The cost of business for initiatives for diversity, justice and inclusion (DEI) has grown sharply over the last decade. The global DEI market is estimated to have reached $ 7.5 billion in 2020 and is expected to double by 2026. To justify these initiatives, many organizations say a diverse workforce is good for business.
These organizations advertise how their efforts for diversity will lead to improvements in the end result by increasing organizational efficiency, improving morale and increasing productivity. Experts now warn that using this business case to justify initiatives for diversity can have the opposite effect.
New research reveals that linking diversity to corporate profits can be a barrier to underrepresented individuals that organizations try to attract. In fact, using the business rationale to justify diversity can lead to underrepresented groups expecting less affiliation to organizations, which in turn ultimately makes them less likely to want to join the organization.
A study by Orian George, a professor at the Yale School of Management, and Annette Ratan, a professor at the London School of Business, found that many organizations use the business case to justify their efforts to diversify. A huge 404 of the Fortune 500 companies included a business rationale for the diversity of their corporate website, suggesting that diversity is important because it would contribute to their profits or the end result in some way.
“First and foremost, we were curious about how this type of rhetoric formed the expected sense of belonging to the poorly represented job seekers. And second, as a result of their expected sense of belonging, we were interested in how much they wanted to join the organization, “Ratan explained the reasons for their study.
To answer these questions, the researchers asked their participants, including women in STEM fields, black students and LGBTQ + individuals, to read a variety of messages from a fictitious employer’s website. The excerpt from the website either provides a justification for the business justification for diversity, which implies that diversity will improve the end result, a justification for justice, which assumes moral and just reasons for diversity, or no justification at all.
Compared to the other two groups, those who read the business argument for diversity report being less likely to feel belonging to the company, more concerned that they will be stereotyped and more concerned that the company will view them. as interchangeable with other members of their group. As a result, the poorly represented groups are less likely to say that they want to join the company that uses a business case.
Ratan explains that the business case “made the members of these poorly represented groups feel as if they would be considered interchangeable. It’s like being known as the Black Engineer or the female professor. These people report that they feel depersonalized by the business case. “
No excuse for diversity is the best
No excuse was the best when it came to attracting underrepresented groups. “The first recommendation based on our research is to abandon the business case,” Ratan explains. Instead, she encourages companies to express their commitment to diversity without any justification. But she has faced many leaders who are reluctant to justify diversity. She explains to these people: “You don’t justify why you have corporate value around trust or integrity, so why do you feel the need to justify diversity? Why do you think people will wonder why they value underrepresented groups?
Getting diversity for impact in the end result requires more than “add variety and mix”
Not only can stating a business rationale have detrimental effects when trying to attract underrepresented employees, but some scholars question the accuracy of claims of a direct link between diversity and profits. Harvard Business School professor Robin Ellie and honorary professor David Thomas called on organizations to do more than just add more women and people of color to their ranks if they expect to increase the end result. “Increasing the number of traditionally underrepresented people in your workforce does not automatically lead to benefits. Adopting a “add variety and move” approach, as long as the business continues as usual, will not stimulate jumps in the efficiency or financial results of your company, they write. What is important, they say, is how a company uses this diversity. If not done properly, adding diversity to the workforce can even increase tensions and conflicts.
Failure to meet profitability targets can be frustrating
University of Toronto professor Sarah Kaplan argues that the business rationale for diversity may also place unrealistic expectations of increased profits as a result of the addition of more underrepresented groups to the workforce. For example, a frequently cited study by Credit Suisse found that companies in which women make up at least 15% of senior executives have more than 50% higher profitability than those in which women make up less than 10%. %. A McKinsey study predicts that advancing women’s equality will add $ 12 billion to global growth. These significant profit and growth figures can set high expectations.
Failure to achieve these lofty goals can lead to frustration with diversity policies, and Kaplan suggests that these effects are exacerbated when profits decline. In the case of downturns, employees who subscribe to the business argument for diversity are more likely to consider efforts for diversity as unnecessary and ineffective.
Fortunately, organizations do not need to offer any justification for diversity programs. As Giorgadzhak and Ratan write about the consequences of their research conclusions: “You do not need to explain why you value innovation, resilience or honesty. So why do we treat diversity differently? “