Diversity, Equity & Inclusion Guide: How to Drive Value with a DEI Audit

As a result of major social changes over the past few decades, the concept of workforce diversity, equity, and inclusion (DEI) is getting a foothold in companies around the world.

Recent studies have shown that "companies with diverse executive teams posted larger profit margins than their rivals, compared with companies with relatively little diversity in their upper echelons." Here are some examples of the potential link between diversity, equity, and inclusion (DEI) and positive business outcomes:

• Companies that ranked in the top quartile for ethnic diversity among their executives were 33% more likely to outperform competitors on profits than those in the bottom 25%. 
• Companies with the highest number of women in management were 21% more likely to achieve above-average profitability than those with relatively few women in senior decision-making roles.
• Further, companies with at least three women on their boards achieved a higher return on equity and earnings per share over the next five years than those with no women on their boards.

This research not only suggests better business outcomes through DEI, but also suggests a link between diverse decision-makers and higher profits.

However, what businesses actually mean by diversity and inclusion, and what they think they need to do to achieve it, often remains elusive. While the awareness and intention might be there, the path toward achieving diversity and inclusion can remain unclear.

To help your company develop a framework for your DEI program, we've developed the guide below. Read on to understand how and why business leaders should play a key role in DEI program development.

How Diversity, Equity, and Inclusion Can Drive Business Value

Diversity, equity, and inclusion in the workplace can bring enormous benefits to your business.

Diversity refers to the differences between employees with regard to race, ethnic groups, gender, age, religion, sexual orientation, socioeconomic status, skillsets and more. But does this mean that all businesses with a diverse workforce can be sure they'll reap the potential benefits of having one? Not really.

While your workforce may be diverse, your company likely will not benefit from these differences if employees don't feel comfortable enough to express their unique thoughts, ideas, or views. This is how inclusion can play a crucial role in your DEI program.

According to the Harvard Business Review, even in diverse organizations, "[e]mployees who differ from most of their colleagues in religion, gender, sexual orientation, socio-economic background, and generation often hide important parts of themselves at work for fear of negative consequences." Inclusive work environments create a space where diverse voices are embraced and valued, ensuring employees that their differences are welcomed and integrated into the environment. Diversity of minds, ideas, and approaches without inclusion is a job half-done. To promote diversity and have a successful DEI program, businesses must first lead with inclusion.

Creating equity within your workplace takes your commitment to diversity even further by making sure you have processes and programs in place that provide all employees with access to equitable opportunities and support to be able to grow within your business.

Here are three ways your organization may benefit from putting these practices into a robust DEI program.

1. It Boosts Innovation and Improves Business Outcomes

Increasing diversity, equity, and inclusion in your workplace is one way to boost innovation and creativity as it brings new perspectives and fresh ideas to your business.

DEI also has the potential to deliver better business outcomes because diversity in talent translates into a variety of worldviews — every employee brings different backgrounds, experiences, and skills to the job. This can offer fresh insights and allow companies to make better business decisions based on a broader range of considerations, developing solutions that take into account a problem's multiple angles.

Solutions that emerge from a process like this tend to be more concrete, thoughtful, and sensible. But for this, you need to make sure your leadership team is committed to developing an effective diversity, equity, and inclusion strategy.

2. It Increases Your Business Footprint

Having and actively recruiting for a more diverse workforce is a way of reflecting your customer base, which can help companies understand and serve their customers better.

According to the survey, 65% of businesses report that their customer base has become more diverse in the past ten years. So, as your customer base becomes more diverse, so should your business.

Employees from different backgrounds can represent the interests of a broader range of customer segments, thus broadening your reach and increasing your business footprint. By mirroring the customer base, your company can improve its understanding of your target audience and make better business decisions based on that information — such as product development or market expansion — to help you reach more consumers.

3. It Increases Your Visibility in the Marketplace

Diversity, equity, and inclusion can help you establish stronger brand preferences in the market that your company serves, as well as in the job market.

More and more consumers, especially those of younger generations, increasingly seek to align themselves with brands and businesses that share the same values as their own.

If your business is genuinely diverse and inclusive, consumers may feel more aligned with your values, and it may inspire them to select your brand over a competitor as they seek to support businesses that stand for values they care about.

And, it isn't just consumers who care about companies being diverse and inclusive. A Glassdoor survey found that 76% of job seekers and employees report that a diverse workforce is an important factor when evaluating companies and job offers. With the war for talent just as ruthless as the war for customers, the business case for diversity and inclusion can't be overstated.

In short, robust DEI programs can directly influence consumer and employee behavior and can positively increase your visibility in both the marketplace and in the job market.

But, before you launch into creating or updating your DEI program, make sure you've established a solid foundation. To better understand where your organization is excelling and where it's deficient regarding diversity, equity, and inclusion, it may be helpful to consult a professional to assist in conducting your DEI audit.

Conducting a DEI Audit of Your Business

To develop an effective DEI program, you need to be aware of your current diversity profile and how it affects your company; this is where conducting a DEI audit comes into play.

A DEI audit can present a valuable framework for analyzing and measuring diversity within your company while also identifying areas of opportunity. By evaluating your people, processes, and strategies, you'll be able to gain valuable insights into the systemic or cultural barriers that impede your company's ability to attract, recruit, and retain diverse talent. You can then use these insights to set your business up for success toward building a more inclusive company.

Based on the findings of your DEI audit, you'll be able to create an action plan for developing DEI training and strategies designed specifically for areas in which your company needs to improve. Here are four steps for consideration when conducting an effective DEI audit. (Note: It is strongly recommended that employers consider partnering with an outside DEI expert when conducting this audit.)

Step 1: Ask Questions

When you want to promote diversity, equity, and inclusion in your company, it's important first to identify the needs of underrepresented groups to provide them with the right support and resources. 

Consider asking yourself the following questions to help identify where your organization currently stands when it comes to diversity, equity, and inclusion:

• What factors affect the ability of my employees to achieve their potential within our company?
• Do differences between employees create disadvantages, or advantages, within the company?
• How do business processes, policies, practices, and strategies impact different groups of employees? (Here, be sure to pay special attention to recruitment, retention, and promotion processes, and conduct racial equity impact assessments.)

Then, consider inviting your employees to share their thoughts or concerns by creating a safe environment for dialogue. Questionnaires, individual and group interviews, focus groups, or surveys can be used to uncover how your employees feel about the diversity and inclusiveness of their work environment, asking questions such as: 

• Do you feel respected and valued?
• Can you have meaningful interactions and relationships with peers and managers?
• Do you have the voice to influence your work and work practices?
• Do you feel safe emotionally, mentally, and physically to voice any of your differing opinions?

Step 2: Re-evaluate Business Processes

Once you've gathered feedback from your team, turn your focus on rules that guide your company and its culture. Take stock of your business policies and practices and eliminate those that hinder diversity, equity, and inclusion efforts. For example, when you look at your internship program, does your company present opportunities for those across various races, ethnicities, sexual orientations, and physical abilities? Consider how and where you are recruiting your candidates from.

When reviewing your business practices, it's also important to identify and eradicate biases that favor processes, methods, and styles used mainly by dominant demographics. For example, do you have an unintended bias in your job posting language that may alienate certain groups of applicants? If yes, then the most qualified candidates may not apply because they are deterred by the language that you use.

In this step, don't be afraid to challenge "the usual way of doing things."

Step 3: Collect and Analyze Your HR Data

Measure the current state of DEI in your business by collecting and analyzing your HR data. You'll want to track and assess metrics related to your talent recruitment and development, leadership demographics, employee engagement and retention, compensation, and benefits to determine whether any discrepancies exist within these areas when it comes to race, gender, age, sexual orientation, and ability.

However, it is important to note that there is risk associated with the actions that may or may not be taken as a result of collecting and analyzing this data. As such, employers are encouraged to protect this information and to work with outside legal counsel to gather this data, and to determine any next steps.

Without clear metrics to track DEI initiatives and their outcomes, it's easy to slip back to habitual thinking and the behaviors that you're trying to change.

Below you'll find several metrics that can help your organization identify blind spots when it comes to bias (employers are encouraged to work with legal counsel where appropriate).

Recruitment and Selection

If you want to improve the diversity of your workforce, it's important to start at the point of entry. Audit your recruitment strategies for any potential bias that may screen out certain groups or favor others by looking at the demographics of your applicants and comparing those demographics to those of the labor market. If you discover that certain groups are underrepresented, you'll want to tap into the reasons behind this. Are you only recruiting from programs or universities that cater to a certain demographic, for example?

And, as previously mentioned, consider whether your job listings contain any unconscious biases in language or tone. Check for patterns or repeated phrases and see if they promote bias towards particular groups or applicants.

Representation

Consider working with legal counsel to compare demographics across different departments, functions, or roles. For example, how many women are in each department? How many people of color are on your leadership team? While you always want the best person for the job, it's easy to get complacent when it comes to representation if you stick to the same old hiring or professional development routine. Assessing the demographics of your departments, functions, and job roles can help you determine where there's room for improvement, and where you can grow your hiring and professional development strategies.

Employee Retention

Respectful treatment of all employees at all levels is the number one contributor to job satisfaction. In short, employees are more likely to stay with a company when they feel accepted and respected, and when they see their co-workers treated with respect.

Similarly, a lack of inclusivity in the workplace may make employees who differ from most of their colleagues in terms of race, ethnicity, gender, sexual orientation or ability more vulnerable to leaving their organizations, as they may be deterred them from being their true selves or feeling comfortable voicing their unique perspectives.

To improve employee retention rates, consider holding focus groups, one-on-one conversations, or surveys to determine their satisfaction with your DEI efforts, and to gather insights on where improvement may be needed. Using this important feedback, you can then identify which metrics you should be tracking and whether there are any new programs or processes you should be implementing to help create a more inclusive workplace.

Promotion and Development

Consider working with legal counsel to assess promotional and development tracks within your organization. Track the promotions awarded to individuals from underrepresented groups compared to promotions awarded to individuals who are not members of a marginalized group. Also, assess the time it takes for each of your employees to progress to a certain level or role. This can help you determine whether your company offers all employees, regardless of their background, equal access to the support and resources needed to thrive within your organization. If there are systemic factors that hinder the development of some employees within your company, your legal counsel can advise on next steps.

Pay and Benefits

One of the most important ways to establish equity within your company is ;to takes steps to ensure pay equity. Help to ensure compliance with applicable pay equity laws by working with legal counsel to identify whether your pay policies may be problematic. It's also important to compare financial and non-financial rewards across your workforce to see if there are certain imbalances in pay and benefits between demographics. A review of pay and/or benefits is an important first step in conducting a comprehensive pay equity audit, which includes complex analysis of this data.

Step 4: Monitor Your Progress

Be sure to set a schedule for regularly monitoring your DEI efforts and measure your progress over time (and compared to that of your peers). Share the benefits of your progress with other leaders in your organization often to assess whether your business is heading — or continuing — in the right direction when it comes to fostering a diverse and inclusive environment.

Remember: It's Not Just About the Bottom Line

When your diversity and inclusion efforts are authentically embraced and embedded in your business operations, what you create and put out into the world is better, and your workplace can be better too.

The role that businesses play in shaping the broader dynamics in our society is transforming. Companies can now affect a real change — but the change requires scrutinizing and letting go of long-held practices, assumptions, and dogmas.

Creating and fostering an inclusive and diverse work environment doesn't mean simply recognizing that differences exist among your workforce. Instead, it means recruiting, hiring, retaining, and developing employees from many backgrounds and making sure their voices are heard and incorporated.

Although the impact of DEI initiatives on your bottom line is tangible, it's about far more than that; it's about building up entire communities of people, both within and outside the business, who feel connected to your company and what it stands for.