Unconscious bias costs U.S. businesses up to $550 billion dollars a year. Alternatively, many studies show the correlation between diverse and inclusive cultures and stronger business performance.
Optimizing diversity for business results requires mitigating bias and addressing systemic inequities across the employee lifecycle. But it also demands an inclusion ethos that begins with leadership, and infuses the culture, organizations cannot fake it.
Inclusion is a measurable factor that influences your business performance.
Correlation Between Inclusion and Business Performance
A few examples of how diversity and inclusion have correlated to business results:
- Top-quartile ethnically and culturally diverse organizations financially outperform their bottom-quartile peers by 36%.
- Top-quartile gender diverse organizations financially outperform their bottom-quartile peers by 25%.
- S&P 500 companies that ranked highest on 10 diversity and inclusion metrics generated a higher profit margin (12%) than the lowest ranking (8%).
- Companies with more women in upper management show faster growth and higher average profits.
- Companies with strong LGBT inclusion attain significantly higher profits.
- Leaders in disability inclusion also have 28% higher revenue and 30% higher economic profit margins than peers.
Innovation revenue and cash flow:
- Companies with above-average management diversity report innovation revenue 19% points higher than below-average leadership diverse ones, and 9% points better financial performance.
- More inclusive companies have 2.3 times more cash flow per employee over a three year period.
- Inclusive cultures help make organizations more recession-proof - companies whose key employee groups had very positive experiences during the Great Recession saw their stocks climb by 14.4 percent.
According to McKinsey research, the relationship between diversity and inclusion and higher financial performance is getting stronger over time. So is the penalty for those organizations that don’t "get it": Bottom-quartile gender diverse organizations are 19% more likely to financially underperform all other companies on profitability. Bottom-quartile companies on both gender and ethnic and cultural diversity are 27% more likely to underperform.
Catalyzing Diversity Into Results: A Culture of Inclusion
Leaders in DEI understand that active inclusion - not passive diversity - translates into cultural change and business performance. These DEI leader organizations exhibit leadership commitment, a systemic approach and take intentional strong steps.
McKinsey found that employee sentiments on inclusion are twice as likely to be negative (61%) as sentiments on diversity (31%) - especially centered on visible leadership accountability, equity and fairness of opportunity, and openness and freedom from discrimination. This means that relatively diverse companies are often still not creating genuinely inclusive workplaces.
Diversity without inclusion is both a talent issue (attraction, engagement and retention) and barrier to business performance. As Robin J. Ely and David A. Thomas argued in Harvard Business Review, increased numbers of underrepresented groups in your workforce will not automatically alter your business performance: harnessing diversity to reshape the power structure of your organization will.
Inclusive cultures leverage a diverse workforce by making differences matter - valuing the benefits of and respecting different viewpoints, amortizing power and influence, recognizing needs and contributions, and enabling individuals to fulfill their potential.
According to the HBR authors, inclusive organizations must prioritize the following: building trust and psychological safety; actively dismantling discrimination and subordination (starting in the minds and hearts and behaviors of leaders, then translating those shifts to the organization); actively embracing a wide range of styles and voices; and making cultural differences a resource for advancing learning.
How to Assess Inclusion
Inclusion allows all employees to use their voice and equitably develop their career. It turns diversity into a competitive advantage. Within our DEI assessment, Pulsely measures the state of inclusion in your organizational culture.
The Pulsely Workplace Inclusion Diagnostic Assessment is designed to assess levels of inclusion, how workplace experiences differ by demographic segment, and how these differences impact the organization’s performance. We measure employee experiences in your organization (Workplace Inclusion) and the inclusion skills and beliefs individuals bring with them into the workplace (Inclusion Competencies).
Our 8 Pillars of Inclusion framework assesses different aspects of inclusion that can impact business, personal, and career outcomes.
- Visible DEI Leadership: leadership visibly demonstrates inclusion (words, actions, priorities) including visible representation in leadership;
- Managerial Relationships: employees feel supported to perform, trusted in their competence and psychologically safe;
- Career Support: employees receive guidance and support in career development and access and visibility to influential networks;
- Equal Opportunity: individuals believe they have equal opportunity to achieve career goals and that promotions are objective and fair;
- Belonging: individuals feel both valued and socially included and enabled to be their authentic selves in positive work interactions;
- Work-Life Effectiveness: individuals have the support they need to integrate work and life in a way that is consistent with their personal values and well-being;
- Team Psychological Safety: employees believe differing views, honest mistakes, or new ideas are welcomed and team dynamics promote positive outcomes;
- Behavioral Accountability: individuals trust that action will be taken in the case of misconduct or inappropriate behaviors, even if performed by a leader;
Pulsely then identifies the patterns of experiences for different employee segments, whether your workplace is experienced equitably by them, and how particular experiences of inclusion impact key Performance Indicators (retention, innovation, and engagement) for different segments.
At Pulsely, we have found that the most compelling business case to leadership is the one focused on your organization. By analyzing which Pillars of Inclusion are related to Performance Indicators in your organization, Pulsely identifies the opportunities for improving business performance.
Our Inclusion Competencies framework complements this by assessing how employees’ personal beliefs and attitudes influence their interactions in the workplace and whether they live out measured by the extent to which they exhibit 7 Competencies: learning from others; cultural intelligence; willingness to adapt; courage to engage; awareness of systemic bias; addressing bias; and allyship.
By assessing Inclusion Competencies among your workforce, we guide you in increasing inclusion by meeting people where they are and inspiring them to own their personal inclusion journey.
The ROI of Building an Inclusive Workplace
As Lee Jourdan, former CDIO of Chevron, told us: “The way to increase ROI is to make sure you're using all of your team: that’s automatically increasing value in your organization.”
Inclusion catalyzes a return on investment in diversity because it contributes to performance at individual, team and organizational level:
Individuals who feel heard at work are about 5x more likely to feel empowered to do their best work, as are those that feel a sense of belonging. Employees who feel included experience more trust and engagement at work. A feeling of inclusion contributes to emotional investment, commitment to a company and job satisfaction.
Diverse and inclusive teams are better at problem-solving, leverage a greater variety of perspectives, are smarter and more adaptable, and more innovative. Teams that follow an inclusive process make decisions twice as fast with half the meetings.
Organizations with inclusive cultures exhibit a more efficient and contented staff and more innovation and agility (up to 6x). They experience greater team collaboration and commitment, less absenteeism and turnover, and more talent attraction. Inclusive companies are 3x as likely to retain millennials for over five years. Creating inclusive policies and cultures increases creativity, innovation and openness and enables better assessment of consumer demand.
The game-changer for your organization’s business performance is to get authentically - and quantifiably - committed to a cultural ethos of inclusion.