You know you need a solid DEI strategy within your company, but how do you justify the cost of adding or cultivating one?

In this episode, Michelle discusses the crucial task of building a business case for Diversity, Equity, and Inclusion (DEI) in the workplace. Recognizing the challenges that many organizations face in justifying and proving the value of DEI initiatives, Michelle outlines a structured approach to demonstrate the tangible benefits. She shares important metrics and examples, explaining how even small changes in gender diversity can significantly boost revenue and the performance of companies on various financial fronts.

Michelle also discusses specific measures for diversity and equity, both internally and externally. She offers advice about how organizations can track progress, such as monitoring representation, hiring, promotions, and compensation. Additionally, Michelle presents a visual quadrant framework to help organizations plot the desired impact level of their DEI initiatives.

For more information or to connect with Michelle, visit: https://www.equity-at-work.com/

Key Topics Discussed:

• Five Key Benefits of Investing in DEI Work
• Metrics and KPIs for Measuring DEI Impact
• Equity at Work’s Quadrant Framework for Measuring Impact
• Diversity: Internal and External Measures
• Equity: Internal and External Measures
• Preparation for the Next Episode on Inclusion

I'm Michelle Bogan, founder and CEO of Equity at Work, and this is your DEI Minute, your go to podcast for leaders looking to navigate the ever evolving landscape of diversity, equity and inclusion in the workplace. Whether you're just starting out with DEI or looking to sustain your long term successes, each episode will provide you with actions you can take to move DEI forward at your organization, all in 15 minutes or less. Thank you for joining us for your DEI Minute. Today, we are gonna dive into how to build a business case for DEI. And this is quite a meaty topic. There's a there are a lot of different components to this, and I wanna make sure that I've got time to share some data and metrics with you as well as a couple different methodologies and examples. So we're gonna split this one into 2 episodes, starting first with some of the benefits, that have been really well researched related to investing in DEI work. Today, we are gonna talk about the very important topic of how to build your business case for DEI.

So many of us are struggling with our DEI work to prove out the value and to justify getting budgets and so forth. So I wanted to make sure that we spend a full episode just specifically focused on the benefits and how to build a benefits case. This will absolutely help you know what kind of goals to track, what metrics can align with those goals, and how to tell a story around that to talk about the impact that you're having. And, ideally, that will also help sustain momentum within your organization around this work and help you not only get some budget, but ideally get more and more budget to continue to fuel the work so that you can continue to expand your impact. So, to start, what I'd like to do is share a little bit of data on, some of the benefits that are a direct result of DEI work. There are a lot of different, research cases out there, from a variety of sources that have looked at, some very on very specific aspects of DEI, some much more broadly. So I'm just gonna share 5 things that we typically talk to clients about that are very relevant as far as a business case. There are a lot of other great sources out there that can give you more information, but I'm gonna start with these 5.

The first is that every 1% increase in gender diversity yields a 3% increase in revenue. And for anyone in charge of a p and l or for generating revenue in a business, that is a huge deal. I would, on any given day, take anything pretty much as long as it was ethical and generally aligned with the business that would drive a 3% increase in revenue. So that is the first one. That's based on some research done by the female quotient, which has a lot of really great, information and data on benefits of DEI if you're looking for more on that. The second one is the top 25% of racially diverse companies are 33% more likely to outperform on EBIT margin. So, again, that's money that goes right to your bottom line and something that anyone driving a business and, you know, focused on profitability should really pay attention to. That's from some McKinsey data, and McKinsey does do quite a bit of research in this space.

So, again, another great, resource for you to go to if you want more information. The third one is diverse companies are 1.7, times more likely to be innovation leaders, And I'm sure that's not a surprise to many of you who are very involved in DI work because a lot of what DI is is about is creating spaces and opportunities for people with different backgrounds, perspectives, experiences, cultures, etcetera, to share ideas and, and be able to brainstorm freely in a psychologically safe environment. So that naturally leads to some great innovation. And that is some research that Deloitte did in, collaboration with Berson. The 4th one is that diverse teams are 70% more likely to capture new markets. So to me, that goes very much in hand hand in hand with innovation, going after white space opportunities, and, you know, finding new places to grow their businesses. That comes out of research from the Harvard Business Review. And the final one that I'll share with you is that diverse and inclusive workplaces have 5.4 times higher employee retention.

So that is a direct impact to, your cost savings, which is amazing and, increasing that retention. And that was seen consistently across low turnover businesses and very high turnover businesses, which can include, the hourly workforce. And and bringing DI to your hourly workforce in distribution centers, in stores, in call centers, etcetera, is an amazing opportunity to do an investment that does not have to be very expensive, but has an incredible return in terms of retention. So taking the cost out of losing people and having to replace them and retrain them, and also driving engagement that feeds a lot of the other benefits that I talked about. And, that last piece of data came from Great Place to Work, who regularly does, you know, certification for great workplaces and a lot of research on what is it that drives great employee value and employee benefit, which then in turn, drives the same for companies. So that gives you a little bit of overall framing for some of the kinds of metrics that, and KPIs that are out there related to DEI, which I think can help you set a just a broad framework for, you know, what are what are some of the levers we wanna pull in our business or our organization that are gonna make a difference? The other thing that I want you to think about as you're considering what a business case might look like or what are some of the, you know, the measurable benefits and values that come out of this work is the degree of impact you're looking to have. So we have a visual that we use at Equity at Work that, is a a quadrant. And along the horizontal line, sort of that, you know, x axis going from is an impact measure.

So, and it's a people measure. So going on one side to individual impact, are you looking to impact 1 or very small maybe a targeted small number of individuals versus enterprise wide impact. So are you looking to impact your entire organization? And then on the y axis or the vertical axis, we're looking at, sales margin and cost impact. So on the high end of that, that's where you're getting a really big impact. That's financial. On the bottom part of the quadrant, there is where you're in sort of, you know, not so much driving worried about driving cost savings or revenue and profit improvement, but maybe there are other sort of, you know, nonfinancial benefits that you're looking for. So if you think of that quadrant, if you can kind of picture that that visual and think about the kinds of initiatives that fall under DEI, I'll give you a couple of examples and and where they would fall. So let's say you're interested in rolling out a leadership development program that's focused on high potential employees from historically underrepresented backgrounds.

That's gonna be closer to the individual impact. So, you know, you're impacting a handful of people, which will lead to a large benefit for the company. But, again, you're you're targeting, a select group of people that you wanna make sure are really well equipped to succeed. And that will generate sort of mid level sales margin and cost, impact. If those people get better leadership development skills, ideally, that helps them lead teams more effectively, maybe lead clients or service customers more effectively, and that typically will have a top and bottom line impact. If you think of something like, let's say you wanna go through a pay parity exercise and make sure that people are leveled appropriately and equally based on their skill sets, and they're also compensated appropriately. That's gonna be sort of on the other end of more of an enterprise wide impact because you're looking at the full organization, and odds are you're going to reduce turnover as a result of that because people know they're paid they're compensated and paid well for their jobs and equally to others. So that drives retention, and that also drives engagement, which leads to innovation and, sales and and improved margin.

So as you're thinking about different kinds of initiatives that fall within DI, try to as part of that work, try to figure out, okay, are we looking at a small group of people or the full organization or something in between? And then how important is the financial impact as part of that. And that can help you plot, again, against another kind of framework that just helps sort of set the stage for the benefits case. The third thing that I wanna walk you through is how DE and I as sort of these individual components, what kinds of things can you measure to indicate or just even get a sense if any of this work that you're doing is is translating to some kind of impact. So as a refresher, you know, diversity measures differences across demographics. So let's say you're in an organization that historically is predominantly white male as an example. The metrics you're gonna look at if you're investing in DI, in particular, if you're looking to bring new bring more diversity from a demographic perspective into your organization, you're gonna wanna look at your representation metrics as well as your hiring metrics. Those are the internal metrics you're gonna use. So you're gonna look at for representation, obviously, the full company from a race perspective, gender perspective.

You may also look at, you know, some other things that are more self reported around LGBTQ plus status, potentially disability, veteran status, age. There are a lot of different things you can include there. And you're looking at the mix of that, not just by total company, but also breaking down by within different hierarchies and lines of reporting within different functions, by level, by location, and doing comparison. So you wanna see where are their variances and where do we think we've got opportunity or where do we need to focus to really get to the kind of diversity we're really ideally looking for. And you can look at that in representation. Also look at that as you go through recruiting and hiring to understand, you know, are you are you touching on those right things to help your representation really change? Now with this benefits casework, a lot of people choose to just focus internally. However, there's an opportunity to focus externally as well. So from a diversity standpoint, the measures that we would look at from an external perspective are things like, are we aligned and supporting different organizations that serve the communities we wanna impact by extending our DI principles externally? Those may be industry organizations.

They may be city or county, chambers of commerce or other organizations that are government sponsored that are trying to, you know, uplift certain communities. And definitely, you know, within the nonprofit space, there are a lot of organizations that are looking to create more equitable, processes and opportunities for a lot of different people, and your involvement with those organizations can really be a great measure of how well you are extending your DI principles and divert a focus on diversity specifically out into the broader community. So that's diversity. When you go to equity, that's really looking at, you know, are there opportunities for all kinds of different people to thrive and succeed? Are we, accounting for, potential things in their past or, you know, accommodations they might need to be able to be competing on a level of playing field? So it's very much about fair access to opportunity and providing great supports in that way. So with that equity work, we look at, 3 key metrics from an internal standpoint that relate to equity or good indicators of how well our equity work is working. The first is professional development. So how many people and this is beyond just sort of what's, required at different levels, but, you know, how many people are participating. Again, if you've got certain groups you're trying to focus on providing more equity and opportunity to making sure that they have the opportunity to participate in professional development.

There also may be additional optional courses that you want you're trying to track participation in. So measuring investment and professional development hours, time, resources is an important one there. The other 2 that are tied pretty closely together are promotions and compensation. So with promotions, do you have people and, again, looking back at the diversity metrics, do you have people from different backgrounds, different cultures, different, dimensions of diversity, are they getting promoted at the same rate? Are they being promoted against, consistent criteria? Is there anywhere in your organization that is imbalanced from that standpoint, or are there places people get stuck and don't have an opportunity to advance? And if so, how can we work on that? Compensation, like I mentioned earlier with pay equity, is about fair pay for fair work. It's equal pay for equal work. It's also being leveled appropriately based on your skill set, your capabilities, and the value that you're demonstrating. So, again, looking at those, side by side, comparing different groups of people to make sure that there is consistency there is a great way to measure equity and and how well equity is working. That's all internal.

If you wanna extend that externally, this is where looking at your financial giving. So that could be, you know, through philanthropic giving. It can be through donations. It could be through sponsoring maybe an apprenticeship program or sponsoring a chair of a department at a university. There are a lot of different ways to look at that, but this really sort of your financial outreach, out in the community. And then the other piece very closely related to that is around supplier diversity. So are you investing in diverse suppliers, suppliers that are, you know, woman owned, minority owned, LGBTQ owned, veteran owned, disabled owned, etcetera, and making sure you're tracking that spend and having a strategy and some governance around that so you can really see how that investment is, ideally is improve is, increasing over time and, and you're continuing to make a really, significant impact there. So that's the equity piece.

So now that we've gone through diversity and equity from an internal and external perspective in terms of how you can measure, we're gonna go ahead and wrap up for this episode. And next time, we will pick back up and do the same for inclusion, And then I'm gonna take you through several examples that I hope will help really paint a picture for how you can best develop a business case for your organization. And that's a wrap. I'm Michelle Bogan, and that's your DEI minute for today. Thank you.