Return on Inclusion = Return on Investment

In this blog, I will discuss:

6 Research-based benefits of Diversity, Equity & Inclusion (DEI) efforts
3 Principles to keep in mind when looking at the DEI Return On Investment (ROI)
2 Examples of measuring the DEI ROI

‘What is the ROI of DEI?’

It’s one of those questions I get asked often. Even though I would love to answer with a simple ‘Your employees will feel safer and more engaged and their feeling of belonging will increase’ this is usually not enough.

Collecting data, setting metrics and reporting the results to your leadership team will make a stronger business case for investing in DEI efforts. Establishing the ROI can help you secure budgets and resources allocated to DEI programs.

6 Benefits of DEI Investments

In recent years various research has shown us that DEI programs have multiple benefits, from financial to employee experience. Below we will look at 6 of them.

1. Better employee experience

High feelings of belonging are linked to a 56% increase in job performance, a 75% reduction in sick days and a 50% drop in turnover risk (1). Employees who feel their voice is heard at work are 4.6 X more likely to feel empowered to perform their best work (2). Another study found that employees in highly diverse and inclusive organisations show 26% more team collaboration (3).

2. More employee retention

18% More team commitment is shown by employees in inclusive organisations and they demonstrate 1.12 X more discretionary effort and 1.19 X greater intent to stay (4). Research has also shown us that increased representation of senior leaders of minority groups boosts retention for employees of minority groups by 15% (5) and inclusive companies are 3 X more likely to retain millennials 5+ years (6).

3. More talent attraction

In research done by Deloitte 72% of employees reported that they would consider leaving an organisation for a more inclusive one (7). Inclusion has become an important aspect in deciding which employer to work for (8). 76% Of job seekers say that a diverse workforce is an important factor to them when considering companies and job offers (9).

4. Improvement of performance

Organisations with an inclusive culture are 3 X as likely to be high performing, 8 X more likely to achieve better business outcomes and make decisions 2 X faster with 1/2 the meetings (10). Research about decision-making also found that the members of racially diverse groups share more information with one another, which leads to better performance (11). Another study showed that companies with more DEI programs created 2 more products a year compared to companies that did not have DEI programs (12).

5. Increase in innovation

Companies that are more gender and racially diverse outperform their peers in innovation and effectiveness (13) and diverse management teams deliver 19% higher revenues from innovation compared to their less diverse counterparts (14). In another piece of research, only 10% of respondents saw their company as innovative when it lacked an inclusive culture but in inclusive cultures, 74% of people believed that their organization fostered innovation (15).

6. Rise in profits

Top quartile diverse companies are more likely to financially outperform their national industry medians, by 35% for ethnic diversity and 15% for gender diversity (16) and companies with a diverse set of employees enjoy 2.3 X higher cash flow per employee (17). A Harvard study on ‘Gender Equity’ reported that organisations committed to reducing/closing their gender equity gaps across all races and ethnicities were more profitable. For every 10% increase in gender equity, organisations saw a 1 to 2% increase in revenue (18).

3 ROI Principles

When you want to look at the ROI of DEI programs, it will be good to keep the following principles in mind:

1. Invest time

The investment focus is usually on direct expenses, such as DEI training but inclusion is ultimately about interpersonal dynamics which demand time investment of individuals. Achieving true inclusion takes time, e.g. changing the composition of your senior leadership team can take years, and your ROI has to reflect that reality.

2. Avoid home-country bias

When determining what and how to measure your ROI, be careful to not allow home-country dynamics or realities to carry disproportional weight. For example, a program focused on increasing the representation of ethnic minorities might make sense in an ethnically diverse society but not in a more homogenous one and an LGBTQ awareness program might not work in countries where homosexuality is illegal.

3. Check in with your employees

Although ROI depends on data, inclusion reflects how people feel about their work and data will never tell the whole story. That’s why it’s important to keep checking in with your employees.

2 Examples of DEI ROI Metrics

Before you can measure the ROI of your DEI strategy, you have to know what the return should look like. Also, there must be a context in which you look at the investment. Perceived ROI can change depending on which data you look at. Let’s look at two examples.

1. Employee & customer satisfaction

You could investigate the happiness of your employees. Simply put because happier employees will provide better customer service which will make the customers happier. The Net Promoter Score (NPS) could be used to collect this information. In a NPS survey questions like “How likely are you to recommend our product/service to your colleagues?” are being asked and answers are on a scale from 0 to 10 with 0 – 6 = detractors, 7 – 8 = passives and 9 – 10 = promoters.

(Promoters : Respondents) X 100 = % Promoters
(Detractors : Respondents) X 100 = % of Detractors
% Promoters — % Detractors = NPS
NPS post-DEI program — NPS pre-DEI program = Satisfaction Improvement

2. Retention improvement

You could also look at improvements in retention rates. Let’s assume you set the goal to decrease your employee turnover by 50%. You train all your people managers in cultural awareness, which could improve intercultural communication between managers and employees and increase employee satisfaction. After the training, you measure a 40% reduction in turnover which looks like a positive ROI. A closer look reveals that the turnover of your IT team increased. Does that mean the initiative failed? Not necessarily, perhaps a shortage of talent in the IT field drove up salaries which made people in your IT team leave for a higher salary. This example shows us that you will always need to look at the data through multiple filters.

Average length of stay post-DEI program — Average length of stay pre-DEI Program = Retention improvement
(Retention improvement X Average value of employee in terms of output X Years in organisation) — Cost of DEI Program = Value DEI program

Final Thoughts

If you want to secure a DEI budget and resources, showing the ROI is oftentimes necessary to persuade your leadership team. DEI might seem too abstract to measure, but with a clear understanding of your organisation’s goals, it’s possible!

If you want to engage with me about any of the topics discussed then please send a PM.

‘What is the ROI of DEI?’

6 Benefits of DEI Investments

Final Thoughts

Sources