Diversity, Equity and Inclusion comes in many shapes and sizes (or rather, dimensions). There’s eight (or more) diversity dimensions alone, depending on where you look: age, race, gender, sexual orientation, cultural background, education level, and disability, cover most of which is commonly recognized. Diversity, to put it simply, is an acknowledgment of difference. However, diversity as a consideration on its own, as important it may be, is much less powerful. Therefore, it’s often coupled with inclusion.
As an overview, inclusion values and leverages differences (or, in other words, diversities). With inclusion, people are accepted, respected, and engaged in the organization. A famous (and simple) way of understanding the intersection of these two terms is: diversity is being invited to the party, and inclusion is being asked to dance.
And of course, there’s also equity. Equity acknowledges difference circumstances and caters the resources to the individual to “level the playing field”. (This is not to be confused with equality, which treats everyone the same way, regardless of their differences and circumstances, consequently giving individuals a “leg up” at times.) In summary, equity considers peoples backgrounds, equality does not. Therefore, what seems similar, is not—and it’s important to be mindful of the difference. Some more points about the similarities and differences of diversity, equity and inclusion are also described by my colleague Isabel in this article.
So, enough with the background information Sarah — let’s cut to the chase.
You may be wondering: why does this matter? What’s in it for me? Well, the proof is in the pudding, you could say– research shows that companies that rock DEI, perform better. This is backed the famous McKinsey study, “Why Diversity Matters” which uncovered two very important findings:
- “Companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians.”
- “Companies in the top quartile for gender diversity are 15 percent more likely to have financial returns above their respective national industry medians (exhibit).” 
Wow! And to think, there’s only 2 diversity dimensions being explored in this study! Can you imagine the impact of a truly diverse, inclusive, and equitable organization?!
Nevertheless, it’s important to recognize DEI goes beyond just financial returns; diversity, equity and inclusion breeds innovation, which is one of the most important elements of a sustainable organization. Why, you ask? Let’s dive into the details of why this may be:
DEI attracts (and retains) top talent
It doesn’t take Einstein to calculate this equation: if you widen your talent pool, you will find more talent. And, as we know, talent comes in many different dimensions. But, as we also know, the challenge goes beyond simply finding talent (which is no easy feat on its own). Not only do you have to attract the talent, and but you must retain them.
This is where inclusion plays a huge role in managing employee attrition. It’s not new news that high employee attrition can be costly (both literally on a financial model and less quantitatively on company culture and morale). In fact, $64 billion is the annual estimated cost of losing and replacing more than two million American workers who leave their jobs each year due to unfairness and discrimination. (source: Center of American Progress).
More diversity, more customer empathy
Does your business provide a service? Or perhaps a product? Chances are likely there will be a human somewhere behind your value proposition. As we know– humans are complicated, emotional beings. It’s no secret empathy is a superpower in many disciplines, and a vital ingredient to an innovation. Moreover, the more diverse a team is, the wider the demographic they will be able to empathize for is. In fact, when at least one member of a team has traits in common with the end user, the entire team better understands that user. A team with a member who shares a client’s ethnicity is 152% likelier than another team to understand that client. (source: Harvard Business Review)
Therefore, diversity could enlarge your market size and/or improve an existing product or service offering. Ultimately, this could also help to manage your risk in bringing something new to market. The fact that we need diverse teams so that we can develop products for our diverse society is described by my colleague Isabel in her article on DEI.
Unconscious bias is everywhere — it’s human nature! As the brain is programmed to make quick judgments, unconscious biases can create unfavorable outcomes– especially for innovation.
Sure, this is something we can be trained to look out for and manage. However, it’s even easier to fall victim to unconscious bias if your team consists of people who are just like you, confirming and affirming your thoughts and ideas. In the words of Katherine Phillips, Columbia Business School professor, in her research for Scientific American, “Diversity jolts us into cognitive action in ways that homogeneity simply does not”.
It’s easy to overlook the importance of diversity, equity and inclusion as it’s not exactly a cookie cutter, one-size fits all solution. Creating strategies or making improvements can even seem daunting at times, as it requires dedication and buy-in from many areas of the business. Perhaps this is why few companies actually get it right.
However, smart leaders know the benefits of strong DEI strategy much outweigh the costs (if you want to drive a culture of innovation, that is). According to a study by BCG including over 1700 companies of various sizes and locations, “Companies with above-average diversity produced a greater proportion of revenue from innovation (45% of total) than from companies with below average diversity (26%).” 
So, there you have it—if you really want to unlock innovation and get ahead of your competition, perhaps prioritizing your DEI strategy has more value than you thought.