DEI Initiatives: Are We Walking the Talk?

The social unrest of 2020 and 2021 brought greater focus to issues of diversity, equity and inclusion (DE&I) in the workforce.  Many companies issued public statements affirming their commitment to the creation of a diverse work environment.  Yet recent research indicates that efforts to translate that commitment into action have frequently stalled.

Why it Matters

Research periodically conducted by McKinsey & Company, Staffing Industry Analysts and many others consistently reinforces the correlation between diversity and business performance.  McKinsey’s 2023 study showed that companies with gender or ethnic diversity in their executive team financially outperformed other companies by 39%.

Evidence also highlights the imperative of inclusivity across all employment categories. When considering the impact of DEI when attracting candidates, Randstad’s 2023 Workmonitor study showed that 77% of those surveyed reported that an employer’s values and purpose regarding diversity, and transparency are essential, with 54% indicating they would quit a job if they didn’t feel like they belonged.

An important consideration is the changing demographics of the nation.  Today, the minority is becoming the majority.  In 2019, for the first time most new hires of prime age workers (ages 25-54) were people of color. Within the next two decades this will be true across all age groups.  The Department of Labor Bureau of Labor Statistics projects that, while the overall growth rate of the U.S. labor force is slowing, women will continue to grow faster than men. The labor force will also continue to age, with the average annual growth rate of the 55-years-and-older group projected to be 1.8 percent, more than 3 times the rate of growth of the overall labor force. Prime-age workers—those between the ages of 25 and 54—are projected to have a growth rate of 0.4 percent and are expected to make up nearly 64 percent of the labor force in 2024.  Hispanics, Asians, and the “all other groups” racial category are projected to increase their numbers in the labor force most rapidly. By the end of 2024, Hispanics are projected to be nearly one-fifth of the labor force.

A Reality Check

So why do we not see more progress? There are 3 key reasons:

1. It is difficult to build the business case. 

A solid business case requires accurate data.  However, privacy and co-employment concerns exist regarding the collection and storage of contingent worker data. A study by Pew Research concluded that 79% of companies focus on spend through diversity suppliers (79%), yet a significantly smaller percentage focused on data to measure diversity among candidates.  

The Pew Research study also indicated that many (54%) do not see this as a business priority and/or feel that their company is doing enough today.  Nearly two thirds of respondents (61%) believe their company or organization has policies that ensure fairness in hiring, pay or promotions, and 52% say they have trainings or meetings on DEI at work. One-third indicated that their organization has a dedicated DEI advocate, that their workplace offers salary transparency (30%), and that it has affinity groups or employee resource groups based on a shared identity (26%).

When asked whether diversity played a part in their employment decisions, only 30% indicated the importance of working with a mix of employees of different races and ethnicities, 28% cited the importance of age diversity, and 26% saw the benefit of a workplace with about an equal mix of men and women.

2. Recent government actions have increased concerns regarding risk of non-compliance.

Long‐standing federal laws prohibit gender discrimination in pay as well as discrimination against prospective and current employees in the workplace when hiring, firing, compensating, promoting, training, or specifying conditions of employment based on race, sex, color, religion, and national origin.  However, these laws place a significant burden on plaintiffs to show that they have been discriminated against.  Many US states have recently added additional protections for workers, requiring pay transparency and salary history bans.  In addition to laws requiring pay data reporting and transparency, Illinois has passed legislation requiring staffing firms to provide temporary workers with equal pay and benefits with workers employed directly by the client.  

However, following the US Supreme Court’s ban on using affirmative action policies in college admissions there is a movement to extend this ban to the private sector, with proponents arguing that complying with diversity, equity, and inclusion mandates may violate federal law.  More than 30 states have introduced or passed more than 100 bills to either restrict or regulate diversity, equity and inclusion initiatives in the current legislative session, with conservative media outlets, politicians, lawyers and social media influencers are now countering DEI efforts in several industries and higher education institutions.

3. Program ownership is often unclear.

Unclear ownership across departments hinders effective goal setting and progress reporting so DE&I initiatives often struggle to gain the necessary momentum and align goals, the study found. The advocacy for DE&I does not rest solely on the shoulders of those holding the title of chief diversity officer. SIA research has consistently shown that individuals from various roles and levels can contribute significantly to the advancement of DE&I. Small actions, such as measuring diversity rather than merely focusing on diversity spend, can lay the foundation for substantial change.

The Backstory

At a time when the world economy is impacted by a global skills shortage, issues of DEI are tied to virtually all current employment trends.  Failing to address impediments to the creation of a diverse workforce directly translates into limited access to talent sources that can make the difference between business success and failure.

• Hybrid work environments – According to the World Economic Forum, a hybrid working model is critical to attracting a diverse workforce, especially for working parents, people with varying health needs, and those impacted by the rising cost of living near their office. Data from McKinsey & Company concludes that black employees are 14% more likely than their White peers to search for alternative work if a hybrid environment is not available, LGBTQ+ employees were 24% more likely to leave than heterosexual ones, and employees with disabilities were 14% more likely to leave than employees without disabilities. Younger employees are 59% more likely to leave than those over 55 years.  Noisy, open-plan offices can be overwhelming for some neurodivergent people. Working from home offers neurodivergent people a less stimulating environment, enabling them to work more productively and comfortably.
• Innovative technologies with AI features -DE&I technology providers are incorporating AI into their products to mitigate bias throughout the recruitment process and improve inclusivity while improving speed to hire and candidate quality. However, this is a two-edged sword.  Widespread concerns over algorithmic bias embedded in AI solutions have led to new Federal, State and local legislation requiring employers to conduct bias audits of AI-enabled tools used in employment decisions and to disclose the use of an AI tool to analyze video interviews of applicants for positions based in Illinois.
• Skills-based Hiring – As we source workers from an ever-shrinking talent pool, many employers have started to focus on skills-based hiring rather than one that is overly focused on degree certification. A skills-based approach to hiring can positively impact diversity, equity, and inclusion efforts by providing access to a more diverse pool of candidates. According to the Census Bureau, 62% of the American workforce lacks college degrees. LinkedIn data shows that skills-first hiring would have a 27% greater impact on women than men, meaning that more women would be seen as prospective candidates for a role when assessed based on relevant skills. In 2023 LinkedIn reported a 21% increase in job postings advertising skills and responsibilities instead of qualifications. In a recent study conducted by the Society for Human Resources Management (SHRM), 1 in 4 organizations that use pre-employment tests plan to expand their use of them in the next five years. And of those who don’t use them, 1 in 10 plan to start.

The Path Forward

The evidence demonstrating the business benefits of a diverse workforce is compelling.  Whether motivated by ethical considerations, talent access, encouraging workforce engagement, reducing turnover or achieving better business outcomes, DEI must remain a business imperative.  While the path forward may seem complex, at nextSource we have learned through experience working with dozens of clients that the following steps are imperative:

1. Apply the same rigor as is applied to any strategic initiative and include your total workforce (permanent and contingent workers).  Set goals, plans, and clear roles and responsibilities.  Collect data and examine change over time. Also benchmark results against other organizations. Metrics should extend beyond spend with diversity suppliers to capture indicators of progress towards a diverse workforce. Analyses should be conducted along dimensions of gender, race, age, ethnicity, sexual preference, and more and correlations must be made to business performance. 
2. Identify alternate sources of talent, reaching out to professional organizations and other groups with highly diverse populations. Give priority to suppliers who have programs in place to source and – if needed – upskill diverse candidates.  When generating job descriptions, determine whether a college degree is needed.  Place greater emphasis on skills and experience.
3. Consider the organization’s culture and structure when deciding how to increase diversity, equity, and inclusion. This requires engagement of managers and other leaders from the start. Verify through their involvement that the program fits into the way managers already work rather than adding to heavy and complex workloads. 
4. Promote your commitment to DEI through greater visibility into the program.  Ensure that underrepresented individuals are given meaningful, high-visibility responsibilities. 
5. Test new technologies for disparate impacts on workers before fully implemented and continuously audit their procedures after implementation to ensure that biases are not creeping in.
6. Ensure continuous and accurate feedback by deploying an alternative complaint process. Studies estimate that nearly half of all discrimination and harassment complaints lead to some type of retaliation and workers who complain about harassment are more likely to end up facing career challenges or experiencing worse mental and physical health compared to similar workers who were harassed but did not complain about it.