ESG & Diversity
Kezia Farnham Image
Kezia Farnham
Senior Manager

Corporate diversity and inclusion: What is it and how can you achieve it?

May 7, 2021
0 min read
A professional considering the importance of corporate diversity.

Corporate diversity is undoubtedly a hot topic at the moment. Type "what is corporate diversity" into a search engine, and you will be presented with a wide range of definitions, explanations, tips and advice on achieving a more diverse and inclusive organization.

Today, the "D&I" of diversity and inclusion are often joined by the "e" of equity, bringing another element into the mix. You may be a corporate grappling with the challenge of making your business more diverse, more inclusive, and equitable. If so, you will need to know what corporate diversity and its associates, equity and inclusion mean, and how you can put in place strategies to achieve them.

This guide will define corporate diversity, identify why diversity is important, and provide actionable advice that will enable you to achieve improved corporate diversity and inclusion in your organization.

What Is Diversity in the Workplace?

What is corporate diversity? That's often the first question asked when business leaders are looking to create a more diverse organization. Today, this could easily be joined by "what is inclusion" and "what is equity?"

As you might imagine, each of these terms has numerous definitions, but the consensus is broadly that:

Corporate diversity is when organizations intentionally employ a workforce of employees of varying characteristics. For instance, these characteristics could include sexual orientation, gender, race, ethnicity, religion, age, physical abilities, political ideologies or socioeconomic status.

Inclusion is defined as "the achievement of a work environment in which all individuals are treated fairly and respectfully, have equal access to opportunities and resources, and can contribute fully to the organization's success."

Equity is defined as "the process of ensuring that processes and programs are impartial, fair and provide equal possible outcomes for every individual."

Why Is Corporate Diversity Important?

Corporate diversity and inclusion don't just represent good practice. They can enhance your organization's reputation and can deliver tangible business benefits.

What does diversity do for a company? Increased corporate diversity:

Powers Creativity and Innovative Thinking

"Groupthink" can be a real problem for organizations whose boards and teams are made up of people with similar backgrounds, skills and outlooks. A variety of voices enhances innovation and the hothousing of new ideas, propelling your business to new levels.

Improves Productivity

Creativity and ideas aren't the only things to benefit from a more diverse workforce. Productivity can soar when team members demonstrate varying skills and experiences that work well together. New concepts can be made real far faster when a diverse range of experience is brought to bear on the challenge. As a result, there are clear connections between diversity and your financial performance.

Helps You Win the Talent War

Diversity is a virtuous circle. Employ people with a broad range of experience and backgrounds, and potential hires will see your organization as a place where they will be welcomed and able to be their authentic selves. For instance, in some areas, in-house legal teams see a growing shortage of qualified candidates. So ensuring that you can tap into as wide a range of talent as possible is increasingly vital.

Improves Employee Engagement, Satisfaction and Loyalty

Employees don't just accept roles where they can be authentic; they thrive in them. They give their best to their employer and become ambassadors for your brand. Your organization benefits from this internal advocacy in terms of external perception and reputation, talent attraction and employee retention.

Gives You a Closer Understanding of Your Customers

Your customers and clients are likely drawn from all segments of the population. And yet, diversity in corporate America often fails to match the make-up of the U.S. as a whole.

How do your customers feel if they see an organization that fails to reflect them in terms of gender, race, age or any other criteria?

Building a business in which your customers can see themselves mirrored goes beyond best practice. It can give you the edge when it comes to connecting with your market.

Making the Business Case for Diversity and Inclusion

You might think that the business case for corporate diversity was pretty watertight. And, after many years of discussion, pretty well understood.

And yet fewer Black executives were added to S&P 500 boards during 2019-20 than in previous years, and in 2020 women made up only 20% of public company directors in the US. A 2020 McKinsey report found that although the representation of women in senior leadership has increased, women continue to be under-represented at every level.

These figures suggest that something about the business case is falling short.

Surprising when the reputational, commercial and financial benefits of an effective corporate diversity strategy should surely be enough to convince business leaders of the need to devote time and resources to it.

Companies with above-average diversity scores have reported higher average revenues due to innovation and are seen as more attractive employers by millennials.

But taking a simplistic approach to the business case can be counterproductive. Harvard Business Review believes that a blind acceptance that better diversity automatically equals better business performance does a disservice to those trying to get buy-in for diversity and inclusion initiatives.

HBR notes that "Having people from various identity groups 'at the table' is no guarantee that anything will get better." However, by replacing what it calls an "add diversity and stir" approach with more substantive changes, you can build a compelling business case.

Three core actions are essential here:

  1. Swapping platitudes for empirically-based action
  2. Focusing less on shareholder return in favor of broader, more holistic success measures
  3. A willingness among top leaders to change the organization's culture to deliver the benefits of diversity

The Culture Changes You Need to Make To Succeed in Diversity and Inclusion

This last point is central to the success of any corporate diversity policy. Diversity in the organization requires diversity in corporate culture. What cultural changes do you need to make to succeed in diversity and inclusion?

Lead From the Top

As CIO puts it, "empathetic leadership is key." Boards and senior leaders don't just need to identify and espouse the behaviors they want to see in their workforce: Organizations also need to model this approach within their highest echelons.

Our recent podcast, sharing findings from two recent surveys by PwC and Corporate Board Member, noted that when it comes to board composition and executive compensation, D&I is lagging.

This needs to be addressed to achieve the culture required to support corporate diversity. This might mean looking beyond your usual sources when recruiting directors. It might mean paying more attention to succession planning; building diversity in the pipeline to corporate leadership is crucial.

If this an issue you grapple with, our tips for improving board diversity will help.

Create an Ethos of Belonging

All your employees need to feel comfortable and welcome at work. CIO notes that "having a connection to an organization or group of people that makes you feel you can be yourself not only results in greater engagement and creativity in the workplace, it's a psychological need."

Creating this sense of belonging isn't a quick process, is not necessarily linear, and a one-size-fits-all approach won't cut it. Be prepared to work at building the welcoming organization you need.

Make It an Ongoing Effort, Not a One-Off Initiative

In the same vein, the whole process of creating an effective corporate diversity strategy is something that requires work over the long term. It's misguided to imagine that you can tick the box once the board or employees have had diversity training.

Creating new behaviors doesn't happen overnight; new habits take time and effort to build.

Beware of Quotas

Quotas clearly have their place in helping to create more diverse organizations. But while quotas can deliver diversity, businesses are mistaken if they

think that they also automatically deliver inclusion. Focusing too much on hiring and attracting the right people can reduce the emphasis on how those people are welcomed and treated once they join the business. Your organization needs to create the conditions that allow the people you have onboarded to thrive once in the role.

The HBR article we cited earlier pinpoints four fundamental steps for organizations genuinely wanting to make a difference around corporate diversity:

  • Build trust
  • Actively work against discrimination and subordination
  • Embrace a wide range of styles and voices
  • Make cultural differences a resource for learning

All of this may be a challenge, but luckily, a wealth of tools boards can improve corporate culture.

Diversity Programs Can Fail: How Can You Avoid It?

A corporate diversity strategy can undoubtedly deliver significant organizational benefits. But we shouldn't avoid the inconvenient truth that diversity programs can fail.

Why does this happen, and how can you avoid failure in your corporate diversity activities? Several tactics organizations use in their corporate diversity plans, and inclusion strategies have been shown to be problematic.

Diversity Training Doesn't Reduce Bias

An HBR article makes the point that when it comes to corporate diversity initiatives, "Companies are basically doubling down on the same approaches they've used since the 1960s with corporate diversity and inclusion training 'force-feeding' diversity best practice in a way that can cause employees to rebel against the concept.

Hiring Tests Aren't the Silver Bullet

The use of hiring tests can engender similarly rebellious responses. Although more than 80% of companies have been shown to use some form of pre-hire assessment, managers can feel these impinge on their ability to choose their preferred candidate. There's also evidence of managers using hiring tests on strangers and then appointing friends with no testing.

Pay and Promotion Decisions Aren't Made Fairly

Many companies have adopted the idea of using performance ratings with the aim of making promotion and pay decisions more equitable. But research has shown that these don't consistently achieve their aims; women and minorities tend to be rated lower ' defeating the object of performance ratings as a means to greater equality.

Grievance Procedures Aren't Working

As a last resort, grievance procedures are designed as a way to redress bias in the workplace. But of almost 90,000 discrimination complaints made to the Equal Employment Opportunity Commission in 2015, 45% included a charge of retaliation, which, as Harvard Business Review discerns, suggests that the original grievance was "met with ridicule, demotion, or worse."

Diversity in corporate America clearly has some way to go. But by avoiding some of these problematic tactics, organizations can tilt the odds in their favor when building successful corporate diversity and inclusion programs. Employers should look at the cultural changes we've outlined above to truly build and embrace diversity in corporate culture.

Why and How to Measure Corporate Diversity

It's long been said that "what gets measured, gets managed." On that basis, is it essential to measure the outputs from your corporate diversity activities?

The short answer is yes. But as with everything, the devil is in the detail. Organizations need to work out their key metrics and ensure that measurement focuses on deliverables that make a real difference.

Leaders from McKinsey identified the parallels between diversity and environmental, sustainability, and governmental (ESG) initiatives in terms of measurement. Both areas relate to corporate sustainability, and it's not unrealistic to imagine that diversity and inclusion might follow ESG's path on reporting.

It's now accepted that ESG metrics are core criteria when investors and other stakeholders make decisions; as McKinsey's Vivian Hunt says, these measurements are now "a nonnegotiable."

A few things are essential when it comes to measuring diversity and inclusion:

Identify what is vital to measure. Your corporate diversity goals are the foundation here: set clear focus areas.

Work out what success looks like. What are you trying to achieve? Having defined objectives is essential.

Ensure consistency. How do you measure your progress? Is it consistent over time? While there are currently no mandatory, standardized diversity measures, you can at least ensure consistency in your internal approach.

Workplace Inclusion: Corporate Diversity in the Workplace

Hopefully, this article has given you:

  • An understanding of corporate diversity, what it is and why it matters
  • An appreciation of the cultural changes you need to enact to ensure long-term success
  • An insight into why diversity and inclusion strategies can fail, and how to avoid that outcome
  • Ideas on how you can measure progress in a consistent and meaningful way

One of the major challenges organizations face when trying to improve corporate diversity is the step from theory to practice. Having a sense that you need to improve your performance is very different from having clear objectives and actionable plans.

Even if you have developed a corporate diversity policy, putting it into effect can be challenging. Where do you start; how do you evaluate current performance to establish a baseline for improvement? Just gathering the intelligence needed to underpin your corporate diversity strategy can fall into the "too difficult" box.

Diligent's suite of solutions can support organizations that want to turn good intentions into measurable action. We can help you to:

  • Define and activate your commitment to corporate diversity
  • Create tangible activities and outcomes from your standards and guidelines
  • Curate the external and internal intelligence you need to define your baseline and objectives
  • Measure your current approach, identifying any risks and red flags
  • Monitor progress toward your goals

Find out more about how Diligent can support your corporate diversity strategies.


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