The ROI of DEI: Still Much Work To Do – March 2021

March 24, 2021

It’s not often that I re-run an article (and it’s certainly not often that I rerun it within the same year).  But the events of this month – the beginning of Derek Chauvin’s trial and the mass killing in Atlanta that targeted Asian Americans – along with a continued and growing recognition from business leaders that inclusion and equity are not just slogans but consequential business strategies, have compelled me to “re-up” it now.  In addition, in response to last summer’s column, a couple of readers asked for more evidence – real data that diversity, equity, and inclusion strategies impact an organization’s bottom line, suggesting that they make good business sense in addition to being the “right thing” to do.

So I’ll start with the same premise as in my June 2020 article: racial inequity sub-optimizes organizational performance and negatively impacts societal outcomes – not only for people of color, but for everyone.  Only this time, I have more proof.

The data are absolutely compelling that diversity and inclusion positively impact organizational performance:

  • The top quartile of diverse companies are more likely to financially outperform their national industry means – 35% for ethnic diversity, 15% of gender diversity (McKinsey)
  • Diverse management teams deliver 19% higher revenues from innovation (defined as new products within three years) compared to their less diverse counterparts; in other words, they produce better ideas (BCG)
  • Companies with a diverse workforce enjoy 2.3 times higher cash flow per employee, and smaller companies as much as 13 times higher cash flow (Bersin)
  • Employees in highly diverse and inclusive organizations show 26% more team collaboration and 18% more team commitment than those in non-inclusive organizations (CEB/Gartner)
  • Teams that follow an inclusive process make decisions two times (2X) faster with half the meetings, and decisions made by diverse teams delivered 60% better results (Forbes)
  • Inclusive companies are three times (3X) more likely to retain millennials for more than five years (Deloitte)
  • According to a national study, those who experienced discrimination at work were twice as likely as those who have not to report illness, injury, or assault – the impact of which on productivity, engagement, and overall workforce effectiveness is probably obvious (NCBI)

The McKinsey study offered a fairly strong summary statement: “Our latest report shows not only that the business case remains robust, but also that the relationship between diversity on executive teams and the likelihood of financial outperformance has strengthened over time.  Our latest analysis reaffirms the strong business case for both gender diversity and ethnic and cultural diversity in corporate leadership —and shows that this business case continues to strengthen. The most diverse companies are now more likely than ever to outperform less diverse peers on profitability.” [emphasis mine]

So diversity, inclusion, and equity are not only the right thing to do, they’re also the smart thing to do if you’re leading an organization (or a team within an organization).

That’s the impact on organizations.  Now consider the impact in our communities – the society at large.  Racial inequities lead to disparities in:

  • educational attainment – which results in negative outcomes related to employment, income, and wealth (for example, the Lumina Foundation estimates as much as a 50% difference in graduation rates between whites/Asians and other people of color);
  • access to healthcare – which results in negative outcomes in individual and population health (for example, look at COVID-19 just in Minnesota, where people of color are 20% of the population but 68%+ of the cases);
  • access to financing and affordable housing (73% of whites own a home versus 43% of blacks, according to the Washington Post);
  • outcomes in the justice system (Pew Research shows that, while shrinking, the number of blacks/Latinos incarcerated are twice the number of whites, despite their percentage of the population being less), and so forth.

Obviously, disparities greatly impact overall quality of life – not just for people of color, but for all of us: the Washington Post estimated a few years ago that racial equity would bring more than $2 trillion to the US economy in terms of greater output and productivity (and their research didn’t consider increased public safety, health, and other quality of life outcomes, so it’s likely understated).

This is not a political issue – a red thing or a blue thing.  It’s a societal issue – an economic, humanitarian, and even moral issue.  Decades (centuries, really) of oppression against African Americans (and other minority groups) have served parts of the US population at the expense of others.  The recent events – as well as the significant and profound response, in terms of protests, emerging legislation, and early corporate action – suggest that now (maybe more than ever) is the time for meaningful, systemic change.  Certainly, part of that change happens with national and local policy, but I believe part of the change can (and should) also happen within our organizations.

As Ben Hecht in his Harvard Business Review article Moving Beyond Diversity Toward Racial Equity claimed last summer, “Achieving racial equity in the workplace will be one of the most important issues that companies will tackle in the coming decade.”  Easier said than done, of course.  Some more context from Hecht:

“Racism’s legacy is complex, brutally ugly, deeply personal, and yet to be truly reckoned with, especially in the workplace. Not even 60 years from the end of legal racial segregation, there’s no question that the harmful effects of that history live on in our institutions and in each of us. Further, it’s clear that the suite of diversity and inclusion tools and practices that went mainstream in the ‘90s are grossly insufficient for racial equity work. Instead of driving fundamental changes in organizations, they largely focus on “velcroing” new guidelines, practices, or programs onto the existing structures and culture of the workplace in an attempt to help employees of color better “fit in” and succeed.

“Today’s racial equity and inclusion efforts must flip that premise on its head. Instead of trying to change some people to fit the organization, we must focus on transforming our organizations to fit all people…To move toward racial equity, organizational culture must prioritize humanity. People need the ability to work with the dignity of having their histories acknowledged and their life experience valued. Only then will companies be able to recruit and retain the thriving, diverse workforce that leaders and customers want — and need — in the next decade, and beyond.”

Again, easier said than done.  What can leaders do to get started?  Here are a few ideas:

  • Listen – truly listen to people of color on your team (or in your community or in your marketplace).  Different ethnicities have different perspectives, different histories, different preferences. And you cannot discover or understand (let alone deliver) if you don’t listen to them.  Have the (thoughtfully crafted) open conversations in team meetings; have listening sessions or focus groups with your customers or prospects.  Assume validity in others’ perspectives and seek to understand.
  • Seek diversity on your team – your workforce, your governing board, your volunteer base (if you have one).  There is power in having diverse perspectives at the table: you’ll make better collective decisions, you’ll stimulate more innovation and creativity, and you’ll attract new and different segments of the marketplace.
  • Be thoughtful with your language and symbols – A couple of weeks ago I made a simple comment that something wasn’t a “black and white issue.”  I caught myself mid-sentence, wondering if the commonly used phrase was racially-centered (I looked it up and it’s not: it originally referred to the Ancient Near East’s Pythagorean Table of Opposites, and more recently in western culture as newsprint).  But it got me thinking: how much of our language and symbols are rooted in racial symbolism?  Companies are quickly adjusting already: PepsiCo is retiring their Aunt Jemima brand; Mars Inc. is reviewing its Uncle Ben’s rice brand; the Duluth MN police force is considering using a different label for its highest ranking leader (instead of “Police Chief,” which is disrespectful to Native Americans).  An organization’s culture is rooted in its language, so reevaluate yours to make certain that common statements, symbols, and even product names are not disrespectful to or marginalize different ethnicities.
  • Educate your team – not just on different ethnicities and beliefs (which is important to do), but on fundamental concepts that create an open, honest, respectful culture.  I’m talking about skills like empathy, respect, and kindness — skills that are really about human decency and civility.  They can – and should – be taught, but they should also be practiced, encouraged, and reinforced (yes, in the workplace, I’m thinking of leadership messaging, reward systems, and the like).
  • Redesign your system – ok, this is the hardest, but the most impactful one.  Most organizational processes are designed to serve those who designed them.  Without making judgment, let me offer this hypothesis: most leaders in the US today are not people of color, so there is a high likelihood that those systems and processes reflect what’s important to people that are not of color.  Maybe not intentionally, but it’s probably de facto true.  So as leaders, consider reevaluating (and redesigning) the policies, procedures, processes you have in place so that they serve all of your employees – your recruiting and hiring processes, your training and education approaches, your employee benefits and services, your reward and recognition, your communication approaches, and I could probably list 30 others.  If you start with the assumption that different employee groups have different perspectives, expectations, and needs, then tailoring your approaches to meet the diversity of needs won’t be a tough leap.  In this effort, be sure to involve all of your employees (see tip #1 above: listen to their needs), make changes, then evaluate and further refine as needed.  Yes, these changes are easier said than done.

If all organizations would consider the five areas above, we’d make considerable progress toward being more inclusive and equitable in the workplace – which would help improve organizational, but also societal outcomes.

PEN is hosting another conversation as part of our ongoing webinar series on best practices in diversity, equity, inclusion – Thursday, April 15 from 8:00-9:00 AM CT.  The discussion will feature a panel of five leaders who are true experts in DEI within their organizations, one each from big business (3M), healthcare (Gillette Children’s Hospital), K12 (Austin Public Schools), higher education (Chippewa Valley Technical College, Wisconsin), and the public sector (Washington County).  The discussion will be moderated by Victoria Ford, DEI Collaborative Program Director at the St. Paul Area Chamber of Commerce (formerly DEI expert with the Wilder Foundation).

The discussion will focus on true practices – methods, tools, action – that leaders can take to improve DEI within their organizations, benefiting their teams but also improving their results.  The discussion is free for PEN members ($20 for non-member guests); ; information is here.

I’ll leave you with this: we are somewhat at an inflection point in this nation’s journey toward true liberty and justice for all.  The recent events have opened many people’s eyes (and minds and hearts), and we have a real opportunity to make meaningful change that leads to more equity and better outcomes for us all.  Some of the actions clearly need to come from our elected officials, but many of them can come from where we all live and work: organizational leaders have a significant role in helping to make America a better place – for the benefit of our workers, our customers, and our communities.

As I did last summer, I’ll close with a quote from former president Jimmy Carter:

“Humanity is beautifully and almost infinitely – diverse.  The bonds of our common humanity must overcome the divisiveness of our fears and prejudices. We have seen that silence can be as deadly as violence.  People of power, privilege, and moral conscience must stand up and say “no more” to a racially discriminatory…system, immoral economic disparities between whites and blacks.  We are responsible for creating a world of peace and equality for ourselves and future generations.” 

Changes won’t happen overnight – real change takes education, dialogue, reflection, and discernment before action.  But we all have a role in making meaningful, impactful, sustainable change to move toward greater racial equity.  It benefits those in our society who have suffered the most, but it also benefits us all.  It’s time to get started.

What other insights/tips do you have regarding the imperative for racial equity?  Participate in a discussion on this topic: visit our LinkedIn group to post a comment.  And follow me on Twitter @LassiterBrian!

Stay healthy and never stop improving!

Brian S. Lassiter

President, Performance Excellence Network

A Catalyst for Success Since 1987!

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