The Business Case for Diversity is a Sinking Ship

“Diversity increases revenue, improves productivity, sparks creativity, and boosts innovation.”

In my line of work, the business case for diversity is practically a mantra. As Diversity & Inclusion has gained mainstream acceptance, so too has this “business case” emerged as the centerpiece of many modern organizations’ D&I efforts. It figures prominently in keynote talks, diversity panels, and internal presentations alike. And when corporate leaders talk about D&I, the business case for diversity is always one of their talking points.

This is, unfortunately, a big problem.

Under its flashy exterior, “business case” rhetoric has resulted in an epidemic of misinformed leaders and D&I strategies that don’t work. It has created organizations with good diversity optics, but plagued with a revolving door of diverse talent and stagnant progress on important D&I issues. The cause: well-meaning advocates and leaders fundamentally misunderstand and misuse the business case for diversity.

If we want to right the sinking ship that is the business case for diversity, we need to get over our infatuation with the buzzwords of the “business case” and actually understand the mechanisms of how diversity actually brings benefits to organizations. We need to resist the pull of performative D&I work, even when it makes good money, and remember that D&I work is rooted in justice, not profit. And finally, we need to learn how to use the “business case” tactically and sparingly, rather than as a miracle cure for every D&I-related context. Here’s how.

the “business case” doesn’t mean what you think it does

I spoke to an executive recently about his company’s work in the Diversity & Inclusion space and was curious to know how he was tackling many of the modern challenges in the industry. “We’re making sure to focus on the business case for diversity,” he said with a smile on his face. “Companies that hire more minorities outperform companies that don’t.”

“If [hire women and minorities] then [business success]” is one of the biggest and most costly misconceptions that leaders have about the business case for diversity.

Decades of research on the impact of diversity (of demographics, experiences, communication styles, etc.) on organizations generally suggests that organizations with more diversity outperform less-diverse organizations on the basis of profit, employee engagement, productivity, and creativity. But taking a deeper look reveals other, more complex conclusions from this body of work:

This isn’t to say that there is no business case for diversity, but that the mechanisms by which diversity creates value are far more complicated than what most people understand. Obtaining any lasting benefit from diversity requires not just the presence of a diverse workforce but also effective leadership that can manage conflict, create cultures of inclusiveness characterized by psychological safety and growth mindsets, and make organizational change where needed to support a diverse workforce. In other words, the business case for diversity only appears after hard work to transform its many costs into benefits, hard work that few companies are actually willing to do.

good optics makes for bad D&I strategy

The vast majority of companies pay lip service to D&I through high-profile hires and marketing, while investing little in the internal leadership buy-in, culture change, policy infrastructure, or content development needed to support a diverse workforce.

Such a “strategy” has disastrous implications.

Women and URM employees drawn to a company by its diversity optics are blindsided by how different the reality inside the company is from the polished exterior they’ve been marketed. It’s a classic bait-and-switch. No policies or practices for pregnant employeesRacist language in the office and managers who ignore it. Leadership — from middle management to the C-Suite — that is overwhelming white, cisgender, heterosexual, men. In these sorts of environments, women and URMs are unlikely to be productive, innovative, or creative. If anything, they quickly become resentful, distrustful, and burned out. They quit as soon as they can, and the cycle of diverse hires entering and leaving organizations — the revolving door, as it’s known — continues.

Why do organizations keep pursuing optics-centered D&I strategies if they fail so often? Because they’re well-rewarded for it. Hiring a high-profile Chief Diversity Officer grants a company a huge degree of social capital and public applause — even if the person hired in that role is set up to fail. Making a well-publicized philanthropic donation is great for strengthening a brand — even if those donations do little good or even harm by the communities they purport to help. And hiring women and URMs is a surefire way to convince the world that a company is reputable, socially-conscious, and forward-thinking — even if the employees they brag about all leave within six months.

our modern understanding of the “business case” twists justice.

Somehow, in the 55 years since The Civil Rights Act of 1964, we’ve come from “Discrimination based on race, color, religion, sex, or national origin is outlawed” to “Diversity = $$$.” This framing shift from protecting communities to benefiting corporations has consequences: today’s D&I work centers not outcomes relevant to marginalized communities (health, access to opportunities, wealth, education) but instead outcomes that are relevant to corporations (revenue, innovation, community relations). As a result, corporations have made billions from without substantially raising up the communities they benefit from.

Making matters worse, advocates for workplace diversity continue to celebrate cosmetic wins in the Diversity & Inclusion space and further incentivize corporations to do more of the same. Plenty of value is generated — just not for the communities who need it. No wonder why people are trusting corporations less and less! We advocates can’t let ourselves enable these trends.

can we fix the business case?

The earliest forms of D&I work relied on the enforcement of nondiscrimination law; private corporations were accountable to the government. Marginalized communities were seen as liabilities to companies that more often than not took their chances with discrimination rather than invest in supporting women and URMs.

Today’s forms of D&I work increasingly rely on making a profit; private corporations are accountable to their shareholders. Marginalized communities are seen as valuable because they represent untapped markets, and companies are increasingly courting these communities in an effort to grow their bottom line. The problem here is that “how can we get money from these people?” results in very different answers compared to, “what do these communities need to thrive?”

The business case for diversity in its current form is deeply broken. And yet, it’s succeeded in elevating diversity discourse into the public domain and given leaders at the highest levels an “in” to talking about race, gender, sexuality, and religion where formerly such topics were unbroachable. But it hasn’t resulted in any substantial challenge to the growing inequity, injustice, and crisis that now defines our world. How do we maintain the progress that the business case for diversity has made in the corporate world without perpetuating more harm? How might we fix the “business case?”

  1. Draw on community to define success. When an initiative pledges to benefit a certain community or communities, members from these communit(ies) should have a guiding hand in determining what it means to succeed. This applies not only to D&I products like events or regional strategies, but also to core services provided by the company.
  2. Tie social capital to outcomes, not intentions. Stop applauding commitments to diversity and start applauding measurable increases in the quality of life of women and URM employees. Rather than relying on a logo change or marketing campaign to signal inclusiveness, rely on communities that trust a company’s presence to speak well about it.
  3. Use different tactics to convince. If profit is the lever that pushes leaders into D&I work, that company’s D&I strategy is likely to be skewed from the start. Use other tactics (linking D&I to company culture, drawing on shared empathy, making personal appeals, storytelling, etc.) so that leaders who buy in do so on a deeper level. Profit can be a sweetener after there’s interest, but it should never be the main appeal of D&I work.
  4. Bring in factors other than profit. Good D&I strategies don’t just generate more revenue, but also result in better reputation, higher community trust, and increased sustainability and longevity. Valuing these alternative metrics means that occasionally, the right decision will be the one that makes a company less money (gasp!).
  5. Rely on the business case to defend your work. The business case is a powerful fallback when you encounter resistance. Know the numbers so that when others push back (typically with “business case”-style concerns about revenue or productivity) you can address their concerns using their own language. The business case makes a powerful tactic in any advocate’s toolbox, but it can’t stand alone.

Organizations that don’t acknowledge the shortcomings of the business case for diversity risk bleeding the trust of consumers in a world that is more impatient than ever for real change, not empty talk. The days where cosmetic changes to “business as usual” pass as acceptable D&I work are ending. It’s time we start looking at solutions beyond the business case.

Originally posted here via Medium
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Michael Berhane, Founder of POCIT
Lily Zheng
Lily Zheng

"Lily Zheng is a diversity, equity & inclusion consultant and executive coach who works with organizations around the world to create high-impact and sustainable change. A dedicated changemaker, speaker, and advocate, she writes frequently for publications including the Harvard Business Review, New York Times, and HR Executive, and is the coauthor of two books."

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