Diversity, equity, and inclusion (DEI) is now well-established among business leaders as key to recruiting and retaining workers in this competitive environment. And businesses are learning it’s important that DEI must be infused throughout all their priorities rather than being another bullet on the list if they’re to hang on to both employees and customers. “67% of job seekers consider workplace diversity an important factor when considering employment opportunities, and more than 50% of current employees want their workplace to do more to increase diversity.”
But to their benefit, progress in DEI generates positive results throughout the business. These improved business outcomes are even more incentive for companies to follow through on their values. With increasingly challenging operational environments and competitive global markets, companies performing well in this area lead in other areas as well:
- “Workplaces that prioritize DEI are statistically proven to be more productive, too. Research shows that a diverse company has 2.3 times higher cash flow per employee, and that inclusive teams improve performance by up to 30%.”
- “McKinsey’s research shows that gender-diverse companies are 15% more likely to outperform their peers and ethnically-diverse companies are 35% more likely to do the same.”
- [C]ompanies in the top quartile for gender diversity on executive teams were 25 percent more likely to have above-average profitability than companies in the fourth quartile.”
- “Companies with executive levels comprised of over 30% women are 48% more likely to outperform companies with less gender diversity.
- “Companies with greater-than-average diversity had 19% more innovation revenues.”
DEIB: The New DEI
Recently, DEI has been revised to DEIB, now including belonging, expanding the definition of key aspects that are needed for an employee to feel safe coming to work. “DEIB recognizes the continual need to measure the humanity of a workplace, and diversity, equity, and inclusion are integral to that.”
And despite the emphasis placed on figuring out whether hybrid or fully remote settings are more effective, inventing new and exciting ways to connect employees across locations to drive a positive culture, as McKinsey put it, companies are learning that “It’s not about the office, it’s about belonging.”
At the heart of it, belonging is about the “why” behind diversity, equity, and including, looking at each individual as a unique set of needs, wants, and ambitions. Deloitte describes the key contributors to belgonging as:
- Comfort: Individuals feel comfortable at work, including being treated fairly and respected by their colleagues and leaders.
- Connection: Individuals feel that they have meaningful relationships with coworkers and teams and are connected to the organization’s goals.
- Contribution: Individuals feel that they contribute to meaningful outcomes—understanding how their strengths help to achieve common goals.
“Diversity matters in business because an employee population that comes from a variety of backgrounds brings different perspectives to all aspects of business. This translates into more creative, innovative and often more effective solutions and products.” These factors are impacted by the level of authenticity and commitment employees sense in their employers’ DEIB efforts, within and beyond their walls.
From the Inside Out: Diverse Supplier Programs
When a company claims to value DEI, employees and customers alike are looking for its policies, hiring practices, and partnerships, for example, to be consistent with those claims. An often overlooked area is in the roster of third-party partners, just one way companies can be both accountable and transparent.
The impact of whether corporate values are found to be authentic or not are clear. Employees don’t want to work for these companies, and customers don’t want to purchase from them. “According to Hootology’s Corporate Diversity Index, consumers who perceive a brand as being committed to DEI are three times more likely to consider their products or services, compared to those who do not. Supplier diversity is therefore a key part of businesses’ evolving recruitment and sourcing strategies.”
Internal programs and initiatives help companies to advance their own DEI strategies, but holding vendors to the same standards expands their sphere of impact. “While some organizations already do some vetting on the supply chain side, it’s time for businesses to look at all their vendor relationships to ensure they’re not complicit in supporting injustice within another organization.”
But much as with internal efforts, it’s critical to success that companies operationalize any supplier diversity program. “A diverse supplier is a business that is at least 51% owned and operated by an individual or group that is part of a traditionally underrepresented or underserved group. Common classifications are small-business enterprises (SBEs), minority-owned enterprises (MBEs), and woman-owned enterprises (WBEs).”
Once the vision for such a program is established, setting clear goals and performance indicators is essential for monitoring and encouraging progress as well as transparency to provide employees and customers with visibility. Similar to the challenges faced in internal-facing DEI efforts, many leaders are still looking for ways to integrate these priorities into operations.
“CEO engagement with supplier diversity programs is at an all-time high, but only 38% of companies include supplier diversity metrics in management’s performance objectives.” In fact, despite being a top priority, companies are finding it challenging to get these programs off the ground. “Seventy percent of respondents globally said supplier diversity is a high or medium priority for their organization, yet many are still in their early stages of implementation. Sixty-three percent haven’t started, or are just getting started, with these initiatives.”
But even just defining and setting concrete goals has been found to make efforts toward supplier diversity twice as likely to succeed. A subsequent benefit of setting goals and tracking progress is access to data that enables transparency with employees and customers. In addition to incentivizing keeping vendors and vendor lists accountable toward these values, evidence of the commitment is baked right into the process.
“Accountability is going to become more and more important as people are starting to look for employers. They’re going to want to see those metrics and make sure that they’re joining an organization that’s really putting their money where their mouth is,” says Ted Kopta, VP of Marketing at ADP.
Far-Reaching Impact
Taking a DEIB-conscious approach to supplier and vendor procurement boosts the bottom line as well as brand identity. Just as internal DEIB initiatives have been found to positively impact innovation and productivity at the individual and workforce level, similar benefits result from diverse supplier programs. “Minority- and women-owned business enterprises have shown that they can have a positive impact on the economy. They offer their corporate partners year-over-year cost savings of 8.5%, considerably more than the 3% to 7% annual procurement savings that most organizations realize.”
The impact of these important efforts doesn’t end there, and this is motivating more and more industries to hold their partnerships under the same critical lens that they use internally. In particular, telecommunications, healthcare, and pharmaceutical companies have been found to source the most from diverse businesses, including developing infractures that allow them to do so.
Major corporations like Verizon make their own commitments to diverse suppliers available to the public, making candidates and potential customers alike aware of a new standard of corporate values: “We are committed to mentoring, promoting and engaging with diverse businesses in our supply chain, and believe that diverse businesses create the greatest economic impact in our communities, as well as offer innovative, high quality and cost effective solutions for Verizon to better serve our customers.”
And beyond the influence within the business community is the impact on the community at large. Corporations have the opportunity to create an all-new kind of legacy, leaving a meaningful mark on the broader economy and society. “Inclusive procurement also delivers broader societal benefits by generating economic opportunity for disadvantaged communities.”
In a conversation with the US Chamber of Commerce, Victoria Yeager, Head of Global Procurement Customer Excellence at Genentech said, “If we can support … one diverse supplier, they are going to be reinvesting in their community. That brings tax dollars [and] … jobs in. So one business decision that we can make can have … a positive impact that stretches way beyond just our business.”