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The Business Case for DEI Initiatives

DEI initiatives not only impact the culture of a workplace, but also lead to measurable financial growth. Studies indicate that organizations that prioritize diversity and inclusion experience better employee retention and improved brand reputation with the general public.

DEI efforts increase profitability

According to a study by McKinsey & Company of employers in the United States and U.K., organizations in the top quartile of gender diversity in their executive teams were 21% more likely to achieve above-average profitability compared with those in the fourth quartile. Similarly, respondents in the top 25% of ethnic and cultural diversity for executive teams were 33% more likely to accrue above-average profitability than those in the fourth.

Another study, conducted by McKinsey & Company in collaboration with the Society for Human Research Management (SHRM), looked at the performance of companies with various levels of workplace diversity. They discovered that companies with gender and ethnic diversity are 15% and 35% more likely to outperform their less diverse counterparts, respectively. According to the same study, companies with more racial and gender diversity have higher sales revenue, more customers and higher profits.

According to SHRM, the average cost to replace a salaried employee is estimated to be between six to nine months of the individual’s salary. This means that in order to replace an employee earning $60,000, the cost could be as high as $45,000. With that in mind, most employers prioritize retaining their existing talent. Employees who do not feel that their workplace is accommodating—or do not feel included and welcome—are less likely to have feelings of loyalty toward their employer and are more likely to leave.


How Your Startup Can Implement Effective Diversity, Equity and Inclusion Practices

DEI prioritization benefits every level of the company

DEI programs are an important part of fostering a culture of engagement and happiness among employees. Employees in organizations with strong DEI initiatives are more likely to be satisfied with their jobs, have a higher level of trust and be more engaged. But it’s not just morale that improves when DEI programs are prioritized; there are tangible benefits at every level of the organization.

Employees

When a team has at least one member who represents their target market’s gender, race, age, sexual orientation or culture, they are 158% more likely to understand them.

Managers

Companies with more diverse management earned 38% more revenue on average than companies with less diversity. This could be due to the fact that gender diversity, country of origin, career path and industry background are all strongly linked to innovation.

Leaders

When it comes to gender diversity among executive leadership teams, companies in the top 25% are 21% more likely to be profitable and 27% better at creating value.

Boost your reputation and responsibility

Businesses with inclusive cultures and practices are 57.8% more likely to improve their reputations. After seeing an advertisement that is perceived to be diverse or inclusive, consumers are more likely to buy, or consider buying, a product. Employees who consider their workplace to be inclusive are more likely to think their company is ethical.

Gender diversity on corporate boards is linked to:

  • Risk-management strategies that work. Adding women to a board of directors can improve investment efficiency, prevent risky overinvestment decisions and reduce male CEOs’ overconfidence.
  • Increased board member engagement, as evidenced by actions such as requesting additional information or updates on topics being discussed, and following up on specific tasks after board meetings.
  • There are fewer financial reporting errors and questionable business practices like fraud and earnings manipulation.
  • Investing in higher-quality audits.

Companies with gender-diverse management teams have fewer lawsuits related to operations.

Strong DEI programs encourage employees to show up every day without fear of being their true selves. This leads to higher levels of engagement, productivity and innovation – resulting in increased revenue.

Whether you are looking to reinforce your DEI program or revamp it completely, Kapnick can help ensure that your company is meeting your DEI goals in order to help your business thrive. Reach out today at [email protected] or 888-263-4656.

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