Deploying the Right Diversity, Equity, Inclusion, and Belonging Strategy to Drive Business Results

Despite research proving that companies with more diverse teams increase their productivity, reduce turnover, and increase profits, many have cut back on their efforts in this area. DHR Global recently interviewed the CEOs and CHROs of over 60 companies to get a better sense of their current diversity initiatives and how they are being used to drive business results.

March 20, 2024 – In a period of economic uncertainty, companies are reducing expenses on diversity, equity, inclusion, and belonging (DEI&B). Instead, they should be doubling down as the following case studies from DHR Global will show how you can drive business results through proactive and thoughtful DEI&B strategies. The right actions can unlock innovation, access new markets, design relevant products, and develop a differentiated go-to-market strategy – allowing companies to build competitive advantage, drive revenue, and gain market share, according to the DHR study, which is authored by John Staines. What’s more, involving employees in addressing pain points leads to improvements in sales, pipeline development, market expansion, and talent retention.

DHR interviewed the CEOs and CHROs of over 60 companies, employing over three million people worldwide, to learn about their DEI&B initiatives and how they are used to drive business outcomes. The search firm wanted to know what companies are doing to attract, develop, inspire, reward and recognize their diverse talent. Finally, DHR sought examples of business results achieved through great DEI&B initiatives. The firm’s recommendations provide a roadmap for more companies wanting to use diversity programs to address problems and drive success.

Recruiters say that the last three years have brought turmoil to the best throughout human capital strategies. “A significant portion of the workforce moved out of the corporate office and into their homes,” the DHR report said. “Others quit and either moved to the gig economy or retired early. With many workers insisting on greater latitude on where they physically sit for their jobs, employers are getting pushback on returning to the office and even hybrid work models. HR struggled to figure out ways to keep employees engaged.”

In 2022, DHR says that CEOs and HR teams tried to determine a go-forward strategy for on-premise, hybrid or remote work while the power dynamics between employer and employee shifted towards the employee. Some companies announced full return-to-work plans, in the face of potential higher turnover and drain in knowledge and experience. In 2023, to make it all more complex, DHR explains that the U.S. economy slowed down, affecting earnings and profits, and forcing companies to lay off a significant number of employees, especially in technology. Companies have also reduced the focus on DEI&B, reducing budgets and not using the DEI&B lens as they execute layoffs.

The Challenge

Many employers are struggling to define the right DEI&B strategy. DHR provides the following case studies that suggest this is the time to double down on talent and DEI&B investments.

Case Study One: A Healthcare Company.

DHR first looked at a healthcare company that had difficulties accessing a diverse community in a major metropolitan market even after investing significant resources. During a planning meeting, the CEO realized the demographics of the delivery team and the target market were very different, yet the team didn’t think that was a problem. When the CEO changed the makeup of the delivery team, the company learned it had made incorrect assumptions about the healthcare needs of this segment of the population.

“This led to a review of products, delivery mechanisms, and access points,” the DHR study found. “By selecting key leaders and members of the team who were more reflective of the target audience, there was a better understanding of the market, enabling the company to better serve the community.”

Result: A 27 percent revenue growth and market share growth of 12 percent in the targeted community.

Case Study Two: A Consumer Products Company.

The CEO of a consumer product company was frustrated with its product development pipeline, which majored in adding new features to existing products rather than actual new products. In conversation with the head of product and the head of HR, they learned that the product development team did not reflect the buyer of their products, so the team was reorganized. Within 12 months, DHR says that the new team had produced a broader set of new products with greater appeal to its target consumer. The CEO could not attribute all new product sales to this change in talent strategy.

Related: What CHROs Need to Know About DEI Moving Forward

Result: An 18 percent sales increase with 60 percent of the increase due to new product introductions.

Case Study Three: A Technology Company.

After years of using the same go-to-market strategy, a technology company wanted to increase its user base by expanding its distribution channels into new demographic segments. After realizing its chances of success were tied to better in-house representation of the users of these channels, it proactively sought new diverse talent for both senior leadership and the sales and marketing teams. The new team developed a differentiated approach to unlock this new and underserved user segment.

The Uncertain Future of Diversity and Hiring
Diversity has had it rough lately. First, there were cutbacks due to the economy and then came the Supreme Court’s ruling against affirmative action. That was followed by a cohort of Republican attorneys general issuing a letter to Fortune 100 CEOs questioning the legality of some DEI efforts. The main issue for the moment centers on quotas, a topic which was at the heart of the recent Supreme Court ruling banning affirmative action at universities, according to a recent report from Korn Ferry. Though the ruling doesn’t apply to the private sector, the attorneys general are raising questions.

Result: An 18 percent increased market share in the underrepresented segments, improving access for users that would have otherwise not participated, and improving profit margins by four percent.

Case Study Four: A Fashion Retail Company.

A fashion retail organization was reviewing the demographic of its sales by geographic region. It discovered that while a large ethnic group represented 26 percent of the community, it accounted for only three percent of sales in that area. Furthermore, in-store sales teams hired less than three percent of that ethnic group. The company therefore changed its talent acquisition strategy for in-store team members and managers.

Result: A 10-fold sales increase over 24 months, and a 30 percent increase in margins.

DHR’s Survey Results

Of the companies DHR surveyed before the economic slowdown:

• 98 percent said DEI&B was a priority.

• 91 percent had measurable goals.

• 83 percent had established a DEI&B office or program.

• 83 percent had revised their mission, vision and values statements to incorporate components on equity, belonging and inclusion.

• Only 60 percent published their measurable goals.

• 56 percent had KPIs tied to DEI&B to reward teams for their achievements.

• 29 percent had a direct impact on compensation outcomes.

Post Economic Slowdown:

• 65 percent of companies had layoffs or hiring freezes.

• 54 percent reported a decrease in DEI&B budgets.

• 60 percent had a reduction in DEI&B team members.

Embed DEI&B into your Corporate Culture

The only way to attract and retain great talent in this new employment reality is to truly embed DEI&B into the corporate culture, according to the DHR report. “Employees need to see that leaders are serious about DEI&B and feel it is part of the company’s DNA versus a superficial set of actions,” it said. “This requires CEOs to drive the narrative concerning DEI&B. Many companies delegate the execution of this to their HR departments or a line leader.”

Related: Navigating the Road to Diversity

DHR explains that the problem with pushing DEI&B down the org chart is that senior to mid-line leadership typically has different and competing priorities and may not necessarily possess the expertise to drive DEI&B initiatives. The study says that this is where prioritizing and reinforcing DEI&B initiatives company-wide is beneficial.

Create a Diversity Leadership Role

DHR learned that those companies reporting the most successful DEI&B programs are leader-led with 83 percent of its researched companies have installed chief diversity officers, with the rest reporting that they have discussed adding the role but have not yet decided to act. Of those companies with CDOs, 10 percent reported to the CEO, 15 percent reported to a line leader who had other responsibilities, and 75 percent reported to the CHRO. It was interesting to note that appointed diversity leadership was mostly found in the healthcare and life sciences sector, followed closely by the technology and telecommunications sector then consumer products and retail. When developing a DEI&B strategy, dedicated resources will produce more focused plans and better results than having this be a part of someone’s role, the DHR study found.

Establish a Culture of Belonging

While company leaders have spent significant time thinking about and discussing culture, their challenge is to create a culture of belonging at their companies, the DHR report notes. “There is no shortage of books and articles out there on establishing the right culture,” the search firm said. “However, there is a difference between culture fit and culture alignment. Cultural fit is hiring talent that fits with the current makeup of the company, whereas cultural alignment is finding talent that aligns with the goals and aspirations of the diversity program. Once those latter people are identified and hired, the company must create a culture of belonging.”

How are companies doing this? In DHR’s research, 12 percent of companies used affinity groups (AGs) to drive strategic business objectives, either by investing in external programs or developing their own programs. Some had invested in branded executive leadership programs, which offered cohorts for women and people of color. Others had established grassroots AGs for diversity and early career development programs. These groups were typically led by one or two employees who volunteered to lead and promote the group, schedule meetings, and meet with leadership to share the group’s goals, report on employee success, and organize celebrations of events relevant to the group.

Review Existing HR Processes, Policies, and Practices

DHR also found that most companies we spoke to have reviewed some or most HR processes, policies, and practices to ensure they are supportive of the DEI&B strategy:

• 78 percent made changes to their compensation packages and practices. This includes detailed reviews of merit, bonus, and equity payouts to ensure gender and ethnic equity, as well as a review of promotion processes to ensure opportunities are given to all employees.

• 91 percent reviewed their talent acquisition processes, with special emphasis on language used in job descriptions, career website, and structured interview questions. Interview panels are selected to include leaders who understand the DEI&B initiatives and are skilled at interviewing a diverse slate of candidates.

• 50 percent reviewed their leadership competencies to ensure they represent leaders of all geographical regions, backgrounds, and cultures.

• 50 percent reviewed their selection practices for leadership development programs to provide equal access to all employee demographics.

“This is the time to double down on the right, diverse talent,” the DHR report said. “Companies doing DEI&B well are now using affinity groups, employee resource groups, and business resource groups to drive business results. Inspirational leaders realize that having a diverse group of employees leads to improved innovation, diversified products and services, new channels of distribution, and a differentiated go-to-market strategy.”

“We have always heard that two minds are better than one. Two diverse minds can lead to more creativity, better solutions, and more connections with your customers,” DHR says. “These actions result in stronger financial results, higher revenues, and improved profitability.”

Related: The Evolving Role of Chief Diversity Officers in Shaping DEI

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Executive Editor; Lily Fauver, Senior Editor – Hunt Scanlon Media


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