The Importance and Impacts of DEI Initiatives

Equity is not a ‘bonus’ to have at a workplace; it is a necessity. Businesses are no longer intimidated by the patriarchal and prejudiced workplaces they inherited from the 20th century. Instead, business leaders have been emboldened to pave the way for environments, policies, and processes that promote equity.

However, Diversity Wins findings from McKinsey’s largest data set to date, covering over 1,000 large companies in 15 countries, reveal that overall growth of diversity, equality, and inclusion in the workplace is still struggling. Statistics show a slowing down in the adoption of diversity, polarization within organizations attempting inclusive policies, and even regression. 

The silver lining remains that organizations are making giant leaps. In this article, we explore the impact of DEI policies backed by global workplace statistics, why the gap between winners and laggards seems to be widening, and the best practices for designing DEI policies that deliver results in 2023.

What is DEI in the workplace?

DEI means fostering, cultivating, and preserving a culture of workplace values:  diversity, equity and inclusion. 

  • Diversity refers to gender, age, ethnicity, physical ability and neurodiversity.
  • Equity recognizes circumstances and allocates resources and opportunities needed for a person to reach an equal outcome.
  • Inclusion is the degree to which organizations embrace all employees and enable them to make meaningful contributions.

The impact of Diversity, Equity, and Inclusion in the workplace

1. Diversity fosters excellence

Katherine Phillips, a Columbia Business School Professor, wrote in her book, How Diversity Makes Us Smarter, “Diversity jolts us into cognitive action in ways that homogeneity simply does not.” Diversity in teams is known to lead to expanded market views producing more market opportunities and better solutions for unmet needs. 

According to a 2013 Harvard Business Review study, teams with at least one member who shares a client’s ethnicity are more than twice as likely to understand that client’s needs compared to teams where no member has the same trait.

2. Inclusivity retains talent

Nearly 40% of respondents to a McKinsey survey said they’ve turned down or chosen not to pursue a job because of a perceived lack of inclusion at the organization. At the same time, a study by Deloitte found that companies with inclusive cultures have 22% lower turnover rates and 22% greater productivity. 

Google’s study Project Aristotle also identified ‘psychological safety’ as one of the most important factors of a high-performing team. Employees who feel they can be authentic at work can focus better on their performance instead of spending valuable time dealing with bias, unfairness or lack of support.

understanding social classifications like race, gender, and sexual orientation are deeply interwoven, learning how intersectionality affects employees ensures everyone can be their authentic self at work - Jheelaf Razdan HR at TBDC

3. Diversity is linked to Profitability

A strong business case for diversity and cultural inclusion has always stood tall for those always looking at the bottom line. Diverse companies are more likely to outperform less diverse peers on profitability.

McKinsey’s Diversity Wins case study showed that companies with the highest level of gender and ethnic diversity in their executive teams were 25% more likely to have higher-than-average profitability than those in the bottom quartile, an increase from 21% in 2017 and 15% in 2014.

Where are companies failing with Diversity, Equity, and Inclusion in the workplace?

true workplace equity means that all employees have access to equal opportunities, equal chance to excel, develop their skills, and progress their careers - Neha Jain, head of business development at TBDC

COVID-19 was like a litmus test for DEI cultures at workplaces globally. Many companies proved that it was just a box to check versus actually believing in the DEI values.

In August 2021, the unemployment rate in the US was 8.8% among Black workers and 6.4% for Latinx workers, compared to 4.5% for white workers. During the pandemic, women lost their jobs at a much higher rate. 5% of the total jobs held by women were lost, as compared to 3.5% for men, costing women $800B in earnings, according to Oxfam International.

A PwC report that surveyed corporate directors revealed that only 16% of corporate directors scored “excellent” for recruiting a diverse workforce. Only 15% felt their companies were excellent in developing diverse executive talent, and a whopping 83% said their company should be doing more to promote gender and racial diversity. 

So, where is it all going wrong?

DEI is misunderstood

Time and again, companies are convinced they are diverse, equitable and inclusive by adducing to the hiring process. We hire diverse people, they say. And that’s where it stops. They are oblivious to the effort of creating environments that maintain and help diversity thrive.

What about the management of discrimination complaints? What about the Muslim man praying in his car to keep his religion out of view? What about the gay woman who is not sure she can bring her partner to the office party? What about the intersectional neuro-diverse trans man who needs extra time to build interpersonal relationships?

true equity is when everyone has an equal chance to succeed, regardless of their circumstances - director of marketing Dharti Chatterjee of TBDC

A McKinsey report showed that although overall sentiment on diversity was 52% positive and 31% negative, sentiment on inclusion was much worse, at only 29% positive and 61% negative. The understanding of equity and inclusivity is highly questionable.

This also explains International Women’s Day theme for 2023, #EmbraceEquity. An effort to shine the spotlight on the difference between equality and equity.

To me Equality in the workplace is not about treating everyone equally but recognizing and accepting people have different experiences and advantages or disadvantages, linked to their social identities - Jheelaf Razdan Hr at tbdc

Failed leadership buy-in

Women control 40% of global wealth. Women either directly make or influence up to 80% of all purchases. Companies with more than 30% women executives are more likely to outperform companies. Yet 77% of S&P 500 company boards are more than 2/3rds male, and only 2% have more than 50% women members.

The Pay Gap

According to PayScale, Black men earn 87 cents for every dollar white men earn, and Latino men earn 91 cents. Last year, women earned 84% of what men earned. Pew Research found that it would take women an additional 42 days to earn what men did in 2020.

The imaginary talent shortage

Business leaders believe that they cannot find enough diverse talent. But the criteria they set out to hire are already biased towards the privileged. Minorities with intersectional identities may not have the same opportunities, but they may be able to deliver the same outcome.

What can companies do to build sustainable Diversity, Equity, and Inclusion pillars in the workplace?

Hold leadership accountable

Instead of DEI being an HR function, it needs to be at the heart of each leadership level. This work can include: 

  • Learning how to run inclusive meetings
  • Assigning work with inclusion in mind
  • Building a diverse network of colleagues
  • Investing social capital to support equitable advancement of careers
  • Raising self-awareness
  • Allocating dollars to programs and projects that support DEI.

Look beyond ‘diversity hires’

Bolstering an environment of equity and inclusion is a framework that lives in the DNA of a company. The effort to make this happen can look like:

  • ERGs: Employee Resource Groups offer support, camaraderie, and a safe space for underrepresented groups. Effective ERGs allow for conversations around sensitive topics and build a strong allyship. You can have groups for women, Black employees, Latinx employees, LGBTQ workers, and more.
  • Systems for complaints: You can create robust systems to deal with discrimination, microaggressions, bullying, harassment and other complaints. There should be strict protocols to handle these situations to ensure minorities feel secure and safe. 
  • Transparency in opportunity: Debiasing of promotions, pay scales, and other opportunities must be focused on to achieve a real meritocracy. Clear criteria shared with all employees can contribute to a positive sentiment of fairness and transparency. 
  • Mentorship: A method to formally connect people in positions of authority with high-potential employees. A mentor can help minorities or employees with lesser privileged backgrounds find opportunities that can open new paths for them in the company.

Data-First DEI Strategies

Data is used for so much in business today, but rarely to inform DEI decisions. Use analytics tools to measure and track employee experience, journey and satisfaction to improve DEI standards. You can analyze data like:

  • % of Diverse employees in leadership positions
  • Time taken for minorities to reach leadership roles
  • Difference between the average career trajectory of white employees and other employees
  • How long do minority employees stay with the company
  • Hours spent on mentorship programs for intersectional/minorities
  • Number of incident reports on racism hate speech, bullying
  • Participation numbers in DEI training
Equity in the workplace is equal access to opportunities and advancement regardless of gender, sexual orientation, etc. - Shivani Jai

Use first-hand evidence to create strategies that make a real impact on your employees and company culture. Here is a sample format by PowertoFly to get you started. 

By building a comprehensive DEI policy, taking informed action, and measuring success, companies can create a more diverse, equitable and inclusive workplace and reap the benefits of a more engaged, productive, innovative, and happy workforce.

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