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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. 

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 their authentic selves at work can focus better on their performance instead of spending valuable time dealing with bias, unfairness or lack of support. 

3.Diversity 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.

Source: McKinsey

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?

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?

  1. 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?

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. 

  1. 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.
  1. 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.
  2. 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: 

1.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:

2. 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:

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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