Whether in fashion, tech, retail, or finance, small and large firms around the world are increasingly being urged to evaluate their strategic goals and their commitments to creating an equitable and inclusive workplace. While there are some companies that have taken a proactive approach in addressing issues of workplace diversity, most have been slow to implement policies and practices around these issues. As a result, those companies that continue to leave workplace diversity unaddressed are beginning to pay the price for their inaction – and the price is high.
The cost of having a lack of diversity, equity, and inclusion (DEI) comes in a variety of forms. Each year, for example, more than two million Americans leave their jobs due to discrimination and unfair working conditions. And the price for replacing this workforce? It costs American companies approximately $64 billion annually. Meanwhile, companies globally are increasingly finding themselves in hot water over issues linked to a lack of diversity, equity, and inclusion. The fallout from these controversies has, in some cases, led to severe repercussions like loss of revenue or demands for a change of leadership.
In such cases of dispute, the price of inaction is often magnified as companies find themselves forced to address DEI issues through a reactive lens rather than a strategic, proactive one. In 2018, for example, global retailer H&M received massive backlash after running an online advertisement featuring an African American child in a sweatshirt that read “Coolest Monkey in the Jungle”— a racist trope that has been used to dehumanize black people throughout much of U.S. history. After intense public outcry, the company hired external consultants to help them think more critically about long-term DEI goals. Today, H&M has restructured its process for flagging sensitive or inappropriate products, which includes more personnel having input throughout every stage of development. While H&M ultimately did invest the time and resources necessary for developing an inclusive internal workplace (and creating more intentional products for customers), they were forced to do so from within the difficult and uncomfortable context of crisis management.
Many of these DEI-related issues can be easily prevented, but doing so means making a calculated investment in your workplace. For example, this could include implementing comprehensive DEI policies that focus on employee trainings, day-to-day operations, hiring, and compensation. Whatever measures a company chooses to take, self-evaluation and commitment to understanding DEI is critical. But since many companies face conflicting narratives in the marketplace about what DEI really means and how it impacts their organization, it can be helpful to break down each of the terms:
“Diversity” is the representation of all our myriad identities, differences, and lived experiences including race, ethnicity, gender identity, religion, and sexual orientation, among others.
“Equity” refers to the accessibility of, and opportunities for, advancement – for everyone. This includes not only identifying and eliminating barriers that have historically prevented the inclusion and participation of select groups, but also understanding the root causes of those barriers to prevent the creation of new ones.
“Inclusion” establishes an infrastructure and environment where employees of all backgrounds can thrive. It also means promoting equal opportunities for employees to overcome structural barriers and achieve success.
While institutional awareness and understanding of the importance of DEI is starting to increase, the corporate sector in particular still has a long way to go in building truly equitable workplaces. According to the New York Times, in 2015, there were more Fortune 500 CEOs named “David” or “John” (4.5% and 5.3% respectively) than the total number of all-female CEOs (4.1%). In addition, in 2018, there were only three African American CEOs on that list. Unfortunately, these shortcomings aren’t limited to the categories of gender and race. There is also widespread discrimination and harassment against the LGBTQ+ community in the workplace. The Williams Institute at UCLA reports that approximately 11.3 million people in the U.S. openly identify as LGBTQ+. Among this population, 62 percent of LGBTQ+ individuals reported hearing homophobic slurs in the workplace; 43 percent experienced workplace discrimination, including termination or denial of promotions; and 35 percent felt the need to hide their sexual orientation entirely.
At Ichor Strategies, we understand the negative impact a lack of DEI has on employees, and we also know the challenges of confronting internal workplace norms. This is why DEI development is one of our core offerings and also why we prioritize DEI policy development in our own workplace. With our knowledge and expertise in this area, we help our clients build safe spaces for their teams to recognize and understand unconscious bias, and then we guide them on how to address it and mitigate its impact.
While DEI efforts are often initiated in the name of social justice, research has shown that they are also a critical enabler of growth – both within a company and within its market. For instance, a 2018 McKinsey report found that companies in the top quartile for racial and ethnic diversity were 33 percent more likely to have financial returns above their national industry median. The report also indicated that companies in the top quartile for gender diversity were 21 percent more likely to have financial returns above their industry median.
In short, companies need to be transparent and make a genuine investment in DEI. Those that do so will have a better understanding of the socio-cultural dynamics, nuances, and sensitivities of key markets, thus giving them a competitive edge to best engage their target audiences and communities at large. This, in turn, results in companies that advance their business goals while becoming more profitable in the long run. But most importantly, developing truly equitable workplaces has a far-reaching ripple effect that benefits companies’ stakeholders and their communities, allowing them to leave behind a powerful and positive legacy. So, when it comes to DEI, which path will your company choose?