DEI Initiatives

Diversity in the workplace is good for business. That's why companies invested a lot in DEI initiatives in recent years. Creating a more diverse, equitable, and inclusive workplace has a positive impact on job satisfaction and performance. Unfortunately, DEI initiatives have increasingly been criticized and politicized. This development has led to companies changing their view on the importance of DEI projects and roles. In a time when people feel more divided, it's essential to look at initiatives that focus on bringing people together.

Diversity, equity, and inclusion (DEI) are values embraced by companies that acknowledge the differences between people and are supportive of different backgrounds. McKinsey (2022) defines DEI as three closely linked values that support different groups of individuals, including people of different races, ethnicities, religions, abilities, genders, and sexual orientations. While the three values are connected, they are not the same. Based on a publication by ABC News Network (2023), each value has its own definition. Diversity focuses on the representation of people from a variety of backgrounds at different organizational levels. Equity refers to how fair employers are in their treatment of different employees. Most often equity is related to pay and career opportunity. Inclusion is about the sense of belonging experienced by employees and focuses when employees feel respected and listened to. These values sound straightforward and easy to implement but history teaches us that it's not. Companies with strong DEI understand that people are different, representation matters, individual differences need to be respected, and these differences should not lead to the better or worse treatment of one group or individual compared to others.

Companies are naturally focused on the business case behind initiatives and the benefits these initiatives have for the organization. Back in 2019, McKinsey found that the most diverse companies are likely to outperform their peers on profitability. In its research, the focus is on diversity in leadership. The analysis McKinsey performed showed that companies with high gender diversity and ethnic diversity financially outperformed others by as much as 25% and 36% respectively.  The study also showed that the gains grow with better representation. The likelihood of outperformance through gender diversity grew by 10% between 2014 and 2019 whereas for ethnic diversity the probability increased by 1%. Next to financial benefits, DEI initiatives help companies in their positioning in the labor market, overall performance, and ability to understand and meet customer needs. Glassdoor (2021) found that 67% of job seekers state diversity is an important factor in their job consideration. In an assessment of the workforce, Deloitte (2020) reported that 83% of employees are actively engaged when their employer promotes an inclusive culture. Equal career opportunities and balanced representation of people with diverse backgrounds combined with fair and respectful treatment lead to better results. Leaders must embrace DEI initiatives if they want to improve (financial) performance.

A search for news articles on DEI results in an overwhelming majority containing political color. Although there is strong evidence that indicates DEI initiatives have a positive impact on society and jobs, the topic has become a talking point for conservatives who claim that DEI destroys "fun", equals being "woke", and that it must be banned. DEI initiatives gained momentum with the Black Lives Matter movement and the murder of George Floyd in 2020. The response of companies in the wake of these events set the stage for a political frenzy. Instead of dedicating resources to much-needed repairs, companies hired DEI consultants for training (The Atlantic, 2023). In 2022, the investment in DEI reached 9.3 billion dollars, yet more than 65% of millennials believed their leadership didn't foster an inclusive environment (Global Industry Analysts Inc., 2022). Research by Frank Dobbin, Alexandra Kalev, and Erin Kelly, already showed in 2007 - 13 years before DEI took off - that the money spent on diversity training had no positive effects. The vast amount of money flushed down the toilet and insignificant one-off lectures on DEI created a picture that DEI initiatives are incredibly costly and super inefficient. This gave way to pundits politicizing and bashing down on DEI.

Due to the negative attention and external pressure, companies are reconsidering their focus on DEI and whether related initiatives are imperative to business success. The effect is visible with the departure or stepping down of DEI Officers at Disney, Netflix, Warner Bros. Discovery, and the Academy of Motion Pictures Arts and Sciences in June (2023). That companies are reconsidering their positions on DEI doesn't mean that there are no critical problems that need to be addressed. The U.S. Department of Labor (2023) shows that women are paid 83.7% of what men are paid. The department also reports 7.6% unemployment among people with disabilities which is almost double the national average. According to McKinsey (2022), 82 women of color are considered to be promoted for every 100 men and only one out of four senior leadership roles is held by a woman. In terms of representation, fair treatment, and an inclusive work environment, companies have a lot of work to do. New generations are more diverse hence challenges around diversity, equity, and inclusion are increasing in urgency.  Instead of collapsing under external pressures, leaders must stay focused and committed to DEI. Dropping the ball on this topic will have growing negative consequences in terms of performance and access to talent.

The extra attention presents a new opportunity for leaders to take ownership of DEI initiatives and deliver a lasting impact. According to Forbes (2022), for this impact to be positive, leaders must retire some of the earlier trends starting with mandatory one-off training sessions. Harvard Business Review (2020) states that most leaders have been advancing a simplistic and empirically unsubstantiated version of the business case. A too-narrow focus on the numbers in diversity and training has led to the absence of results. Data is important but companies and their leadership have focused on the wrong data. Metrics on DEI initiatives must shift from input to output. Companies need to harness DEI and take a broader approach to measuring diversity, equity, and inclusion. Booking results requires a cohesive strategy supported by a commitment to financial and human resources. Such a strategy is aimed at fixing issues first before transforming in focus to preventing new issues.

Diversity, equity, and inclusion are values companies must adopt to ensure everybody has equal opportunity to perform and develop. There is a strong business case for DEI initiatives with data-backed research that companies taking DEI seriously perform 25%-36% better than their peers. Unfortunately, people hostile to change have used the absence of results from initiatives that lacked strategy and resources to discredit DEI and create a social division. The invited toxicity has led to more attention and surmounting pressure on leaders. The urgency of DEI challenges will grow as new generations enter the workforce. Leaders have to cut out the noise, focus on collaboration, and deliver data-backed results.