more profitable than their peers.
The World Economic Forum’s report “Diversity, Equity, and Inclusion 4.0” suggests that companies with diverse employees have “up to 20% higher rate of innovation and 19% higher innovation revenues.”
Think of the most innovative companies (e.g. Google and Apple). Ever wonder why they are so innovative? One reason they, themselves, point to is their diverse employee base.
Diving deeper into diversity
What does that mean for organizations here in New Hampshire? Many say that in a state that is 91.2% categorized as white, there is no diversity. Many say they have trouble hiring “diverse” people. Others think of diversity strictly in terms of gender. In my experience, those narrow definitions prevent us from realizing that diversity is broader than race or gender.
In my experience, it is best to define “diversity” using the “Diversity Wheel” shown in the figure to the right. The wheel was originally created in 1991 by Marilyn Loden at Johns Hopkins University. It was updated in 2009 by Gardenswartz and Rowe.
The basic notion is that we all have internal, external and organizational characteristics of our personalities.
Internal characteristics are powerful/sustaining characteristics, having a lifelong impact (e.g. age, ethnicity, gender, physical abilities/qualities, race and sexual orientation/identity).
External characteristics are other important characteristics acquired later, potentially less influential, mutable differences (e.g. educational background, income, marital status, work experience, military experience, religion and geographic location).
Organizational characteristics are social interaction characteristics (e.g. function in an organization such as sales or R&D, seniority in the organization, level of contribution such as individual contributor or manager).
Diversity is more than just race or gender. It includes belief systems and ways of thinking or interacting with the world.
But diversity of people in an organization alone is not sufficient to achieve the results described by the research. Inclusion must also be part of the equation — inclusion with the goal of making people feel like they are valued and belong is what drives those results.
A good way to think about inclusion is that it is “active, intentional and ongoing engagement with diversity in ways that increase awareness, content knowledge, cognitive sophistication and empathic understanding of the complex ways individuals interact within systems and institutions. (It is) the act of creating involvement, environments and empowerment in which any individual or group can be and feel welcomed, respected, supported and valued to fully participate.”*
This begs the question, how do we include people so they feel welcomed, respected, supported and valued — in other words, like they belong?
Many people feel that including and treating people equally is what makes them feel as if they belong. Yet, equality is also insufficient to produce belonging and superior organizational performance.
Treating people equally does not take into consideration the different needs, capabilities and circumstances of individuals.
Have you ever been given the same sized chair in your office as everyone else yet you are smaller (or larger) than most? Was not the chair uncomfortable, leading you to spend time addressing that discomfort that could, otherwise, be spent on your work?
Treating people equitably accounts for those differences and provides people with what they need. Treating people equitably is what makes people feel as if they are valued and belong. Treating people equitably helps them perform at their best.
Bringing these three concepts (diversity, equity and inclusion — DEI) together, organizations that equitably include diverse people are those that outperform their peers.
Your next steps toward DEI
We have established that diversity is more than just race or gender. We have established that organizations that equitably include diverse employees outperform those that do not. With New Hampshire demographics the way they are, how can you gain the advantages of DEI?
We know that benefiting from DEI is a long journey. Different organizations are at different points along the journey. Some have a DEI committee and a DEI plan already in progress. They are making their way through the challenges faced by any organization, trying to change the way an entire organization operates. Others are just starting and don’t know where to begin.
First, realize that DEI is all about people. I suggest you think of DEI as an organizational approach or set of principles rather than a goal or objective. DEI should be in the DNA of your organization – in everything your employees do. How do you do this? Make it part of your organization’s culture. Establish DEI principles that align with your organizational values.
Second, think of DEI as a change management effort. We humans are resistant to change. We tend to change only when we are truly motivated to do so. Everyone’s motivations are different. Identify and empower a person in your organization to be the change agent authorized to drive the change. This person will need to identify what motivates the people in your organization and help identify ways to make change happen.
Third, follow my 5 Magic Guideposts to DEI. (Note: Any change or project management professional will recognize these “phases,” but it is their application to the topic of DEI that makes the difference.)
- set the tone. Provide foundational DEI education. Establish definitions of words such as “diversity,” “equity” and “inclusion.”
Answer questions such as “What percentage of our employee base is <insert characteristic from Diversity Wheel>?” “Do employees feel like they ‘belong’ in the organization?” “How many discrimination lawsuits have we had?” “Are we not reaching part of our TAM (Total Addressable Market) because we don’t understand them?”
Identify challenges in your organization around race and set the stage for addressing race as a priority for your organization, such as establishing board and management-level commitment.
- identify areas. Identify the areas in the organization where discrimination is occurring or where there is lack of innovation or belonging due to exclusion of diverse people based on the questions identified in the first step.
- assess gaps. Assess the gaps in employee understanding of how to live by DEI principles at multiple levels: informal (off-task office interaction) and formal (policy/process/procedure).
- establish goals. Define goals for living by DEI principles that support organizational goals. Create an action plan (including funding) to close that gap.
- implement change. Implement the action plan. Monitor and control the effort. Track and report on progress regularly. Make adjustments to the action plan as needed to reset the tone for further success, even returning back to the beginning of the cycle. Always look for continuous improvement.
The journey ahead
Organizations across New Hampshire are working toward diversity, equity and inclusion. You don’t have to create tools and techniques from scratch or go it alone. But do expect to have many difficult conversations about race, gender, age, religion, ways of thinking, how the organization is structured and how the organization is run (to name a few).
While some conversations may not be pleasant, they will lead to employees bringing their authentic selves to work.
As Debe Henley wrote in a recent Forbes article “How To Be Your Authentic Self At Work (And Why It Matters),” bringing our authentic selves to work is critical to achieving best personal performance, which leads to best organizational performance.
Just think, you will be killing four birds with one stone: bringing about social justice; following the precept of corporate responsibility; making New Hampshire a more welcoming place for people to work and live; and achieving the best performance your organization can muster.
*Accreditation Review Commission on Education for the Physician Assistant Standards 5th edition
James McKim is founder and managing partner of Organizational Ignition, a consulting practice focused on organizational performance. He can be reached at email@example.com or 603-540-3988.