Re-framing the DEI narrative

We are all familiar with the 'business case' for DEI. For over a decade, there has been an increasing body of research that points to the downside of homogenous teams, as teams with like-minded individuals are more prone to groupthink, and cognitive and social biases. This narrows an organisation’s ability to think big, impacting innovation and ultimately, business performance.

Additionally, organisations that do little to embed inclusion and belonging into their cultures are less likely to benefit from the principles of the ‘psychological contract’, as described by Denise Rousseau, a professor at Carnegie Mellon University.

Psychological contracts are the unwritten expectations between colleagues and their employers. In this context, they align to Gardner's seven inclusion principles:

1. Fair treatment: Recognising and rewarding employees fairly for their contributions to the organisation's objectives.
2. Integrating differences: Valuing and respecting diverse perspectives and opinions.
3. Decision-making: Ensuring that all team members' ideas and suggestions are fairly considered in decision-making processes.
4. Psychological safety: Creating a workplace where employees feel comfortable sharing their thoughts and ideas without fear of judgement or negative consequences.
5. Trust: Maintaining honest and open communication within the organisation.
6. Belonging: Fostering a sense of community and support where employees feel connected and cared for.
7. Diversity: Ensuring that the workforce reflects the diversity of the broader population, including representation at all levels.

And yet, while the business case for DEI may seem well established, a reminder of the relationship between DEI and business success is long over-due, particularly within the current context of an anti-DEI movement. By reaffirming the human, innovation and commercial value of DEI to business performance, we help to protect it from becoming a political football, which is having a material impact on businesses, their approaches and levels of investment.

The current criticism around DEI suggests that its activities are too performative, focusing on light-touch inputs with limited KPIs aligned to business outcomes. Further criticism states that DEI is a corrective measure, designed to work against nature by stripping out our unconscious biases.

As part of FAIRER Consulting’s on-going series of in-person roundtables with d&i Leaders, I was joined by Rachel Osikoya (Director of Diversity Equity & Inclusion at Lloyds Banking), Natalie Sigona (Global Diversity Equity & Inclusion Director at Imperial Brands) and Diane Thomson (Diversity, Equity, Inclusion and Leadership Specialist at Imperial Brands) to explore how we reframe the current DEI narrative.

Our session focused on the commercial benefits of diversity and inclusion within the current landscape. Rachel stressed the macroeconomics, and the great work Lloyds Bank is doing to support diverse customers, as well as colleagues. Natalie and Diane stressed the relationship between belonging and a commercial strategy, and how this can be supported by focusing on core values and behaviours.

During the roundtable discussions, colleagues shared their insights, which we can summarise into three core themes:

1. Play the business case on repeat: While the business case for DEI is well established, the financial case may have got lost within the broader arguments, such as those around business values, ESG, EVP and people-centred cultures. This is a reminder that DEI actions lead to stronger financial outcomes (as well as additional benefits), thus DEI professionals should continue to stress the benefits within their organisations. This applies equally to those working in the public and third sector, as there are financial consequences and benefits relating to talent attraction, retention and wider brand image.
2. Connect with key internal stakeholders: During the roundtable, many stressed the importance of working in-house with other key stakeholders to ensure that there is a strong mental and psychological link between DEI and wider business outcomes. These collaborations include marketing and branding teams, customer and data insight teams, procurement and wider people functions.
3. Sharing the data: While we in the DEI community are aware of how our work affects wider commercial outcomes, we should not assume that other stakeholders are familiar with existing research. Thus, we should make extra efforts to share well-established research.

As a reminder, the core business case covers the following key dimensions:

1. Increase individual and team engagement and motivation through a sense of team belonging and psychological safety. Google’s Project Aristotle found that psychological safety within a team was the most crucial factor in determining the team’s effectiveness. Amy Edmondson’s research has shown how psychological safety can be a key driver for team performance and engagement. Psychological safety refers to a team member's shared belief that they can take interpersonal risks (like speaking up, sharing ideas, or admitting mistakes) without fear of negative consequences.
2. Ideation and better decision-making: Research by Cloverpop found that inclusive teams make better decisions up to 87% of the time. High levels of cognitive diversity - if leveraged through inclusion - enables teams to approach problems from multiple perspectives, leading to faster and better business outcomes. Diverse teams are more likely to avoid groupthink.

3. Talent attraction, retention and brand image: Companies that embrace the principles of inclusion and belonging are more likely to attract and retain highly skilled and quality talent, which is in short supply in many business sectors. A BCG and Future Forum survey from 2022 found that employees who feel like they can be their authentic selves at work are nearly 2.4 times less likely to quit, due to higher levels of happiness and motivation.

4. Customer and market insight: Diverse and inclusive teams, in comparison to like-minded teams, are more likely to avoid biased thinking, and instead offer critical insights into the changing habits of consumers. This insight is critical for business innovation, product development and sales. This is particularly true when we adopt the ‘wisdom of crowds’ approach, as popularised by American journalist James Surowiecki.

5. Financial performance: Since 2015, McKinsey’s ‘Diversity Matters’ reports have stressed the relationship between high levels of representation and financial performance. In its 2024 ‘Diversity Matters Even More’ report, it stressed that companies in the top quartile for board-gender diversity are 27% more likely to financially outperform compared to those in the bottom quartile. Similarly, companies in the top quartile for ethnically diverse boards are 13% more likely to outperform than those in the bottom quartile.

And as a final reminder: while the headlines tend to focus on organisations that are rolling back on DEI, many companies, such as Lloyds Banking Group and Imperial Brands, and consumer-facing brands, such as Coca-Cola, Levi Jeans, Calvin Klein, Apple and Costco, are holding tight and even doubling down their DEI efforts.

For more information, read our whitepaper, 'Proving the business case for DE&I initiatives: A guide for HR professionals', or get in touch.