A Strong DEI Policy Will Help You Outperform — Here’s Why

You would never trust your assets in only one type of investment, so why would you hire a homogeneous team to lead your company? Just as diversified investments are smarter and reduce risk, the same goes for diversified teams. Simply put: representative teams, make better teams.

As the co-founder and CEO of an hr-tech startup, I am constantly speaking to my clients about how to build world-class teams, and, as a result, how to hire top talent. I work with a lot of financial services firms and coming from the hedge-fund world myself, I’m often drawing parallels between the world of investing and that of hiring to help illustrate key talent principles.

When you build a portfolio of talent within your company, representation means bringing in people with complementary capabilities and skills. It also means bringing together individuals with a wide range of lived experiences and racial, ethnic, and socioeconomic identities — people of different backgrounds who bring different perspectives to the table — so that your company can capture as much of the upside that comes from different ways of thinking while mitigating the the negative business consequences that can happen when you invest in one dominant set of voices and views. 

The data is incontrovertible – prioritizing diversity, equity, and inclusion (DEI) drives better business outcomes. 

DEI practices help you outperform.

Companies that prioritize diverse leadership are more profitable than their less diverse counterparts. In fact, according to a 2019 McKinsey report, the top companies outperformed the least diverse companies by 36 percent. But, despite this clear success, still, only a fraction of executive teams (13 percent) have minority representation. 

Racial and ethnic diversity in particular is directly related to financial performance. And companies making a consistent effort for inclusivity in hiring, promoting workers, managing teams, and leadership roles generate up to 30 percent higher revenue per employee, according to Deloitte’s DEI study.

This tells us that diversity, equity, and inclusion goes beyond the efforts of your DEI leader—its foundation is in who makes up theteamsthat comprise your business.

The best way to build a team with diverse ideas is to ensure that the team itself is representative of the world we live in. Including people with different life experiences and cultural backgrounds is a key component in bringing different perspectives to the table in a fundamental way. And a team that reflects the diversity of a company’s customer base is more effective in making key decisions, leading to better adaptability, creative solutions, and innovation for the company as a whole.  

DEI is not a passive investment

Building an inclusive and representative culture requires both upfront work and, most importantly, ongoingwork. And, while goal setting is often an effective way to drive positive change, we cannot measure success by hitting a one-time milestone, patting ourselves on the back, and then forgetting all about it. 

An active investment manager is constantly assessing and rebalancing their portfolio of stocks and bonds, reallocating resources to make sure the portfolio stays diversified and strong. If you want a diverse talent portfolio, you have to be continually assessing & managing your team. When managing a talent portfolio, you must be an activemanager.

Companies that prioritize DEI understand that it is part of the fundamental fabric of their business and overall strategy, similar to how today’s most successful companies understand that their talent strategy is no longer a back-office function but rathera key component of their company’s future relevance and success . And, just like any core strategy, it takes constant attention.  

Taking the first step

Building a comprehensive DEI strategy and plan can feel all-consuming, but taking small, deliberate steps in the right direction can lead to impactful and lasting change within your organization.

Start by trying to understand the state of the union at your company: what do your company’s demographics look like, and, even more importantly, how do people feelabout your company culture? The support of your c-suite is, of course, necessary for your DEI efforts to be effective; but it’s your employees on the ground who are truly experiencing your company culture and they need to be the most involved. You need to know how theyfeelworking at your company and ensure they are empowered to voice their concerns.

Consider sending out a survey to your employees to collect anonymous feedback and plan to have follow-up conversations with them based on survey data. Without trust, it’s impossible to have effective, open dialogue between managers and employees at all levels of your company. Just because you allow someone to speak out, it doesn’t mean they’ll feel comfortable doing so.  

Again, taking stock is not a one time, checked-the-box action item it is an ongoing “pulse” check. Each person that joins your team and each person that leaves it changes the dynamic of your work environment. Building an inclusive culture and a representative team is an ever-lasting, ongoing process. 

And remember – you cannot have representation without inclusion.

Diversity is not synonymous with inclusivity. This is a critical distinction that’s often lost or overlooked. If we don’t have an inclusive workplace – an environment where all people from all backgrounds and walks of life feel safe and supported – then we’re unlikely to have a successfullydiverse workforce. 

According to a recent Harvard Business Review’s January study, since many organizations still make decisions based on racial stereotypes, Black employees are frequently hired into less prestigious positions with little room for promotion, leaving them underrepresented in leadership positions and at a higher risk of losing their jobs. And according to HBR’s study, The study suggests that organizations that hold their leadership teams responsible for improving racial and gender representation in the workforce tend to produce better results than those that solely rely on diversity training programs. 

As business leaders, we need both to hire and advocate for leadership teams that reflect the makeup of our overall company’s population as well as actively work tocreate inclusive, supportive work cultures and environments that promote productivity and progress. 

Perfection is often the enemy of good. The fear of messing up can paralyze us from taking action. On top of this, the overwhelming nature of the problem at hand can make it feel like no action will ever be enough to drive positive change. But small actions do make a big difference. After all, we all can only do what’s in our control. We can’t be afraid to make mistakes, but we cancontrol how we handle them and we can ensure that we learn from them. 

Change won’t happen overnight, but it’s important to remember that representative teams make better teams. The driving force behind an effective DEI strategy is a constant and consistent push toward a better outcome for your employees—and, notably, also your bottom line.