What Is DEI in Business and Why Does It Matter?

Jason Hanold
4 min readNov 27, 2023

In the business world today, forward-looking businesses recognize the need to make diversity, equity, and inclusion (DEI) a priority. Companies are taking DEI more seriously than ever before — they see its effect on business performance, organizational culture, the employee and applicant experience, and retention.

For instance, in one LinkedIn study, 60 percent of respondents agreed that diversity within their company’s sales team contributed to the overall success of the business. The study also revealed that organizations in the top quartile for gender diversity had a 25 percent likelihood of outperforming their non-diverse competitors, while those in the top quartile for ethnic diversity increased their chances of outperforming their competitors by 36 percent.

Three Separate, but Related Terms

Diversity, equity, and inclusion may seem like synonyms at first glance, but these terms mean different things. Diversity brings together people from all different backgrounds within a single organization. The differences between them might be social, physical, or psychological. A diverse workforce is one that comprises a full spectrum of cultural and social characteristics. Note that diversity encompasses many such characteristics — race, culture, gender, age, sexual orientation, religion, socioeconomic background, disability, education, and more.

An equitable company ensures that all employees benefit from the same treatment and opportunities. Employers who are serious about equity take active steps to identify and eliminate any barriers that hinder the full participation of marginalized groups. These barriers may take many forms, such as racial and gender biases.

Inclusion refers to how employees with different social identities feel as part of the larger organization. Even in a company with a diverse workforce, some employees may lack a sense of belonging, or question whether they are valued or even welcome. An inclusive company will work to foster a culture where all employees feel embraced and able to be their authentic selves at work.

Diversity, equity, and inclusion are distinct, but mutually reinforcing principles within a business. Companies need not only diversity, but equity to ensure all workers benefit from the same opportunities, and inclusion to instill a sense of belonging in all employees.

Benefits of DEI

Put simply, investing in DEI is the right thing to do because it’s an investment in a company’s most precious resource: its people. There is also a strong business case for DEI, too. DEI presents valuable opportunities for employers to tap into the potential of their entire workforce and maximize the capabilities of all workers. For example, diverse teams tend to be more creative and innovative because they benefit from multiple viewpoints as well as enhanced decision-making and problem-solving skillsets.

In addition, a collaboration between The Society for Human Research Management and McKinsey & Company suggested that companies that exhibit ethnic and gender diversity are, respectively, 35 percent and 15 percent more likely to outperform less diverse competitors. The same study indicated that organizations with greater racial and gender diversity generated more sales, attracted more customers, and had higher profits.

A strong culture of DEI is also an insurance policy that can protect a company over the long term. Change is inevitable, and companies need to be nimble enough to pivot when needed. DEI helps companies avoid the stagnation that can happen when everyone in a group comes from the same background and shares the same assumptions and perspectives.

DEI Needed Now More Than Ever

One of the most significant business benefits of DEI is its ability to help businesses attract talent. Companies that embrace DEI in their cultures exponentially increase their potential talent pool and boost their ability to attract the best of the best.

This is particularly true when it comes to attracting the next generation of workers: Gen Z, or those individuals born around 1997–2012, according to Pew Research. The oldest have been in the workforce for a few years, others are in college or starting their first jobs, and the youngest are still in school. Gen Z is the most racially diverse generation in American history; nearly half are people of color.

Deloitte Global’s 2022 Gen Z & Millennial Survey revealed that along with pay, development opportunities, and work/life balance, younger workers also take heed of the environmental and societal impact of prospective employers. Similarly, a Monster survey found that 83 percent of Gen Z job searchers said that a company’s commitment to diversity and inclusion was important in their search.

Other research has also revealed that Gen Z takes a slightly different, more holistic view of diversity than previous generations. They consider experiences, identities, and opinions as markers of diversity, along with the traditional categories like race, gender, and religion.

According to the Deloitte report, 52 percent of Millennials and Gen Z workers reported feeling dissatisfied with their current employer’s progress towards creating a diverse and inclusive workplace. This result indicates that companies still have a long way to go in fully embracing DEI.

In order to appeal in a competitive marketplace, companies need to make DEI a top priority. Creating and executing an effective DEI strategy not only helps teams to pull together to create a strong culture, but also helps to drive growth and retain talent, giving the company a competitive edge when it comes to winning over skilled workers and customers.

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Jason Hanold

Executive Recruiter, clients NFL, Google, Patagonia, Under Armour, Gucci, Nike, Northwestern, eBay, UFC, Vail, REI, Electronic Arts, Live Nation, #HR #Recruiter