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Right now, diversity, equity, and inclusion (DEI) initiatives are under growing scrutiny.

Some companies are pulling back from DEI initiatives amid nervousness around shareholder activism and possible investor or customer pushback.

The So What

Highlighting the benefits of DEI to an organization’s performance and the wellbeing of employees is the best way to address this negativity, according to Nadjia Yousif, BCG’s Chief Diversity Officer.

“This isn’t about taking sides, but rather making the most of the opportunities to enhance business and societal value. DEI raises standards for everyone by improving innovation, performance, and the workplace experience across the board.”

DEI initiatives can boost financial performance, according to BCG research based on data from more than 27,000 employees in 16 countries.

  • Attracting talent. In a world where companies are reporting significant talent gaps, it makes sense to recruit from a more diverse pool. BCG research shows that almost one-third of people from underrepresented groups choose not to apply for or accept a position in companies that do not have inclusive work cultures.
  • Reducing attrition. Leadership that prioritizes inclusion in the workplace can slash attrition risk by 50%. That’s because employees who witness or experience discrimination, bias, or disrespect are nearly 1.4 times more likely to quit their job.
  • Increasing motivation. When employees believe that DEI programming is a corporate leadership priority, the number of all employees who are happy increases by 31 percentage points, while the number of those who feel motivated increases by nearly 25 percentage points.

Companies with above-average diversity on their management teams also report innovation revenue 19 percentage points higher than companies with below-average leadership diversity.

“Diversity in business is not about hitting quotas, it’s about assembling the best teams with different backgrounds and perspectives. Just think about developing products or services, for example. A broad range of backgrounds and views will fuel innovation and be better attuned to the diversity of your customer base,” Yousif says.

Now What

Measure the leading indicators of diversity and inclusion, not just the outcomes. Approach DEI as any other business initiative, with KPIs that are measurable and have a set timeframe. Review the success of different initiatives and learn from what works. Keep track of your recruiting statistics, and ensure there is equity in pay, promotion, and retention. It’s also important to measure employee inclusion to ensure underrepresented groups feel included in the workplace—keeping in mind that this leads to higher levels of motivation, ambition, and retention.

Communicate what works and what doesn’t. Be transparent when communicating the impact of DEI initiatives to staff, the board of directors and/or shareholders. Be open about areas where it’s taking longer to make progress, and where there’s been success. Using data to demonstrate the impact of DEI initiatives on company performance is the best way to address criticism.

Lead from the front. Senior leaders should openly and publicly commit to the importance of DEI as well as equipping direct managers with the tools to practice empathetic leadership. This creates psychologically safe team environments where every individual can thrive. Companies also need a clear feedback loop and escalation mechanism to quickly address any instances of discrimination, bias, and harassment that can undermine progress.

Influence your network. Companies can influence a wider ecosystem beyond their own workforce. They can expand supplier diversity, for example, and improve the customer experience (and revenues) through more inclusive product design or marketing materials that avoid stereotypes. By embedding the importance of DEI into all aspects of a company’s operations, organizations can drive broader societal change—often an element of organizational purpose statements.

“DEI isn’t a nice-to-have for companies. In an increasingly complex and competitive market, business leaders need to access and nurture the best talent, regardless of gender, race, ethnicity, sexual identity, or disability status. But it’s not just a business imperative, there’s also a moral imperative to ensure all human beings have a chance to flourish and thrive,” Yousif says.