Employees at the Center: What It Takes to Lead on DE&I Now

What leaders need to know now

• Fundamentally, this survey indicates that businesses’ activity around diversity, equity, and inclusion (DE&I) has changed faster than some thought, though the areas of activity have been interesting. Companies on the cutting edge of success with DE&I in 2019—only 20% of all respondents—got there by taking a mix of actions that are now table stakes, activities 58% of respondents in our current survey report taking.
• Ninety-three percent of executives in countries around the world said that diversity, equity, and inclusion are more important to their company now than at the beginning of 2020.
• Respondents cite many reasons for this shift that make the very high number believable, including the effects of COVID-19 and the rise in calls for racial and social justice following the murder of George Floyd. Other factors may include the shift to hybrid ways of working, inflation and general economic anxiety, a global rise in nationalism, and increasing political polarization and extremism that extend to all facets of life, including the workplace, in ways that profoundly affect relationships and therefore culture. But we also identified a through line in the data that offers the most important reason. Fifty-two percent of executives said their DE&I efforts contribute to their business success to a large extent, up from 22% three years ago.
• Why? The data shows that employees are at the center of why DE&I matters and how it contributes—ahead of customers, external factors, or anything else. The most important ways in which DE&I was seen to contribute to business success were, first, engaging current employees and, second, attracting a wide pool of talent so companies can hire the best.
• With that clarity, leading companies indicate they are approaching DE&I like any other strategic initiative: leaders (including the board) setting the standard, clearly defining the scope and vision, linking to business strategy and goals, tracking progress, and aligning to processes and operations throughout the organization. This signals a higher probability of progress than many earlier approaches to DE&I. But even the best companies are still finding their way.

Initial insights

DE&I matters more to companies around the world than it did at the beginning of 2020: 93% of executives who responded to this year’s survey, from eight countries around the world and in every industry, say so. And they are doing more to try to succeed in their DE&I efforts: in a survey we conducted three years ago, we identified a group of companies on the cutting edge of success—only 20% of all respondents. Those companies got there, they said, by taking a mix of actions that are now table stakes, activities 58% of this year’s respondents report taking.

The change in importance is intuitive. The effects of COVID-19 on ways of working, the murder of George Floyd that amplified global calls for racial and social justice around the world, inflation and general economic anxiety, a global rise in nationalism, and increasing political polarization and extremism that extend to all facets of life, including the workplace, all play a role. And those factors are part of a broader shift in the role of corporations in society; trust in government as an institution to address not only DE&I but also climate change, geopolitical instability, and other global challenges is at historic lows and dropping, while trust in—and expectations for—business to do so is growing.¹

But the pace of change is striking, and it is underscored by the finding that more than half of executives now see DE&I as contributing to a large extent to their business success, up from 22% three years ago. For too long, in most companies, DE&I efforts were marginalized, of interest only to a few HR executives. In the past decade, the evidence connecting diversity to improvement on crucial business outcomes—including resiliency, innovation, talent attraction and retention, and, of course, financial results—has become impossible to ignore, though the links are still being debated inside many organizations.

So perhaps the most fundamental insight we take from this survey is that the connection between DE&I and business success is basic: every corporate leader wants to improve employee engagement, attraction, and retention, and these are the ways in which survey respondents most often saw their DE&I efforts contributing to business success.

Care for employees has become a core responsibility of senior leaders, starting with COVID-19’s effects on the workplace and rippling far beyond. The greater expectations for corporations to meet broad social needs, combined with many employees’ growing preference to work for a company with values that match their own as well as a greater ability and willingness to switch jobs, have all led to a new and comprehensive focus on employees from senior leaders, rather than considering employees as just subjects of one-off initiatives. (For more, see “The overlooked weapon in the war for talent” and “Creating an inclusive culture: Five principles to create significant and sustainable progress.”)

Leading companies are beginning to understand and visibly act on this. A recent survey by Just Capital, for example, showed that 31% of surveyed Americans said that large corporations valued employees the most among all stakeholders, up from 9% six years ago.² And to us it is clear that companies that don’t improve their transparency with and about employees will incur greater and greater risk and competitive disadvantage. In the context of ongoing talent shortages and the likelihood of slower economic times, that’s a risk most corporate leaders can’t afford.

But identifying and taking effective actions is hard. One reason is fatigue: it’s been a long two years for everyone, and DE&I efforts are among those where progress can be hard to see and resistance is more common, leaving leaders overwhelmed.³ Other reasons are that companies are in very different stages of progress on DE&I, and each organization has a unique culture. So, although there are common tactics to make progress on DE&I, those tactics need to be adapted to each organization—and, most important, visibly committed to by leaders and woven through the company’s processes, operations, and incentives. The leading companies we identified in this year’s survey are, the data shows, more often taking those steps, though in our experience, no company is all the way there. Furthermore, change is continuing at speed.

All that said, these findings give us hope. It is clear that more and more companies are taking concrete steps toward treating DE&I like any other strategic, enterprise-wide change initiative. Changing human behavior is hard. When leaders approach DE&I like safety, or Six Sigma, they have a better chance of success. And executives’ perception of the fundamental importance of employees clarifies both the why and the what of DE&I.

Looking ahead: Next steps

As a leader, what practical actions might you take to advance DE&I efforts in your company?

There are seven actions we recommend:

1. Clearly define diversity, equity and inclusion and make sure your organization understands what you mean when you use those terms.
2. Put employees at the center of your effort and keep them there. Use what you learned by engaging directly with employees in the summer of 2020. Keep those channels open to all employee groups, not just a few.
3. As hybrid work takes hold and more employees are back in the office, embrace the full range of engagement approaches available, from digital town halls to brown-bag lunches. Don’t assume they need to hear less from you just because they are sitting in their cubicles.
4. At many companies, close to 40% of employees have joined since January 2020 and hybrid work has raised a range of inclusion questions. Ensure your company has a clear sense of the cultural and inclusion experience of new hires versus longer serving employees. Consider how everyone can move forward together into a new culture.
5. Take a systematic, enterprise-wide approach to DE&I. This means leveraging existing systems for driving change or creating new ones, measuring your progress, and communicating your results to employees.
6. Get your board engaged and talking to stakeholders, including employees, about DE&I.
7. Finally, ask yourself and your team a few questions:
   1. Have you defined “diversity,” “equity”, and “inclusion” for your organization? Have you measured how well understood they are across your organization?
   2. Are your employees the primary constituency for your DE&I strategy? Are you as sophisticated in how you talk to them about it as you would be to any customer?
   3. Are you taking a systematic approach to this work that looks like other major initiatives you have undertaken to change behavior or thinking at scale (such as safety, lean, or agile)? If not, why?
   4. Are you leveraging your board as effectively as you could?

We look forward to continuing this conversation with you.

To dig deeper into the data and findings, download the full report.

About the author

Jonathan McBride (jmcbride@heidrick.com) is the global managing partner of the Diversity, Equity & Inclusion Practice; he is based in Heidrick & Struggles’ Los Angeles office.

Acknowledgments

Thanks to the following Heidrick & Struggles colleagues for their contributions to this report: Krishnan Rajagopalan, president and CEO; Cecilia Nelson-Hurt, chief diversity officer; Lyndon Taylor, regional managing partner of the CEO & Board Practice, Americas; and Lisa Baird, global managing partner, Human Resources Officers Practice.

References

¹  For example, see Edelman Trust Barometer 2022, Edelman, January 2022.

²  Jennifer Tonti, On the 3rd Anniversary of the Business Roundtable's Redefined Corporate Purpose, Corporations Aren't Living up to Americans Expectations, Just Capital, August 2022.

³  James Serrano, “Here’s a large obstacle to DEI you could overlook (...and what to do about it),” LinkedIn, September 22, 2022.