Why the Smartest Investments Are Businesses With Learning Equity

By Dani Johnson and Stacia Garr, co-founders, RedThread Research

In recent years, investors have become more focused than ever on businesses that promote diversity, equity and inclusion. As Mercer put it, “DEI has become a vital consideration for investors who are increasingly aiming to align their portfolios with their values. At the same time, evidence is mounting to show how considering a range of views, backgrounds and experience can help achieve long-term sustainable returns, as well as stay in line with the direction in which business is heading.”

The business case for DEI is even stronger than many people realize. A column for the World Economic Forum calls it “overwhelming.” And the Harvard Business Review published research demonstrating that “diversity significantly improves financial performance on measures such as profitable investments at the individual portfolio-company level and overall fund returns.”

Unfortunately, stories abound of employees and investors feeling fed up with a lack of progress at many companies in actually achieving the DEI that they wish to see. Part of the problem is that systems put in place to advance organizations often don’t work -- including the dreaded, frequently ineffective, “diversity training.”

But there's good news. A new approach, which many companies are only now discovering, can deliver big, concrete results, boosting both diversity and financial performance.

Building DEI into L&D

Until now, much of the focus has been on teaching people about DEI issues. Instead, organizations need to focus on learning equity: making the system and process of employee development itself more diverse, equitable, and inclusive.

Learning and development opportunities are one of the most important factors in attracting and retaining excellent employees, making it especially crucial amid the “great resignation.” But, as a headline in Chief Learning Officer put it, “L&D has a racial inequity problem.” A recent survey by The Conference Board shows that people of color report having fewer opportunities for learning and development. They’re also more likely to leave their companies when they don’t get such opportunities.

While the importance of learning equity has been studied in educational environments, far too little is known about its importance in businesses. Our study sought to change this.

Our team at RedThread Research surveyed more than 1,500 people across the world and analyzed the performance of businesses based on four metrics that are crucial to success: business performance, agility, innovation, and customer satisfaction. We call those in the top 25% “high-performing organizations”. The study then examined how well these high-performing organizations do at learning equity -- and the responses were clear.

Three key elements

The study found that there are three key elements to learning equity in a business. The first is discovery, ensuring that the formal and informal methods that employees have to learn about development opportunities are available to all equally. The second is access, which determines whether employees can actually take advantage of learning options if they wish to. And the third is participation. It’s crucial for organizations to track which employees take advantage of development opportunities, and to learn why or why not.

The results of the study provide overwhelming evidence that learning equity makes businesses more successful, rewarding employees and investors. We found that in high-performing organizations:

• 81% of employees say their employer is transparent about development opportunities available, compared to 61% in other businesses
• 84% of employees say their business offers equal access to development opportunities, compared to 58% in other organizations
• Employees are about twice as likely to report that they are enabled to participate in development efforts.

The upshot is that when businesses build learning equity, everyone comes out ahead -- and shareholders see the results not only in DEI metrics, but also in bigger yields.

We recommend that in looking for smart investments, shareholders ask about the state of learning equity inside organizations. Ask executives and investor relations representatives what metrics they have available about the intersection between L&D and DEI.

Businesses should survey employees regularly about their experiences with development opportunities. They should gather not only quantitative data that looks at the experiences of employees in different demographic groups, but also qualitative information -- that is, employees should have the opportunity to provide anonymous feedback about what is holding back their development.

After all, to succeed in the future, businesses need as many top performers with as many skills as possible. And until everyone can be engaged in learning and development, opportunities for growth -- the growth of employees, businesses, and share prices -- will continue to be hampered.

Dani Johnson and Stacia Garr are co-founders of RedThread Research.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.