Want to Advance Diversity? Avoid These Three Pitfalls
By Janet M. Stovall, Global Head of DEI at NeuroLeadership Institute, a global neuroscience-backed consultancy
The business case for DEI is dead. Long live the business case. If it feels like you’ve been through whiplash on how companies view DEI these days, you’re not alone.
Since the Civil Rights Act of 1964 ushered in affirmative action, making diversity the legal thing to do, subsequent movements in the 1970s — Women’s Liberation and Gay Rights — ushered in the moral case, or diversity as the right thing to do. Then in the 1980s, capitalism became king, and diversity as a driver of profit was born.
Today, DEI is big business. A industry worth $7.5 billion in 2020, DEI grew 24% to $9.3 billion last year,, and is forecast to reach $15.4 billion by 2026, a nearly 66% increase from where it is now.
And yet as the DEI business grows, so does skepticism of the business case for DEI. Critics primarily point to three big reasons they view the business case for DEI with skepticism: that it’s diametrically opposed to the moral case; that it’s a recruitment turnoff; and that, well, it doesn’t really work.
While it’s possible to see how they might have come to these conclusions, a closer look reveals a host of nuances and realities that invalidate those reasons.
Myth No. 1: You can’t make money and be moral
Ask several critics about why they get upset about the business case for DEI and you may hear arguments that it’s inherently exploitative because it relegates diverse groups to “assets” for organizations to acquire and allocate. Taken to its full extent, it can support exclusion, critics say. And it’s not difficult to think of examples of such exploitation, from redlining, devaluing home values in Black neighborhoods because they’re deemed “risky” to “the customer is always right” excuse to tolerate discrimination in sales.
But let’s get real. Business is in the business of business, which means it has three primary motivations: increasing profits, reducing costs, and achieving organizational goals. Anything that doesn’t advance one of those three things is subject to devaluation or dismissal, which is why DEI budgets often are the first cut in tough times. According to a recent KPMG survey, 91% of U.S. CEOs are “convinced” a recession is on its way, and 59% view pausing or reconsidering efforts around ESG — where many DEI efforts live — as one of the top two ways to prepare for it.
Business realities, however, don’t have to negate moral aspirations. In fact, achieving positive business outcomes with diversity requires building inclusive cultures. An organization can’t optimize diversity's contribution to business results without creating a culture of inclusion, belonging, and psychological safety. Employees must be able to feel safe to challenge constructively so they can bring their diverse perspectives to innovation. They must consistently experience intentional inclusion creating opportunities of belonging. The business case and the moral case for DEI are not diametrically opposed; they’re inextricably linked. Simply put, if DEI is tied to business goals, people’s paychecks depend on their execution of DEI outcomes, whether they like it or not.
Myth No. 2: The business case for DEI is backfiring
If recent headlines are any indicator, when job seekers from underrepresented groups see the business case for DEI on company websites, they assume they won’t feel a sense of belonging — and they don’t apply. A key point to note, however, is all those headlines stem from a single study.
The study, from researchers at Yale University and the London Business School, analyzed responses to a fictional DEI message on the website of a fictional company. Women in STEM, Black college students, and LGBTQ+ individuals read either the business case, diversity improves the bottom line; the fairness case, it’s the right thing to do; or no justification at all. When asked if they would join the company, those who read the business case for diversity anticipated not feeling belonging. The researchers concluded that, for underrepresented groups, the business case triggered social identity threat that undermined belonging.
While this is a valuable study, what if those participants were surveyed about real DEI initiatives a year after taking an actual job at a real company? Would the fairness case lead to actionable DEI initiatives and a sense of belonging? Inquiring candidates want to know the truth about what it’s really like to work at a company, and candidates from underrepresented groups would reconsider applying for a job in such cases. And when it comes to actual as opposed to anticipated feelings, research shows people’s sense of belonging comes from being valued and recognized for their contributions to the organization. Organizations that connect business outcomes to diversity, build systems to recognize and amplify such connections.
Myth No. 3: DEI initiatives just don’t work
Stats about diverse representation in the workplace suggest that the business case for DEI is not working — that we’ve only moved the needle only incrementally in leadership for women and traditionally underrepresented groups. Globally, gender diversity on boards increased by just 1% from 2017 to 2019, while ethnic diversity in executive leadership increased by just 2%. And yet stats about business outcomes suggest that it is. Companies in the top quartile for gender diversity on executive teams were 25% more likely to have above-average profitability in 2019 than companies in the fourth quartile — up from 21% in 2017 and 15% in 2014. The contradiction rests in what’s measured and how.
To measure representation, you simply have to count. Measuring outcomes starts with asking and answering, “What are you solving for?” and then connecting diversity directly to the identified business goals. Unfortunately, only 30% of companies are prepared to consistently monitor their organization's DEI progress through metrics.
A path forward
With an understanding of common arguments about why DEI initiatives fail, we can turn to what actually makes the business case for DEI successful — which comes down to how behavior change works in the human brain.
Diversity is the business asset, the what. The how is inclusion — continual behavior change and habit formation that create the culture necessary to deliver positive outcomes from diversity-centered business goals — and equity — the process of continuously evaluating and enhancing organizational systems to sustain, accelerate, and scale inclusion.
Thus, the objective, actionable business case for DEI is a three-step process that can’t be approached with a subjective, aspirational lens. Instead, it must:
- Prioritize diversity by tying it directly to personal, departmental, and organizational business goals.
- Habituate inclusion by implementing learning and development solutions focused on changing behavior rather than hearts and minds.
- Systemize equity by inspecting, interrupting, and improving policies and procedures to sustain and spur the behavioral change.
When it comes to the business case for DEI, the critics aren’t wrong. But they’re not right, either. To increase diversity in representation, it's not what you promise about DEI but what you can prove. The business case works if you connect DEI to business goals and work on changing behaviors rather than hearts and minds. The bottom line: Diversity, prioritized organizationally, leveraged through inclusive habits, and sustained by systems of equity, can solve business problems and improve business outcomes.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.