Diversity and Inclusion in the Workforce

Increased focus on diversity has been driven by the growing body of evidence of the strong positive relationships between diversity and business performance and worker satisfaction and changes in the social, cultural and political environment that have heightened sensitivity among employees and other stakeholders to workplace diversity and inclusion.  Companies have incorporated diversity and inclusion initiatives into their efforts to fulfill the expectations of various voluntary standards and instruments relating to corporate sustainability and social responsibility.  For example, diversity and inclusion are core principles of several of the UN Sustainable Development Goals including gender equality, decent work and economic growth and reduced inequalities, and Goal 10 (reduced inequalities) explicitly calls for efforts to empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status, ensure equal opportunity and reduce inequalities of outcome by eliminating discriminatory laws, policies and practices.  Companies’ commitments to racial equality and social justice should include democratizing recruitment processes, being transparent in disclosing strategies and results relating to diversity and inclusion initiatives, expanding diversity in the recruitment pool and having a diverse workforce that mirrors the customer base.

The following is an excerpt from the chapter on Racial Equality and Non-Discrimination just released on the website of the Sustainable Entrepreneurship Project.

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Two important trends have been driving increased focus on diversity, defined by the U.S. Department of Labor as “the infinite range of individuals’ unique attributes and experiences such as ethnicity, gender, age and disability,” and diversity and inclusion now has a far-reaching impact on businesses that spans brand, purpose and performance.  The first trend has been the growing body of evidence of the strong positive relationships between diversity and business performance and worker satisfaction.  Diversity enables companies to tap into the knowledge and experience available in different cultures and belief systems.  A McKinsey analysis of racial and gender diversity at firms in 15 countries from 2014 to 2020 found that the top quartile of firms measured on employee diversity outperformed the bottom quartile on metrics such as operating profit margins.  The McKinsey researchers noted that the returns on diversity were stronger on race than on gender and appeared to be increasing over time.  In addition, many studies have provided support for the idea that diverse teams are better at innovation, at least when team leaders are able to successfully build a capability for creative abrasion.[1] 

The second trend, no less important than the first, has been a change in the social, cultural and political environment that has heightened sensitivity among employees and other stakeholders to workplace diversity and inclusion.  Diversity and inclusion, which require addressing and eliminating long-standing practices of discrimination in activities relating to the employment relationship, are now treated as issues of fairness, social justice and human rights.[2]  For example, the International Labour Organization (“ILO”) has declared that freedom from discrimination in employment is a fundamental human right and that it is essential for workers to be able to choose their employment freely, develop their potential to the full and reap economic rewards on the basis of merit.  There are numerous international labor standards addressing discrimination in relation to access to education and vocational training, access to employment and to particular occupations and the terms and conditions of employment.  For example, the 1998 ILO Declaration on Fundamental Principles and Rights at Work  calls on all member States to promote and realize within their territories the right to be free from discriminatory employment practices and references rights and obligations created in earlier fundamental conventions such as the Discrimination (in Employment and Occupation) Convention, 1958 (No. 111) (promoting the principle of equal pay for work of equal value)  and the Equal Remuneration Convention, 1951 (No. 100) (promoting equality of opportunity and treatment in employment and occupation).[3]

Companies have incorporated diversity and inclusion initiatives into their efforts to fulfill the expectations of various voluntary standards and instruments relating to corporate sustainability and social responsibility.  Diversity and inclusion are core principles of several of the UN Sustainable Development Goals including gender equality, decent work and economic growth and reduced inequalities, and Goal 10 (reduced inequalities) explicitly calls for efforts to empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status, ensure equal opportunity and reduce inequalities of outcome by eliminating discriminatory laws, policies and practices.  The OECD Guidelines for Multinational Enterprises include provisions addressing a wide range of employment-related practices including prohibitions on discrimination, occupational health and safety, fair standards of employment and industrial relations and training to improve skill levels.  Section 6.3.10 of the ISO 26000 Social Responsibility Guidance Standard is concerned with organizational commitment to the ILO’s “fundamental principles and rights at work” discussed above.[4]  Companies committing to the UN Global Compact bind themselves to the elimination of discrimination in respect of employment and occupation.

Companies should act immediately to take stock of where they stand in terms of diversity among the members of the workforce.  In order to determine where to prioritize the steps necessary to improve fairness and equality throughout the organization, companies need to collect data relating to recruiting, promotions, salaries and other issues that can be used to identify situations in which the company’s practices may be biased.  Surprisingly, many companies do not track the necessary data, which means that their leaders may not understand that problems exist with respect to workplace diversity or gender and racial gaps in pay.  This is not a simple process at the very beginning because it will require going back in time to assess a large number of employment-related decisions including decisions made by persons who are no longer with the company.  As the data is collected steps should be taken to create a permanent system so that performance can easily be tracked and measured in the future. 

At the same time the information described above is being collected the company should analyze the skill sets of the current group of employees and the skills and experience that the company would ideally like to have throughout its workforce.  This is important because the drive toward greater diversity must be aligned with the business needs of the company.  Companies cannot sustain their drive toward diversity unless they either focus their recruiting efforts on underrepresented groups that have the skills and experience that the company requires or commit to providing people of color (and everyone else in the company) with the training and other support necessary for them to be successful in their professional development with the company.  The company should also work to have a better understanding of the relationship between its customer base and the diversity of its workforce.  It is important to have a diverse workforce that mirrors the customer base, which means ensuring that core business units such as product development, marketing, sales and customer service include employees who can raise concerns about discriminatory, exclusionary or insensitive actions in their areas and in the company’s training and external messaging (e.g., advertisements that are racist or culturally inappropriate).  In addition, increasing diversity in the workforce allows the company to credibly pursue new business opportunities that advance racial equity by recognizing and serving the specific needs of markets of color and avoid products or services that are discriminatory or exclusionary towards gender of race.

Achieving and maintaining diversity and inclusion in the organization is a challenging project and requires a plan that can be used to guide the company through the necessary steps and establish milestones that can be referred to in order to assess whether the measures taken have had the desired and expected impact.  A diversity and inclusion plan should begin with a statement of the company’s mission, namely growing a diverse workforce in an inclusive work environment, and an affirmation of the company’s commitment to the fundamental values of diversity, equality and inclusion.  The plan should then set out specific strategic goals with respect to diversity and inclusion, such as assembling a workforce that reflects all segments of society, establishing an inclusive and engaged organizational culture, promoting diversity in the company’s supply chain and participating as a contributor and advocate in community-based efforts to promote social justice, equality and economic wellbeing.  Each goal should have several specific objectives (e.g., with respect to achieving diversity in the workforce, one of the objectives should be eliminating institutional barriers to equal employment opportunities) and strategies for achieving each objective.  Finally, the plan should incorporate metrics that can be referenced to track performance for each of the objectives and the company’s overall progress toward achieving its goals relating to diversity and inclusion.  In order for the plan to be relevant and effective it needs to be based on solid information collected and analyzed in advance relating to the company’s current diversity and inclusion profile and the specific concerns of the company’s employees, customers and other stakeholders.  The company should prioritize its goals and objectives giving greater weight to initiatives that address the most immediate problems and/or are likely to have the strongest immediate positive impact on improving diversity and inclusion.

An article in The Economist included suggestions from consultants on how best to create an effective diversity strategy for African Americans in the workplace.  They noted that while investing in skills development programs to improve the competitiveness of employees of color was useful, companies should not rely on traditional arguments of meritocracies to resolve racial inequalities inside organizations, suggesting that forces of systemic racism were too strong inside most companies.  They argued that the better answer to the problems was to explicitly focus on race in diversity and inclusion efforts, taking care not to dilute the plans by lumping race in with gender and other issues.  The consultants recommended creating a diversity strategy specifically for black employees that included clear and consistent standards, goals and targets for promotion and attraction.  Responsibility and accountability for the strategy should be placed in the hands of the CEO, not offloaded to outside consultants or a chief diversity officer, and if goals and targets are missed there need to be explanations.  For example, if promising African American managers are leaving the company, an assessment needs to be made as to whether they were provided with sufficient mentoring and clear and fair feedback on how they could further their professional development.[5]

The diversity and inclusion plan is obviously an important internal roadmap for the company; however, the company should also commit to transparency in disclosing its diversity and inclusion strategies and results to stakeholders as part of the company’s overall reporting on social responsibility issues.  News reports indicate that only 40% of larger companies are transparent about the gender and racial makeup of their employees and CEOs often balk at setting and announcing measurable targets relating to diversity in their workforces.  Given the pressures for change, this lack of clarity cannot continue and companies must be prepared to provide data relating to recruiting, promotion, wages and other issues as to which bias is likely to arise and commit to measurement and reporting on meaningful indicators of diversity and inclusion.  Reporting must be continuous and regular so that stakeholders can measure and assess progress or backsliding and should include commentary that goes “beyond the numbers” so that stakeholders have a better understanding of the actions that the company has taken and the reasons for their success or failure.  The National Credit Union Administration argued that transparency regarding an organization’s diversity and inclusion initiatives including commitments and plans and related metrics for measuring performance sends an important signal to a broad constituency of current and potential employees, customers, suppliers and the communities in which the organization operates.[6]  Companies needs to be bold and fearless about their reporting in this area and accept that mistakes may be made and that stakeholders will likely be forgiving within reasons as long as companies move quickly to address problems and grievances.[7] 

Companies can do a number of things to expand diversity in the recruitment pool including focusing on local communities, dramatically expanding the size of internship programs and committing to setting aside a significant portion of the slots to young people of color and providing them with mentors and support and a clear path to full-time employment in jobs that come with real development and progression opportunities and increasing recruiting at historically black colleges and universities.  Internship and similar programs can be particularly important and impactful if they are credibly broadened to promote diversity and provide opportunities for people who do not meet the traditional educational requirements; however, care should be taken to ensure that such programs are not used as a means for avoiding fair compensation and benefits.  A number of new programs were announced in the wake of the outcry following the death of George Floyd including Visa’s commitment to create a $10 million fund for college-bound students and guarantee jobs to those students who satisfied certain requirements.

Other important recommendations to companies seek to democratize the recruitment process by eliminating questions on employment applications and testing that disproportionately exclude people of color (e.g., “felony convictions” and testing for use of marijuana and other drugs not required by law or the nature of the job), eliminating college degree requirements for jobs that do not actually require higher education and developing hiring, mentoring and training programs for young people of color without high school degrees and thus at higher risk for unemployment.  The initial goal of these changes is to bring more people of color into the workplace; however, the jobs in question are typically entry level and thus not necessarily optimal from a long-term perspective and it is therefore important to be sure that these jobs come with a living wage and are accompanied by eligibility for other skills development and educational programs sponsored by the company.  For example, companies should commit to support all of their employees who do not have a high school diploma in their efforts to complete their coursework and then provide them with counseling and financial assistance relating to additional education.

Recruiting and retaining people of color should be part of a broader initiative to increase diversity throughout the organization.  The chances for success in a diverse world are enhanced when a company is able to call on the experiences and viewpoints of different races, religious backgrounds, genders, nationalities and physical abilities.  A diverse workforce is a fertile ground for innovation and new ideas and can lead to the company being recognized in the marketplace and communities as a credible champion of diversity and economic equality.  Achieving diversity will require attention to several types of strategies and tactics.  For example, companies will usually need to expand the geographic scope of their recruiting activities in order to reach groups that may be underrepresented in the current workforce.  Changing and maintaining the organizational culture of the company is also essential so that workers from “different” backgrounds feel welcome and accepted once they join the company.  This will require that companies provide diversity training and opportunities for workers from different backgrounds to work together.  In particular, companies need to focus on retention to ensure that their diversity initiatives do not stagnate, which means taking special care to regularly engage with women, people of color, workers with disabilities and older workers to identify and understand potential problems before people decide to leave the company.  Also important is seeking and achieving diversity among the holders of senior positions in the company, which not only expands the lens used for strategic decisions but also provides workers at lower levels with role models within the company and a sense that the company is open to supporting their professional development goals through promotions.

[1] The great awakening?, The Economist (June 13, 2020), 49.

[2] J. Bourke, S. Garr, A. van Berkel and J. Wong, “Diversity and inclusion: The reality gap”, Deloitte Insights (February 28, 2017), https://www2.deloitte.com/us/en/insights/focus/human-capital-trends/2017/diversity-and-inclusion-at-the-workplace.html

[3] International Labour Standards on Equality of opportunity and treatment,

[4] Section 6.4.2.1 of ISO 26000 references various sources of fundamental principles relating to labor practices and social responsibility including the ILO’s 1944 Declaration of Philadelphia, the Universal Declaration of Human Rights and the International Covenant on Economic, Social and Cultural Rights.

[5] The great awakening?, The Economist (June 13, 2020), 49.

[6] National Credit Union Association Voluntary Credit Union Self-Assessment Checklist on Best Practices for Demonstrating a Commitment to Diversity & Inclusion, OMB No. 313340193 (Expired 3/31/2019).

[7] Emerging sustainability reporting frameworks, such as the Global Reporting Initiative, include various metrics that relate to aspects of diversity, equality and inclusion such as the implementation of policies and programs promoting equal opportunities; the ratio of basic salary and remuneration of women to men by employee category, by significant locations of operation; significant indirect economic impacts, including the extent of impacts; and the ratio of basic salary and remuneration of women to men by employee category, by significant locations of operation.