DEI Drives Business Outcomes Despite Pushback

Author: Victoria Kelleher, HR & Compliance Center Lead Survey Specialist

February 13, 2024

For decades, DEI has been a hot topic within board rooms across the United States. The stance a company takes on DEI can have wide-reaching effects on the type of talent it is able to attract and retain, since many job seekers have high expectations for how a prospective employer should navigate the subject.

However, some recent changes in the legal world have sparked uncertainty around the risk involved in policies designed to push forward DEI progress. After the Supreme Court's decision blocking race-based admissions in higher education, there have been a wave of lawsuits aimed at the DEI efforts of private employers. As a result, many employers are approaching DEI with more trepidation than usual. Some leaders have become more hesitant to invest in new initiatives to advance DEI, and some may even be tempted to reevaluate or retract the measures that are already in place to promote it. 

While it is certainly wise to be realistic about the current context and take the necessary precautions to minimize risk, being overly cautious to the point of neglecting DEI altogether poses its own risks. Beyond the risk of sending the wrong message about an organization's culture, deprioritizing DEI may prevent organizations from reaping the demonstrated benefits of a well-designed DEI strategy.

DEI is Good for Business

Since the term DEI was coined, employers at leading organizations have worked to develop practices to optimize it within their companies. Its potential to attract high quality talent and increase employee retention has been connected to observable boosts in business performance. For example, organizations with more diversity and representation at all levels outperform their counterparts in profitability and demonstrate measurable boosts in innovation.

The ultimate improvements in business outcomes are a result of how the people-affirming values of DEI can help foster more loyal, engaged employees and customers. The HR & Compliance Center 2023 Global DEI survey found that various leading practices in DEI have strong relationships with business outcomes such as turnover, employee engagement, and Net Promoter Score (NPS). For example, companies that treat DEI as a high priority were significantly more likely to report improvements in key talent turnover, employee engagement, and Net Promoter Scores (NPS) over the past year (see Chart 1).

Chart 1: DEI Prioritization and Business Outcomes

The use of various practices to push forward diverse representation were also associated with boosts in these business outcomes. Organizations that put in effort to stay ahead in the DEI space saw more improvement. For example, companies that regularly review DEI practices to ensure that they are aligned with current leading practices were more likely to report improvements in turnover, engagement, and NPS (see Chart 2).

Chart 2: Regular DEI Review and Business Outcomes

Retreating from the frontlines of DEI could deflate the demonstrated boosts to growth that the most mature DEI strategies have been shown to confer. Although the losses associated with this may be more difficult to quantify than legal fees, companies will see this play out indirectly through the long-term impact it has on talent attraction, employee productivity, and employee retention. Dips in the health of these metrics could cascade to affect business function, either directly decreasing the company's profit margins or preventing the company from meeting its full potential.

Employers that retreat from an established stance on DEI may even cause the reputation of the business to come under fire. For example, Target's recent response to anti-LGBTQ+ backlash has led to a secondary wave of criticism. LGBTQ+ advocates perceived the withdrawal of merchandise in the face of opposition as a failure to defend an established stance of support for the LGBTQ+ community.

A similar effect may be seen if established initiatives to promote DEI are dismantled. Setting a precedent with the intent to support a marginalized community and then backtracking may cast doubt on whether a company is authentic to its stated values.

Prioritizing Data-Driven DEI

While employers should be proactive to insulate DEI practices against the risks associated with recent legislation, the relationship between DEI and key business outcomes cannot be denied. Many steps that can be taken to promote DEI in the workplace act on a broader scale to promote inclusion and equity without risking a retaliatory lawsuit. Employers should focus on carefully examining the rationale behind existing DEI strategies, bolstering DEI decisions with the evidence that comes from benchmarking data and building processes to track the relationship between internal DEI data and KPIs. This will ensure that an organization reaps the full benefits of a well-designed DEI strategy, instead of missing out on the potential benefits DEI can offer for key talent turnover, employee engagement, and NPS.