Why Companies Fail at Diversity and Inclusion, Despite Significant Investment

By: Hart Hillman

As described in my previous post, I don’t care for your gender diversity hiring statistics, because it is only one small part of offering a gender diverse workforce, and the same is true of broader equity inclusion initiatives.

Historically speaking, efforts to improve workplace diversity have failed to make significant change, despite significant investment, and now we know why. Affirmative action and other initiatives focussed wholly on hiring can be effective in getting people in the door, but they’re all for naught without structures in place to support those employees once they arrive. At the end of the day, it doesn’t matter how many diverse hires you add to your roster if the majority end up leaving soon after.

As with gender diversity, equity inclusion has proven to be a strong indicator of company performance, with more diverse teams consistently seeing better results.

According to a study by McKinsey, diverse executive teams are 35% more likely to report higher than average profits, while diverse boards are 43% more likely to see above average profits. According to the study, every 10% increase in racial and ethnic diversity amongst the senior executive team leads to a 0.8% increase in earnings.

Furthermore, the ability to draw from diverse perspectives increases an organization’s propensity for creativity and innovation by 20%, while making it 30% better at spotting and avoiding risks, according to a study by Deloitte. Overall, two thirds of the 10,000 business leaders surveyed by Deloitte cited diversity and inclusion as important or very important to the success of their organizations.

In an effort to reap those benefits companies have sunk untold billions into hiring efforts, and yet the needle rarely moves. In an effort to get to the bottom of their lack of progress, some innovative organizations began publicizing not just their diverse hiring numbers, but retention statistics as well, and pretty soon the problem became clear.

One such company, Intel, made a $300 million dollar commitment in 2015 to have a workforce that was fully representative of the diversity of America within five years. That year the company hired 209 African American employees, but according to retention figures published later that year, 201 left. Intel also hired 11 Native American employees in 2015, but by the following year they were further behind then when they started after 19 left. “All this work to hire doesn’t mean a thing if Intel, or any company, can’t convince its newest employees that they are going to feel like they landed in an inclusive workplace,” reported Fast Company’s Lydia Dishman at the time.

Intel was essentially trying to fill a bucket with holes in it, and once the problem became clear the company made plans to patch the leak. In 2016 Intel put a number of initiatives in place to better support diverse employees, and to rally their colleagues into joining the cause.

One such program called Warmline provides employees with a confidential hotline they can call to get career advancement advice or with suggestions on how to improve the overall employee experience. “It has increasingly gained traction as a resource for employees, and as a result has also become a source of insight into creating a more inclusive environment,” reported VentureBeat’s Dean Takahashi in 2018. “Since its inception, the Warmline has received more than 20,000 cases with a retention rate of 82 percent.”

As a result of this program and other policies aimed at creating a more inclusive workplace, Intel was able to reach its diversity goal in 2018, two years ahead of schedule.

What Intel and others have since discovered is that diversity hiring is too focussed on numbers and groups, but doesn’t put enough emphasis on supporting the individual, resulting in widespread retention problems.

According to Trevor Wilson, an author and leading voice in the equity and inclusion space, there are five stages in what he calls the “equity continuum.” The first level of motivation for employers is “compliance,” followed by “beyond compliance,” which begins when an organization recognizes the benefits to their internal and public image. Next is the business case, which has now been well established, but still doesn’t meet what he considers the standard for true inclusivity. That designation is achieved in the next phase, “integrated equity,” which moves beyond a focus on the group and towards an emphasis on the individual.

“They value people because of—not in spite of—their differences and have moved towards an environment that is equitable for all,” he writes. “They have internalized diversity and inclusion as core values and view human equity as an essential element of sustainable competitive advantage or organizational effectiveness.”

The final stage is “inclusive and equitable,” which capitalizes on “individual differences to unleash maximum human potential and self actualization.”

As with gender diversity and inclusion, many organizations like to showcase their diverse hiring numbers, but according to Wilson and other experts they’re only in the early phases of creating a truly diverse and inclusive workplace.

Those who fail to put policies in place designed to support the individual rather than the group are likely to see numbers dwindle quickly. Organizations like Intel that find ways to stop the leaks by supporting their staff and truly internalizing the diversity and inclusion as a core value can truly capitalize on the significant returns that are associated with a diverse workforce.

Until then, companies will continue investing billions into diversity and inclusion initiatives, but won’t have much to show for it.

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