DEI initiatives are important because they address underlying needs for equity in the workplace. This is generally what comes to mind when arguing for DEI plans in the workplace. A few statistics reveal that the American workplace overall has multiple issues to be addressed.
- A Glassdoor survey released in 2019 found that three in five US employees have experienced or witnessed discrimination based on age, race, gender or LGBTQ identity at work.
- 50% of women employed in STEM settings have been discriminated against at work because of their gender.
- In 2020, only 4 CEOs on the Fortune 500 list are black
- 33% of Native Americans have experienced inequities in wages and promotions.
- Michigan is the only state to make weight discrimination illegal.
DEI PROGRAMS ARE AN INSURANCE MEASURE
When you have such disparities, you have lawsuits as a result. For instance, Tesla made headlines in a negative way when a black employee sued for racial discrimination and was awarded $137 million dollars. Here is a quote concerning this from NPR.
A federal jury in San Francisco has ordered Tesla to pay a former Black contractor $137 million over claims that he was subjected to racial discrimination at work.
Owen Diaz, who worked as a contract elevator operator at Tesla's factory in Fremont, Calif., from 2015 to 2016, said in his lawsuit that he and others were called the N-word by Tesla employees, that he was told to "go back to Africa" and that employees drew racist and derogatory pictures that were left around the factory.
The suit said Diaz was excited to go to work for Tesla, but that instead of a "modern workplace," he found a "scene straight from the Jim Crow era."
As surprising as it may be to learn that such an incident happened in a “majority minority” employee population, it is an example of several lawsuits that the Equal Employment Opportunity Commission (EEOC) handles on a regular basis. Here are a few recent incidents that have been reported on by the EEOC.
The EEOC's lawsuit charged that Chicago Meat Authority discriminated against Black applicants in hiring, subjected African American employees who were in the workforce to racial harassment, and fired a Black employee because of his race and in retaliation for complaining about racial harassment.
The EEOC’s investigation revealed that the company favored hiring Hispanic employees over African American employees, even though the company is located in a largely Black neighborhood on Chicago’s South Side. The investigation further revealed that African American employees who were hired were subjected to repeated racial slurs by both co-workers and managers.
AZ Metro Distributors, LLC, a distributor of Arizona Iced Tea products, will pay $300,000 and furnish other relief to settle an age discrimination lawsuit filed by the U.S. Equal Employment Opportunity Commission (EEOC), the federal agency announced today. The EEOC had charged that the company willfully discriminated against two sales employees by discharging them because of age, and, in September 2019, a jury agreed. After the EEOC declined to accept a lesser award of monetary relief proposed by the court, the parties entered into the settlement agreement in lieu of conducting a second trial on damages.
At trial, the EEOC presented evidence that AZ Metro discharged Cesar Fernandez and Archibald Roberts — the two oldest sales employees in their department — at the ages of 64 and 66. On the day the employees were fired, a supervisor at AZ Metro’s Brooklyn location said that the company wanted to hire younger workers and move the sales force in a “different direction,” according to trial testimony.
Aerotek, a national temporary placement agency, has agreed to pay $3.525 million to resolve federal systemic investigations relating to the hiring and placement of individuals assigned to work at Aerotek’s clients, the U.S. Equal Employment Opportunity Commission (EEOC) announced today.
According to the EEOC, Aerotek failed to recruit and denied assignments/placements and/or hiring to individuals based on age (over 40), sex and race. Such alleged conduct violates Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act of 1967 (ADEA). Aerotek denies it engaged in any discriminatory or unlawful conduct, but the company agreed to resolve the matter with the EEOC rather than through litigation.
DEI PROGRAMS ARE A PROFIT CENTER, NOT A COST CENTER
Those relevant points aside, DEI should be regarded as a profit center rather than a cost center due to the advantages to the enterprise. For example, a 2018 Boston Consulting Group study reported that innovation revenue was higher among companies with diverse management teams.
The biggest takeaway we found is a strong and statistically significant correlation between the diversity of management teams and overall innovation. Companies that reported above-average diversity on their management teams also reported innovation revenue that was 19 percentage points higher than that of companies with below-average leadership diversity—45% of total revenue versus just 26%.
A Harvard Business Review study found that teams solve complex problems faster when they have more diversity of thought.
Having run the strategic execution exercise over 100 times and observed such big differences in the performance of teams, we decided to use the AEM cube to measure the level of cognitive diversity in groups undertaking the exercise. Our analysis across six teams who recently undertook the exercise shows a significant correlation between high cognitive diversity and high performance…
McKinsey and Company also proved that diverse workforce perform financially better than those who have less representation of minorities.
In the original research, using 2014 diversity data, we found that companies in the top quartile for gender diversity on their executive teams were 15 percent more likely to experience above-average profitability than companies in the fourth quartile. In our expanded 2017 data set this number rose to 21 percent and continued to be statistically significant. For ethnic and cultural diversity, the 2014 finding was a 35 percent likelihood of outperformance, comparable to the 2017 finding of a 33 percent likelihood of outperformance on EBIT margin; both were also statistically significant.
In addition to being a profit center for a company, DEI programs bring benefits in terms of attracting talent.
DEI PROGRAMS REPRESENT A RECRUITMENT ADVANTAGE
Let’s take a look at African Americans. According to 2020 Census data, African Americans make up 12.1% of all American workers. Depending on the industry you are recruiting for, attracting and retaining talent in this demographic is very challenging. According to research from Glassdoor Economic Research, job satisfaction ranks lowest among African Americans. To quote…
Black or African American Employees Overall Are Less Satisfied at Work: Overall, the average company rating for Black or African American employees as a group on Glassdoor was 3.3 out of 5 as of January 2021. That’s below the overall average Glassdoor rating of 3.5 out of 5 rating for all employees during this same period. As noted above, Black or African American employees tend to be underrepresented in professional and management roles which have the highest job satisfaction, which likely contributes to this pattern. We also know that Black or African American employees report different experiences at work compared to employees of other races. In a separate Glassdoor survey, 47 percent of Black or African America job seekers and employees reported quitting a job after witnessing or experiencing discrimination at work, sentiment that’s higher than reported by white respondents.
Glassdoor’s report is the first of its kind and sure to exert added pressure on companies seeking to appear as diverse and equitable as possible. While there are several competitors in the employee review space, Glassdoor stands as a leader in the area. As such, it is not improbable to foresee similar reports of this nature in the future. How high or low, will your company rank, if at all? And if not at all, how will that affect your diversity recruitment efforts? These types of reports could cause significant damage to your employer brand. For instance, if your company is deemed racist, how many minority workers (or non-minority workers) will want to be affiliated with you? Some large enterprises are dealing with this very issue. Here is one such example from Vox.
Current and former Amazon diversity and inclusion professionals — employees whose work focuses on helping Amazon create and maintain an equitable workplace and products — told Recode that internal data shows that Amazon’s review and promotion systems have created an unlevel playing field. Black employees receive “least effective” marks more often than all other colleagues and are promoted at a lower rate than non-Black peers. Recode reviewed some of this data for the Amazon Web Services division of the company, and it shows large disparities in performance review ratings between Black and white employees.
“We struggle to bring [Black] folks in because there’s not a whole lot of desire, in my opinion, to go outside of our normal practices,” a current Amazon diversity manager told Recode. “And then when they do get here, it’s harder to get promoted, harder to get top-tier rated, and easier to get lowest-tier. All those things combined make it so folks don’t wanna stay. And folks will leave Amazon and go take on more senior roles elsewhere.”
Conversely, imagine how being ranked high in terms of treating all employees well would increase your recruiting efforts. To quote the aforementioned Glassdoor Economic research again...
Highest Rated Companies by Black or African American Employees: Among the 28 employers we examined, technology giant Apple had the highest overall company rating according to Black or African American employees of 4.2 out of 5. Notably, at Apple, Black or African American employee company ratings were about 8 percent higher than the comparison group. Apple was followed by Bank of America with 4.0 out of 5 rating, and Capital One with 3.9 out of 5 rating. It’s important to note that these averages are from preliminary data only, and may not reflect patterns in the full workforces at these employers.
Recruiting diverse talent is helpful in the near-term but it also has long-term positive consequences.
DEI PROGRAMS PROMOTE LEGACY OVER FLEETING RECOGNITION
DEI is typically connected to comply with corporate governance and self-regulation which is why the overall intent is to check a box rather than tie DEI into growth or revenue related strategies. They also seem to be comprised to make employees fit into a workplace culture rather than the existing workplace culture evolving as a result of new ways of thinking. One sure way to turn this around is to move DEI out of Human Resources and infuse it into every aspect of the business in some way; transform the very concept of DEI into a profit center rather than a cost center. When the C-Suite can see how such initiatives drive revenue there will be bigger budgets and acceptance for such programs and an industry wide respect that goes beyond citation on a list of most diverse companies.
DEI programs save money, reduce the chance of reputational harm, give recruitment advantages and plant the seeds of long-lasting respect. With so many plusses it's hard to argue against the success inherent in such programs. Here at Proactive Talent, we have assisted several companies with their DEI initiatives and are here to assist you if you need it. Contact us today.