The Business Impact Of Diversity, Equity And Inclusion

The murder of George Floyd and the subsequent rise of the Black Lives Matter movement, coupled with the Me-Too movement, have raised awareness and sparked action on issues of diversity, equity and inclusion (DEI) in various sectors and institutions. These movements have challenged the status quo and demanded accountability and justice for marginalized groups who face discrimination, harassment, and violence. As a result, many organizations have launched or strengthened their DEI initiatives to foster a more inclusive and respectful culture, address systemic barriers and biases, and promote equity and representation in their policies and practices. Often, however, these efforts remain performative. As we have experienced during the last few months, the lack of a direct tie to the core business makes them vulnerable to cuts as soon as the pressure is off or the economic environment becomes tougher.

One of the challenges that DEI initiatives face is the difficulty of measuring their impact on organizational performance. While there is ample evidence that DEI can bring benefits such as innovation, creativity, customer satisfaction and employee engagement, these outcomes are often hard to quantify and attribute to specific DEI actions. This may limit the willingness of some organizations to invest in DEI, especially in times of budget constraints or competing priorities. Therefore, DEI practitioners and advocates need to develop clear and consistent metrics and indicators that can demonstrate the value and effectiveness of DEI efforts.

A new study by TechTarget's Enterprise Strategy Group (ESG), sponsored by Amazon Web Services, addresses this issue by trying to quantify the impact of a well-executed DEI strategy. The global survey assessed the DEI commitment of 2,000 business strategists and their organizations through questions focused on the benefits of DEI for their business outcomes and performance. Based on the answers, ESG classified the organizations into four maturity levels: Nascent, Emerging, Evolving, and Leading. These levels reflect the degree of DEI integration and alignment with the business strategy. According to the study, DEI programs can enhance organizations' competitive position, agility, innovation, and brand perception. The study also shows, as you would expect, that the maturity level of DEI programs matters, as organizations with the most mature programs experience the highest returns on their investment.

The core principles ESG highlights as critical to building DEI maturity are:

DEI strategies should be discussed with employees regularly and within the organization's mission. This provides transparency, which builds trust in the organization and its DEI efforts.

DEI strategies should be co-owned by human resources (HR) and other line-of-business leaders. Of course, HR will be instrumental to an organization's DEI success. Still, the maturity model advocates for a collaborative approach that puts DEI at the core of the business and drives accountability for success throughout the organization.

DEI strategies should evolve over time as the organization's progress develops. An organization's DEI strategy cannot remain static because the company itself is ever-changing, as are external factors. Being in touch with the evolving landscape allows for a better-targeted approach to DEI strategy. COVID is the perfect example of an outside stressor that impacted DEI's strategies and goals.

DEI goals should be SMART (specific, measurable, achievable, realistic, and timely). Setting quantifiable goals is critical to success. DEI should be no different from any other business priority, such as profitability or security, where quantifiable goals keep the execution on track.

The mature organization should hold itself accountable. Accountability is critical to success. Without accountability from the top, it is easy for an organization to be distracted by other business issues that might seem more pressing.

Employee enablement is key. The maturity model requires that organizations that do not conduct regular training, or run training on just a subset of topics, will hinder their DE&I programs from having a truly transformational impact.

Organizations should find additional avenues (beyond training, goal setting, and communication) to foster a culture of DEI. The maturity model considers the presence of corporate-sponsored affinity groups as a characteristic of a DEI Leader.

Once the study was able to isolate organizations that were Leaders in DEI, the impact of a well-executed strategy was obvious both as they viewed the success of the actual DEI strategy and its impact on the business:

• 75% of leaders saw their DEI investments as having a very positive impact on their business's competitive position. However, only 28% of Nascent organizations agreed with this statement.
• 63% of Leaders vs. 30% of Nascent organizations attested that DEI efforts extensively positively impacted agility/innovativeness. Another 68% saw a vast positive impact on brand perception (while 64% saw an extensive impact on recruitment and retention.
• 71% of Leaders, compared to only 24% of Nascent organizations, view their DEI ROI as very positive.

Unsurprisingly, a mature DEI strategy will result in better organizational diversity numbers.

Leaders recorded a 33% increase in representation compared to Nascent organizations regarding the percentage of managers and new hires members of one or more underrepresented groups. We know all too well that growing the diversity numbers in an organization takes time and effort. It has much to do with building an inclusive culture rather than just hiring. This is why AWS starts with inclusion rather than diversity. Without an inclusive culture, you will pour water into a leaky bucket. You might be able to hire diverse talent, but you will not be able to retain it.

74% of underrepresented individuals working in Leader organizations were more likely to agree that their organization values diversity strongly. This number dropped to 36% among individuals at Nascent organizations. Furthermore, 68% of employees working for Leaders organizations and belonging to underrepresented groups strongly agree they feel a sense of inclusion at their organization vs. 34% in Nascent organizations.

Beyond the outcomes respondents directly associated with DEI initiatives, the research also showed a strong, positive correlation between DEI program maturity and various positive business outcomes. This is the critical finding of the whole study. While DEI strategies might yield positive results to an organization's diverse makeup and inclusive culture, mature DEI strategies have a concrete and positive impact on the business.

• 71% of Leaders report usually beating their competitors to market. This compares to only 34% of Nascent organizations. On average, Leaders enjoy a 4-month time-to-market advantage.
• Leading organizations reported seeing an average 11.7% gain in market share in the last 12 months compared to 7.7% growth among Nascent organizations.
• 36% of Leaders compared to 14% of Nascent organizations report beating their most current fiscal year revenue expectations by more than 10%.

This study is an excellent first step in trying to provide actual data that leadership can use to advocate for a budget to support DEI initiatives. That said, there is more direct data we can all understand that points to the risks of not making diversity and inclusion a priority.

Not having a diverse organization can pose several risks to a business's performance, reputation and innovation. A lack of diversity can lead to a homogeneous culture that stifles creativity, limits perspectives and reduces opportunities for learning and growth. A lack of diversity can alienate potential customers, partners and employees who value inclusion and social responsibility. On the other hand, a diverse organization can benefit from various skills, experiences and viewpoints that can enhance problem-solving, decision-making and innovation.

The US population is becoming more diverse and multicultural due to immigration and naturalization, which increase the share of racial and ethnic minorities and foreign-born workers. This will reflect on the composition of every organization in the next five years. However, diversity alone is not enough. Inclusion and equity are also essential to enable talent to thrive in an organization that fosters growth and promotes engagement and retention rather than high turnover.

Disclosure: The Heart of Tech is a research and consultancy firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this column. The author does not hold any equity positions with any company mentioned in this column.