Many companies are regressing in their Diversity, Equity, and Inclusion (DEI) progress, which is having a direct negative impact on talent retention, the ability to meet customer needs and their overall business success, reveals a new report by global leadership consulting firm DDI.  

The 'Diversity, Equity, and Inclusion Report 2023', found an 18 per cent decrease in leaders’ endorsement of their company’s overall DEI efforts in the last two years.

Furthermore, the number of companies that didn’t offer DEI programmes increased from 15 per cent in 2020 to 20 per cent. As leaders lose trust in their companies’ inclusion efforts, leaders, who are women or from minority ethnic and racial backgrounds, are significantly more likely to plan to switch companies to advance, and especially among the senior leaders.  

“With the stress of economic uncertainty and labour challenges, companies have turned their attention away from DEI toward these urgent issues, but that has left many leaders, especially those who are women and from minority racial and ethnic backgrounds, questioning their company and role,” said Stephanie Neal, Director of DDI’s Center for Analytics and Behavioral Research.

“If companies don’t act now to rekindle and reinvest in their DEI programmes, the loss of talent will have a profound impact on future business success.”

The report highlights additional findings regarding the correlation between DEI initiatives and business outcomes. 

Letting DEI slip impacts business performance

Organisations with greater leadership diversity are 2.4 times more likely to outperform their competitors. Companies that rank in the top 10 per cent among their peers in financial performance have at least 5 per cent more leaders who are women and from minority racial/ethnic backgrounds than below-average performers, showing that even a modest increase can have significant results.  

Generational divides influence DEI perception

While leaders under age 35 are the most optimistic about their organisation’s commitment to DEI, their Gen X counterparts (age 46-55) are the most disappointed. This could be an indicator of experienced leaders’ frustration with slow progress, or a feeling of being overlooked as many programmes target younger workers.

Inclusion doesn’t require an office

DDI's data shows that 34 per cent of workers who work remotely report a strong sense of inclusion in their organisations, compared to only 29 per cent of their peers who work in person. Among women leaders, only 21 per cent who work in-person report a strong sense of inclusion.

Preparing the next generation of diverse leaders of utmost concern

Burnout is soaring across all ages and demographics with over 75 per cent of minority leaders and 72 per cent of women leaders under age 35 feeling “used up” at the end of each day.

The combination of childcare responsibilities, coupled with pressure for younger leaders to portray perfection, is likely driving this trend. To overcome this heightened risk of burnout, leaders should prioritise showing empathy, acknowledging their own vulnerability and shortcomings, and inquiring about employees’ wellbeing.

“A key question posed by these findings is how companies can create an inclusive remote work culture and embrace diversity in all aspects. Gender, racial, and ethnic diversity in leadership is a clear business advantage, and you could be pushing away these highly talented leaders by taking away flexible work options. Options like remote work empower them to do their best work for the organisation while meeting personal goals and family obligations,” said DDI CEO Tacy Byham.

Five critical components crucial for achieving success in DEI

DDI's DEI report not only identifies critical trends but also offers guidance on how companies can mitigate the risk of losing diverse talent and how robust DEI programmes can enhance bottom-line performance.

The report details the five crucial components of DEI success to help companies implement best practices that drive engagement, inclusion, retention and performance.

DEI is a clear priority, backed by high-quality DEI practices

Making DEI a top priority requires strong backing from senior executives and a commitment to implementing high-quality DEI practices. Mere lip service won't be enough - the support must be accompanied by the integration of inclusive practices into the organisation's daily operations and talent management systems. Without this level of commitment, progress in DEI will be difficult to achieve.

Leaders have strong interpersonal skills, including empathy

The behaviour of leaders plays a vital role in bringing inclusion and equity to life within an organisation. Without leaders who possess the ability to make diverse talent feel like they belong, are valued, and have a future at the company, it is unlikely that this talent will remain in the long run.

Proactively recruiting high-potential talent from diverse backgrounds crucial aspect of succession planning.

To build a robust leadership pipeline, organisations must broaden their definition of leadership potential and thoughtfully include a range of skillsets, mindsets, and perspectives in their high-potential pools.

Senior leaders build trust with employees.

Employees who have historically been overlooked and underrepresented in leadership may be naturally sceptical of senior leaders' commitment to achieving DEI success. To overcome this scepticism, senior leaders must follow through on their promises, practice transparency, and build trust as a fundamental part of how they conduct business, not just in relation to DEI matters. 

Coaching for growth is crucial

To promote growth and development among team members, managers must provide opportunities for them to learn and develop new skills. Some organisations mistakenly place individuals from underrepresented groups into roles for which they are not adequately prepared, without providing sufficient support for their success. However, organisations that excel in DEI deliberately build coaching capabilities throughout their organisation to ensure that individuals receive the necessary feedback and guidance to thrive in new opportunities.