The following is a guest post from Jay Titus, vice president and general manager of workforce solutions at the University of Phoenix. Opinions are the author’s own.
Reading the news, it’s impossible to escape the conclusion that diversity, equity and inclusion (DEI) efforts are on the way out in corporate America. Many DEI programs have either died, are under siege or simply don’t work.
But that shouldn’t be the case because DEI itself isn’t the problem.
Over the past four years, many organizations adopted DEI initiatives for the right reasons — they just executed them wrong. This is why companies should now pause and pivot, reassess the situation, and move to incorporate DEI the right way.
Companies should reposition the initiative as outcome-based, and that means getting their CFOs involved to establish benchmarks that tie diversity to improved business results.
There’s no point in arguing whether DEI is still with us; it most definitely is. Companies continue to seek employees with different backgrounds, experiences, and ideas because a diverse workforce helps companies drive faster growth, grab market share, boost profits and make the most of recruitment efforts. So, the main challenge for companies is to encode diversity into their DNA effectively.
LinkedIn reported earlier this year that “vice president of diversity and inclusion” is the seventh-fastest growing job in the U.S. Bloomberg recently reported that U.S. companies made good on their promise to hire a lot more people of color — many hundreds of thousands among the top 100 companies by market value.
Still, there’s cause for criticism in how companies have approached diversity initiatives, and, like any new program, there were fits, starts and undoubtedly mistakes made along the way.
Some companies rushed to adopt DEI measures viewing them as beneficial to company culture rather than integral to business success. Unfortunately, in many cases, there wasn’t sufficient time or effort made to link DEI initiatives to corporate outcomes.
3 ways CFOs can improve DEI policies
Now is the time for a diversity reset with CFOs working closely with human resources to establish policies and metrics. Here’s how that might work:
1. Avoid quick fixes
Diversity programs require time, training and increased sensitivity among employees. CFOs can lean on research that shows diversity helps enormously with hiring, retention, and employee satisfaction. About a third of people from underrepresented groups don’t apply to, or accept positions at, companies without an inclusive culture.
Likewise, attrition plummets by 50% when leaders make inclusion a priority, which increases the number of employees who are happy by 31%. CFOs have an important role in holding the institution accountable for those kinds of results.
2. Look within
Companies must undertake a thorough self-assessment to pinpoint their primary business challenges and determine how diversity can address them. CFOs working with the HR team need to develop those tools. And then they need to benchmark the results against other companies in the industry.
This process involves identifying areas for potential growth, market expansion, improved employee retention and enhanced product innovation. Before implementing a DEI initiative, CFOs should ask, “What specific problem/problems will this initiative help you solve within your organization?”
More diverse companies tend to be more innovative, according to a study from Boston Consulting Group conducted in Europe. Such companies generate 38% more of their revenue from innovative products and services than companies below the median.
The same results can be seen in elite, hyper-competitive industries. At venture capital firms, the more homogeneous the staff, the worse the investment returns, according to the Harvard Business Review. VC firms are among the least diverse — only 8% of the investors are women, 2% are Hispanic and fewer than 1% are Black.
The effect of shared race or ethnicity typically reduces an investment’s comparative success rate. In the HBR study, the reduction was a staggering 26% to 32%. Measuring those results against the investment in DEI can help keep the initiative on track.
3. Go slow
Address underlying business problems while integrating diversity solutions one step at a time. DEI shouldn’t be viewed as standalone interventions but rather as integral components of broader strategic goals.
Just as CFOs would carefully monitor introducing artificial intelligence into a company, changing an entire benefits structure, or upskilling the entire workforce, integrating diversity requires thoughtful planning and execution. A systematic approach with bold steps is the best way to launch a diversity program at companies, according to a study by consultant McKinsey & Co.
Failure to reset DEI efforts now risks eroding employee confidence in leadership and the company. Bosses sometimes forget that employees are astute and insightful, and their trust in leadership is paramount to business success. Without an honest and concerted effort to make real diversity and inclusion a priority, companies risk losing the trust of their workforce, resulting in bad outcomes including trouble in hiring and retention.
