How Integrating DEI Into Strategy Lifts Performance

Today’s top leadership priorities include attracting and retaining top talent, fostering innovative thinking and action, motivating employee performance, and enhancing stakeholder value in an increasingly diverse and competitive market. At the same time, many leaders have supported diversity, equity, and inclusion (DEI) initiatives to address inequities for marginalized groups. But our research shows that there is a broader opportunity to use DEI as a strategic lever in tackling the key challenges noted above and make the practice a critical driver of organizational effectiveness and performance.

Earlier research has found that there is a robust business case for DEI, with an array of potential benefits to organizations, including access to new markets, increased innovation, and improved employee engagement.1 A recent study of DEI practices at U.S. credit unions that I conducted with McKenzie Preston has surfaced further evidence that taking a strategic approach that integrates DEI into business processes is linked to better financial performance in terms of return on assets and net income.

Given the notable undercurrent of backlash against DEI, often rooted in misperceptions or resistance to change, business leaders are at a critical juncture. They need to employ evidence-based strategies that not only bolster the DEI proposition but also align with core business goals. Driving culture change and fostering environments that are both resilient in the face of criticism and capable of delivering tangible benefits will require more strategic approaches to DEI. In this article, I draw upon the findings of our industrywide survey of DEI practice implementation and company financial performance and highlight the practices that are effective for achieving competitive advantage through DEI.

There are three keys to leveraging DEI to enhance financial performance. First, companies should take a strategic approach to the creation and maintenance of diverse, equitable, and inclusive environments. Rather than implementing discrete operational practices focused on a specific area of human resource management, such as recruitment or training, DEI must be integrated into a company’s strategy in a way that is consistent with its business objectives. Second, companies should implement sets of DEI practices intended to achieve similar goals. Although singular practices may be effective for achieving a desired outcome, such as diversifying candidate pools or enhancing employee engagement, enacting multiple practices that reinforce one another in working toward a common goal appears to amplify their effects.