Diversity, equity, and inclusion (DEI for short) initiatives are an essential component to cultivating a more ethical corporate culture—an insight backed by LRN research. The 2023 E&C Program Effectiveness Report found that more than one-third of compliance professionals are adding to or strengthening DEI content in their organization’s training curriculum. But many companies are regressing when it comes to DEI initiatives, causing a direct impact on talent retention, the ability to meet customer needs, and overall business success. Findings from the 2023 Diversity, Equity, and Inclusion Report from global leadership consulting firm DDI caution that if companies don't act now to rekindle and reinvest in the DEI programs, the loss of talent will have a profound impact on their future success. Let’s take a closer look.
Diversity, equity, and inclusion efforts are disappearing—and so is talent
According to the DDI report, there has been an 18% decrease in leaders' endorsement of their company's overall DEI efforts in the last two years. Additionally, data shows that the number of companies that don't offer DEI programs increased from 15% in 2020 to 20%. As the trust that leaders have in their companies' inclusion efforts wanes, those who are women or from minority ethnic and racial backgrounds are significantly more likely to switch companies, particularly those who hold senior leadership positions.
"With the stress of economic uncertainty and labor challenges, companies have turned their attention away from DEI toward these urgent issues, but that has left many leaders, especially those who are women and from minority racial and ethnic backgrounds, questioning their company and role," said Stephanie Neal, Director of DDI's Center for Analytics and Behavioral Research.
The report showed that some of the drivers that caused women and minority leaders to stay with their companies included senior leadership that had earned their trust, managers providing opportunities for growth and development within the company, the inclusion of diverse perspectives, and empathetic managers. These attributes are most crucial to mid-level leaders and executives.
Letting diversity and inclusion efforts slip impacts business performance
Organizations with greater leadership diversity are 2.4 times more likely to outperform their competitors, according to the DDI report. Companies that rank in the top 10% among their peers in financial performance have at least 5% more women or minority leaders than below-average performers, indicating that even a modest increase in DEI programming can yield significant results.
Despite a small decrease in the number of women in leadership roles—29% now compared to 30% in 2020—companies have gained ground with ethnic and racial diversity. While the report notes that much of this increase is the result of high-potential candidate pools, such pools still tend to have fewer women and minorities than their general leadership population. In low-performing companies, women make up only 14% of high-potential leaders and those from minority backgrounds only account for 11%. In high-performing companies, women and minorities make up 23% and 15% of high-potential pools respectively.
Companies gain significant benefits when developing more high-potential women and minority leaders. The report reveals that more diverse companies are 11 times more likely to have high-quality leaders overall and are four times more likely to understand and act on changing customer needs. Further, they're more than three times more likely to engage and retain top talent.
Generational divides influence the perception of DEI
While leaders under the age of 35 are most optimistic about their organization's commitment to DEI, their Gen X counterparts, ranging in age from 46-55, are the most disappointed. The DDI report shows that there is an indication of more frustration experienced by older workers who cite slow progress or feeling overlooked by DEI programs at their place of business that tend to target younger workers.
Coaching employees for growth is crucial, the report stated. Companies with a greater “bench strength”—i.e., pools of high-potential employees employees ready to fill leadership positions—have an average of 28% women and 26% minorities who are ready to step into leadership roles, compared to 18% and 10% respectively in companies with low bench strength. It's a common organizational mistake to attempt to boost DEI by placing people in positions where they're not prepared to do their best. Successful DEI programs make a conscious effort to develop coaching across all levels so workers feel confident as they grow into new opportunities.
Inclusion doesn't require an office
According to DDI's data, 34% of employees who work remotely report a strong sense of inclusion in their organizations, compared to only 29% of their peers who work in person. Among women leaders, only 21% of in-person workers report a strong sense of inclusion. The report notes that the connection between inclusion and remote work may relate to the feeling of being seen as a whole person in a work environment that gives them the flexibility to navigate home and family obligations.
Interestingly, minority leaders, regardless of whether they work in the office or remotely from home, reported feeling a stronger sense of inclusion compared to the broader workforce—a strong indication of the impact of DEI efforts undertaken by their organization.
- 47% of minority remote employees reporting that inclusion is a strong part of their company's culture, versus 34% of fully remote workers.
- 36% of minority hybrid workers feel similarly, compared to 27% of all hybrid employees.
- And 38% of in-person minority employees report similar inclusion levels, versus only 29% of all in-person employees.
Preparing the next generation of diverse leaders remains a top concern
Burnout is soaring across all ages and demographics, the report reveals, with over 75% of minority leaders and 72% of women leaders under age 35 reporting that they feel "used up" at the end of each workday. The combination of childcare responsibilities coupled with the pressure for younger leaders to portray perfection are likely some of the strongest drivers of this trend. To overcome this heightened risk of burnout, leaders should prioritize showing empathy, acknowledging their own vulnerability and shortcomings, and inquiring about employees' well-being.
Succession planning requires proactively recruiting top talent from diverse backgrounds, the report states. Younger leaders who are striving for perfection and pushing themselves too hard are 1.5 times more likely to experience burnout. This issue is more impactful for women and minority leaders in this age group than burnout among young organizational leaders overall. It's up to organizations to rethink how they define leadership potential in order to include a range of skill sets, mindsets, and perspectives, as well as a culture where leaders are free to express empathy and vulnerability.
The key takeaway
According to a report in Harvard Business Review, an extensive study of 79 large companies revealed that for every small improvement in the DEI offerings, there was a significant increase in the company's ability to measure, quantify, and build their ability to change, leading not only to a better financial outlook but also to engaged and inspired workers. To build a culture that promotes diversity and inclusion in the workplace, corporate training must change employees' behavior. This type of learning is an ongoing process, and to sustain lasting change, DEI strategies must include constant reinforcement.
LRN's three-year DEI curriculum includes four learning stages per year, with each stage consisting of three to five learning components that showcase the benefits of diversity and inclusion training. Download a copy today for step-by-step guidance on integrating diversity, equity, and inclusion throughout—and beyond—your corporate training.