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The Connection Between Workplace Diversity & Employee Retention

The Connection Between Workplace Diversity & Employee Retention

As Diversity, Equity, Inclusion and Belonging (DEIB) practices evolve, we constantly discover new research and perspectives that seek to understand the impact and benefits of diversity in the workplace. Outside of organizational improvements that result from diversity, such as higher productivity and performance, we also see strong correlations with employee retention. 

Employees perform better when they feel accepted and respected, and when they see their co-workers treated with respect. Diversity, equity, inclusion and belonging are all separate concepts — it’s possible for a company to exhibit one of these concepts, but not the others. For the purposes of this article, we’ll focus exclusively on the benefits of diversity in the workplace.

Diversity Applies to the Full Range of Human Attributes

When we use the word diversity in relation to the workplace, many people think only in terms of race, religion, and gender, a holdover from an era when companies discussed diversity primarily within the context of legal protections for traditionally disadvantaged groups. But diversity applies to the entire range of human attributes, including but not limited to:

  • Personality
  • Race
  • Ethnicity
  • Thinking style
  • Working style
  • Nationality
  • Worldview
  • Gender
  • Religion
  • Age
  • Socioeconomic background
  • Disability
  • Sexual orientation
  • Language

A successful workplace is one in which peoples’ differences are viewed as an advantage that can drive business performance while helping individuals thrive.

Benefits of Diversity in the Workplace

There are many benefits to diversity in the workplace. From the organization’s perspective, it allows access to the widest range of talent, not just talent reflective of a particular worldview or segment of society — and it helps provide insight into the needs and motivations of the organization’s entire universe of potential customers. These benefits result in documented higher profitability.

But workplace diversity also delivers benefits to employees. We outlined the various ways employees and organizations benefit from a diverse workplace:

  1. Collaboration and innovation: It has long been established that companies with more diverse leadership are more likely to be innovative, but more recent research shows that diversity at the team level is just as important for innovation. Collaboration among diverse teams means bringing more ideas to the table and thinking outside the box, giving employees an opportunity to learn from each other and have more exposure to diverse perspectives.

  2. Culture enhancement: In the past, organizations often had the goal of hiring people who “fit” with their culture. What this translates to in practice is hiring people similar to those already in the organization’s workforce — reinforcing a monoculture. As the advantages of a diverse workforce have become increasingly clear, HR has shifted its focus to cast a wider net and bring in new talent who differ from the existing workforce on a variety of attributes. The result is that HR has recognized the benefit of managing cultural diversity — it adds incremental value to the culture and helps move it to the next level toward the desired future state. Since culture is a key aspect of employee experience, employees benefit from a culture that’s enhanced by differing opinions, collaboration, and mutual respect.

  3. Talent attraction and recruitment: Companies that focus less on who “fits” with the existing culture — i.e., those who are most like the current workforce — have the benefit of access to a wider pool of talent. Of course, employees still need to have the right skills and experience for the position, but it’s important to look for candidates who can leverage their differences to enhance the organization’s culture. Diversity begets diversity, and applicants who see diversity in the organization are more likely to see how they can fit within the organization as well. Current diverse employees are also more likely to recommend the organization to their close friends and family, thus broadening the talent pool.

  4. Improvement in experience: Things that matter to the organization such as engagement and the employee experience can be enhanced by diversity. As the organization strives to ensure that the work environment is inclusive — often a prerequisite for engagement — all employees (and the organization itself) profit. One of the benefits of hiring a diverse workforce is that it incentivizes the organization to focus on inclusivity and creating an environment in which all employees receive the necessary support from leaders and colleagues to grow and succeed. Diversity and inclusion create high-performing teams.

  5. Better business performance: Study after study has confirmed that companies with greater-than-average diversity outperform less-diverse companies in profitability; this report from the Harvard Business Review is one of the more recent to reconfirm findings that have been replicated numerous times over the past 20 years. While some studies calculate 20% higher profits for the diversity premium and others have calculated it to be as high as 35%, they all reach the same conclusion: Greater diversity equals better business performance and higher profits.

Each of these benefits has a positive impact on retention, but it’s also important to keep in mind that a lack of diversity in the workplace can have a negative impact. Not only will the organization and its employees miss out on the benefits enumerated above, a lack of diversity may drive higher attrition — and not just due to employees who feel like the “odd man out” departing. The bystander experience, where employees are turned off by observing inequities against others, can generate discomfort and lead to a decision to leave the organization. This impact may be more pronounced among younger workers, who place a very high value on corporate social responsibility in all its forms.

Achieving Diversity in the Workplace

The data is clear: Diverse organizations perform better and are more profitable. Corporate leaders have taken notice and are taking steps to diversify their organizations. But achieving diversity is an ongoing process — and a difficult one, because it requires changes in business culture, as well as recognizing and confronting the inherent or unconscious biases of both the organization and individual employees.

While HR may play the most prominent role in staffing a diverse workplace, creating a diverse and inclusive work environment relies on everyone in the organization. Leaders have a critical role in modeling behavior for the rest of the company. Recognizing the challenges that leaders and businesses face in creating diverse organizations, the CEO Action for Diversity and Inclusion initiative has enlisted more than 700 CEOs representing the world’s leading companies to advance workplace diversity and inclusion. CEO Action sponsors an ideas exchange for organizations seeking ideas about the actions they can take to advance diversity that are the best fit for their company.

Ultimately, there are no one-size-fits-all solutions for creating diversity in the workplace. The steps that an organization may need to take to create a diverse and inclusive workplace will depend on the culture, the current workforce, the current state of the company, and its future business goals. Organizations focusing on enhancing diversity should take advantage of all available best practices to help with this challenge and start by assessing the equity of their systems and process to identify a baseline to go off of. For example, assessing the proportion of employees who fall into different demographic groups can help organizations identify underrepresented groups to target for recruiting.

Assessing the selection process can help organizations identify aspects of the process that bias can creep into. For example, how are resumes screened? Are recruiters equipped to understand and check their biases at the door? Are hiring managers using a standardized interview to mitigate bias creep? Artificial intelligence, although not perfect, can help eliminate biases in hiring, as well as blind resume reviewing, which removes some of the candidate’s demographic information that can cause bias in the screening process. These same tools can also mitigate bias when assessing internal promotion processes.

Leaders can model inclusive behavior for employees and support the practices of organizations like CEO Action that share best practices. Additionally, employee survey data is one of the most effective tools for mapping a path to workplace diversity. Survey data, correlated to demographic data, can provide feedback identifying areas of friction. Effective collaboration is a primary driver of the innovation organizations crave. Barriers to collaboration, related to ineffective workplace interaction, can be identified using employee surveys. Surveys can pinpoint parts of the organization that need help in increasing diversity to create more effective, diverse leadership teams. In addition, surveys are useful for monitoring the effectiveness of actions taken to promote diversity. Surveys can also help organizations understand how day-to-day experience and career mobility relate to diversity attributes.

Creating a diverse and inclusive working environment takes time and commitment — but it yields big dividends for both the organizations and their employees. (Tweet this!) A diverse workforce makes better decisions, and the many points of view in a diverse group of employees promote innovation. Most importantly from the employee standpoint, a diverse workplace is one where people are respected for their skills and for who they are as unique humans. They feel they belong. Employees who feel respected, accepted, and valued tend to be highly engaged and productive — and are less likely to leave the organization.

Want to improve DEIB practices in your organization?

The Perceptyx Listening Framework can help you understand what your organization is doing well when it comes to DEIB, where improvements are needed, and how individual employees view DEIB progress and its importance within your culture. Get in touch and let us show you how.

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