Why is Diversity and Inclusion Important?

Here is an overview of research into the benefits of diversity, equity and inclusion where ‘equity’ is an invisible yet ever-present​ theme in understanding why D&I is important. Using the framework provided by ACAS referenced at the beginning our Equality, Diversity & Inclusion in the Workplace Report we refer to research that demonstrates the impact of D&I investment in the workplace.


Diversity and inclusion: You can’t have one without the other

The notion that a diverse workforce is an inclusive one has dominated thinking on workplace culture. By establishing diverse teams and improving workforce diversity ­– hiring more women, people of colour and those with different sexual orientations, etc. – those traditionally underrepresented employees feel more included at work and company culture benefits accordingly.

In many ways, the logic is sound – diversity promotes variety and to a certain extent nurtures a sense of belonging. The concept lends credence to the idea that bolstering the numbers of marginalised groups will have a positive impact on the employee experience. Employee engagement may even become obsolete, due to a tangible sense of fulfilment felt across the business.

Yet despite the huge amount of time, resources and money invested in improving organisational diversity over the last decade, issues around inequality persist and marginalised groups of people continue to suffer as part of exclusionary workplace cultures. This is because focusing on diversity alone – even deep-level diversity – doesn’t account for individual perceptions of working life.   

What organisations tend to find is that a diversity strategy (e.g. investing in hiring diverse talent) that disregards inclusion can lead to the development of a toxic working environment. Similarly, socially homogenous companies that prioritise inclusion without attempting to diversify their teams risk limiting innovation and the generation of new ideas.

In their 2020 Harvard Business Review article professors Robin J. Ely and David A. Thomas – two early proponents for encouraging heterogeneity in organisations – reinforce the “no-brainer” logic of establishing a truly diverse workforce, while arguing that increasing the number of people from under-represented groups is meaningless “if those employees do not feel valued and respected.”

Inclusion, then, as the CIPD unequivocally states in its 2019 report, Building Inclusive Workplaces, is the key element in creating a “positive environment for a diverse workforce.” Further, only a long term “concerted effort” to engender an inclusive and diverse workforce will empower employees and allow them to flourish as individuals, as team members, and as part of the wider organisation. 

Achieving diversity is an ongoing project that all organisations should commit to. Starting with the principle that everyone is unique, companies that wish to turbocharge already existing diversity initiatives should seek to canvas perceptions of workplace inclusion and find ways to improve the employee experience for those individuals that feel excluded in the culture.

In a later section, we will look more closely at equality, diversity and inclusion strategy and consider the importance of executive team participation in inclusion endeavours. Developing inclusive leaders and achieving diverse leadership teams are now seen as equally important. And as the data below attests, general efforts to prioritise D&I together help businesses consistently perform better. 

The positive outcomes of prioritising D&I together

By prioritising D&I together, guided by the principle of equity, organisations can achieve positive outcomes across several key metrics. Further, efforts to bring together these interconnected concepts under one strategic action makes it easier for firms to remain compliant with the Equality Act 2010.

In diverse organisations, employees feel a greater sense of connection to colleagues and the wider business if they are valued for who they are and have a voice to effect change. ACAS helpfully summarises the benefits of a joined up D&I approach. We use that framework below to highlight research demonstrating why prioritising diversity and inclusion is important.

Happier employees

It’s true – employees are happier when they are part of a diverse and inclusive workforce. Happiness in the workplace is measured by factors such as willingness to stay at a business, a decrease in absenteeism, and an improvement in individual discretionary effort. Combined, they give firms a powerful competitive advantage.

Research carried out by the Corporate Executive Board (CEB), confirmed that discretionary effort increases by 12% and intent to stay rises as much as 20% in organisations that promote D&I. Similarly, Boston Consulting Group discovered that 81% of employees who feel included in a diverse company culture are happy in their jobs.

Further, the CIPD reports how gender diversity is linked to a reduction in absenteeism only in situations where there is a high level of support and enthusiasm (i.e. inclusion) for diversity within teams. The causes of absenteeism in this context refers to conditions such as stress & anxiety, burnout, and low morale.

Improved retention and attraction

We’ve already alluded to how combined D&I strategies improve retention. Several other studies compliment the CEB’s findings. Great Place to Work, for example, indicate that diverse and inclusive workplaces enjoy 5.4 times higher employee retention. Deloitte, too, revealed how over half of millennials will consider leaving an employer if they perceive D&I initiatives to be insufficient.

Perhaps unsurprisingly, the impact on talent attraction is equally impressive. Not only will a D&I strategy help businesses recruit from a diverse talent pool, but it will also enable firms to easily attract more candidates. Over two thirds of candidates actively search for employers with a track record in D&I, including 47% of millennial job seekers. 

Interestingly, authenticity is a key factor in successful D&I related retention and attraction initiatives. Evidence suggests that D&I initiatives that are too focused on financial gains will put candidates off. Yes, there is a business case for D&I. But firms should always seek to promote the social and moral aspects of D&I or risk seeming disingenuous. 

Fewer people issues

Data suggests that discrimination is still widespread in the world of employment. In the UK, one in three people experience age prejudice. Almost 20 percent of LGBT staff have been targeted by negative comments at work because they’re LGBT. And a third of people consider those with disabilities to be less productive than non-disabled people.

Discriminatory views stem from either conscious or unconscious biases – explicit or implicit prejudices that people develop over time due to socialisation, media exposure and other subjective experiences. Biases can be aimed at protected characteristics as well as other traits such as weight, accent or political beliefs. They affect our perceptions of, and behaviour towards, others.

Diversity alone is inadequate. Research indicates that decision making and the performance of diverse teams are impacted when biases exist. Issues of bullying, harassment and victimisation as a consequence of people’s biases are only reduced when D&I is prioritised, the right policies and procedures are in place, and efforts are made to understand and act upon unconscious biases.

Heightened innovation

Organisations recognise that innovation is essential in today’s complex and competitive business environment. The Covid-19 pandemic demonstrated that an ability to pivot was a key factor for firms that performed well during that turbulent period. Innovation requires companies to look at things differently and diverse cultures have always been an enabler of that. 

Organisations with diverse management teams have 19% higher revenues due to innovation. Other studies also highlight a statistically significant relationship between diversity and original thinking. Recent research, however, has pointed to the role of deep-level diversity and team creativity. Surface-level diversity, on the other hand, has no positive impact on innovation.

As well as a willingness to change directionknowledge-sharing is believed to be a vital component of innovative cultures. Employees only feel able to share ideas with colleagues in inclusive environments. Exceptional ideas also tend to arise within diverse and inclusive teams. Trust, collaboration and innovation only really occur when organisations adopt combined D&I practices.

Enhanced customer service

According to the Institute of Customer Service, “True customer service excellence comes when diversity and inclusion is hardwired into businesses practices and governance structures.” And it’s notable that contemporary consumers favour those organisations that can actually prove they are making progress in engendering a diverse and inclusive culture.

It is logical that a company’s ability to leverage a diverse culture will enable it to better understand and service its customer base. But it’s the combination of inclusion, too, that allows different perspectives to be heard and new and more relevant services for a variety of customers to emerge. Ongoing D&I activities enable businesses to tap into the needs of emerging customer profiles too.

One of the indictors of an inclusive working environment is the presence of high levels of empathy. Making a human connection with customers is an ongoing challenge for firms. Businesses with empathetic employees will more likely achieve authentic connections with customers, leading to greater loyalty and customer satisfaction over time.

More successful organisations

Of course, all the above points to the fact that diverse and inclusive organisations are more successful. As previously stated, however, the motivation for financial gain – while clearly attractive – should never be the primary motivation of pursuing diversity and inclusion in the workplace. Engagement, retention, innovation, etc. are sufficient indicators that your D&I strategy working.

Several studies have demonstrated the impact diversity has on revenue. Deloitte revealed that diverse companies enjoy 230 percent higher cash flow per employee. McKinsey highlighted how racial, ethnic and gender diversity leads to an increase in earnings over time. Harvard Business Review also discovered that diverse companies are 70 percent more likely to capture new markets.

In terms of the combined impact of D&I on the bottom line, Gartner found that inclusive teams increase productivity by up to 30 percent in diverse environments. Employees from empathetic workplace cultures are 44 percent more likely to work for above-average revenue generating companies. And highly diverse, inclusive firms enjoy consistent stock performance increases.