The Financial Case for EDI

Why do employers care about diversity, equity and inclusion? Is it principle, or is it about the bottom line?

Recently, a large American law firm announced that it was reducing its paid parental leave program from 18 weeks to 12 weeks. In justifying the change, the firm said that its “top priority is to provide consistent, exceptional client service.” Apparently, according to this employer, including new birth and adoptive parents interferes too much with the bottom line.

Commenting on the decision, a former American Bar Association head commented that the decision “makes sense if retention isn’t a priority.” Given her work and values – she’s now a diversity and inclusion consultant helping companies make systemic changes to better retain women – she presumably meant it made sense from the firm’s short-term financial perspective. This firm and others in its market were experiencing financial challenges and considering layoffs, so perhaps they really didn’t care about retaining employees, diverse or otherwise. It’s easy to support diversity and inclusion when times are good, but can employers afford it during the hard times?

In our view, the answer is a resounding yes. In fact, the real question is, can employers afford not to?

According to a McKinsey D&I global market report,

• diverse companies earn 2.5 times higher cash flow per employee
• inclusive teams are over 35% more productive, and
• diverse teams make better decisions 87% of the time.

Were I running a business that was struggling financially and considering layoffs, I would certainly want to ensure my limited numbers of staff could be significantly more productive and bring in more cash flow than competitors’. And better decision-making is all the more crucial when conditions are challenging and a wrong step can do serious damage.

But it doesn’t stop there. Here are a few more insights about the business impact of diversity and inclusion:

• A LinkedIn study showed that employers who discussed diversity received 26% more applications from women, significantly improving their overall candidate pool
• In another LinkedIn study, companies with a DEI team were 22% more likely to be seen as “an industry-leading company with high-caliber talent” and 12% more likely to be seen as an “inclusive workplace for people of diverse backgrounds.”
• 76% of employees and job seekers said diversity was important when considering job offers
• 60% of employees want to hear business leaders speak up on diversity issues.
• 80% of survey respondents said they want to work for a company that values DEI issues.

And the big one: According to an analysis by Accenture, American companies forgo a combined $1.05 trillion, every single year, by not having inclusive work cultures. High turnover rates, low productivity and low employee engagement make exclusionary cultures extremely costly.

In our view, diversity and inclusion initiatives should be done on principle. Every human being deserves dignity, respect and belonging. This is true throughout our lives, and especially in the workplace where we spend most of our waking hours. And people need equitable access to gain employment in the first place, so they can contribute productively to society while supporting themselves and their families. But concerns about affordability should never pose a barrier. The business case is clear: inclusive workplaces are as healthy for the “bottom line” as they are for the individuals who work there.

Join us on May 8, 2024 from 12:00 – 1:15 p.m. (EST) for Module 7 of our Inclusive Workplace Series where we will be discussing Dismantling Systemic Discrimination in the Workplace.