Diversity & Inclusion drives success for companies in today’s labor market

The implementation of Diversity and Inclusion (D&I) in a company’s culture is an opportunity to become more innovative, address labor shortages, positively restructure internal hierarchies, and exercise social leadership. To harness these opportunities, companies need to embrace D&I through long-term, meaningful shifts in policy and ethos in the workplace. What value does D&I contribute to a company and its employees? And how can the challenges involved be navigated? This article provides practical guidance on successfully implementing D&I in the workplace in order to promote innovation and counteract the waning labor market.

Success factor D&I

The labor market is undergoing a period of change: executives and HR professionals are confronted with a number of challenges in today’s workplace. An ageing population in in many countries worldwide and evolving expectations from stakeholders mean that companies need to adapt their internal structures to embrace “Diversity and Inclusion.” In the Roundtable discussion organized by WifOR, researchers and thought leaders from industry identified a range of opportunities for companies who pursue long-term policies anchored in D&I, whilst also positively contributing to their social footprint.

D&I: Definition

Diversity

Diversity refers to the welcoming of a rich variety of social demographics within a company and its structure, including, among others, different nationalities, genders, ages, sexualities, and religions. 

Inclusion

Open communication, a sense of belonging and mutually reciprocated trust: an inclusive workplace incorporates each of these factors. In essence, inclusion promotes active participation amongst all employees by valuing and respecting one another as individuals. 

Implemented together, Diversity and Inclusion represent a method of tackling existing problems in the contemporary labor market, fulfilling social responsibility, and enhancing innovation.  

Information Sheet Diversity and Inclusion

 

Opportunities for companies resulting from D&I

Approaching D&I seriously can resolve increasingly pertinent issues for companies such as a waning labor pool and meeting the expectations of stakeholders. D&I also presents a variety of opportunities for companies, including enhancing innovation and bringing employees closer to the organization's goals.  

An inclusive corporate culture can help address demographic change

Germany, for example, faces an ever-decreasing workforce due to an ageing population. In 2020 over a third of those employed in Germany were more than 50 years old and it is estimate there will be more workers over 65 than under 20 before the end of this decade. Also predicted is the pool of workers in Germany will decrease by 7.2 million by 2035.  

By limiting employees to specific demographics, the current and future demand for workers will not be met. Diversifying the workforce offers employers the potential to meet labor needs. Therefore, broadening the targeted demographics in the workforce and consciously committing to promoting engagement amongst all employees can enable companies to secure future value. Moreover, a culture rooted in inclusion increases the affiliation of those employees with the company. For a company, this offers an opportunity to overcome the economic consequences entailed with an ageing national population. 

In addition, D&I is a topic highly relevant amongst younger generations. These generations will comprise the future labor market, therefore companies committing now to a working culture embracing such values will align brand images with the expectations of tomorrow’s workforce.

Pressure from stakeholders paves the way for companies to be social leaders

At an institutional level, programs such as the Value Balancing Alliance and the Sustainable Development Goals (SDGs) push organizations to reflect equal opportunity values. Discourse in the media focuses on topics of inclusion, such as the role of gender in language: interest over Google in the term ‘gendern’ (to gender) in Germany has sharply risen over the past three years.  And both employees and applicants publicly engage in dialogue with companies on the topic of D&I over evaluation platforms such as Kununu. By actively promoting D&I, companies can position themselves as progressive forerunners through exercising social leadership as opposed to passively responding to increasing societal pressure.

Measuring D&I performance can produce internal benefits

D&I generates positive impacts within an organization’s structure. But which rewards can companies expect? 

Firstly, measuring D&I within an organization can make pre-existing hierarchies visible. For example, collecting employment data can serve to identify issues such as discrimination in the applicant process. This provides the opportunity to restructure your company in alignment with your D&I targets. 

Secondly, when carried out throughout structural levels, D&I has been shown to promote a culture in which expressing opinion and posing questions can be carried out free from fear of discrimination. This creates an environment ripe for mutual learning, healthy confrontation, and enhanced decision-making.  

Meanwhile, various studies have shown that supporting employees in bringing their own personal perspectives and experiences into workplace through inclusive measures activates innovative. Studies have applied statistical methods to quantitatively identify a positive relationship between diversity within management teams and revenue produced from innovation. Diversity in dimensions such as country of origin and gender, for example, are shown to have a high positive impact on a company’s innovation. 

Lastly, increasing employee satisfaction results in a closer affiliation with the company and its goals. By creating a sense of inclusion, a company becomes disposed to retaining workers and creating use-benefits over medium- to long-term future. In the process the quality of life for employees is also improved.  

Potential challenges

Measure and Evaluate

The initial challenge for companies is to identify the most relevant factors within D&I to their organization and measure current performance according to these criteria. Collecting data on D&I metrics can require considerable effort, especially when considering data protection regulations in some countries. It can also be complex; what does inclusion mean to our company? Which values do our employees prioritize?  However, understanding the answers to these questions provides a foundation for implementing effective measures to improve D&I within the company as well as for setting industry benchmarks.  

D&I Inclusion Factors (EN)Long-term shifts are required

Another primary consideration for companies is to focus on long-term, sustainable shifts. One-off surveys or token activism will not lead to enhanced results. 

Undervaluing the complexity and intersectionality of D&I

The implementation of D&I policies also has the potential to result in unintended discrimination when reduced to one-dimensional factors. If D&I measures, for example, seek to improve representation and integration across all age ranges, the multidimensionality of each individual is overlooked. This overlapping of social categories is known as intersectionality.  

Guidance on practicing D&I

Successful D&I policies focus on the long term and revolve around people. This guidance is applicable for both companies new to the topic as well as those with experience. 

  • Obtaining data on D&I metrics within current workforces can be carried out using surveys and studies. Start by finding out answers to questions such as: Which demographics are over/underrepresented in my organization when compared with regional averages of the (employed) population? What are the most important inclusion factors for my employees? By making D&I measurable, companies can identify the impact of their policies and compare against others in the industry as well as international targets set out by the SDGs. Notably, these studies are to be carried out regularly so that policies remain up-to-date and focused on longevity. 
  • Define D&I for all employees at management level and educate them on the topic’s relevance. Onus should be put on sustainably integrating D&I within the company structure as well as embedding it as a core factor in each decision-making process. The goal is to make D&I a standard practice.
  • Increasing interaction within teams and tasks maximizes understanding between employees. The benefits of D&I include nurturing a cultural of open exchange. To capitalize on this, lateral and horizontal communication should be encouraged as far as possible.
  • D&I is a topic relevant to society as a whole and to which we must collectively commit ourselves. Companies are positioned to make a meaningful contribution to the current situation of marginalized groups. Companies can act as leaders in D&I by avoiding tokenism and implementing sustainable measures in their company. 

As an expert for empirical labor market analyses, WifOR can offer concrete insights into the D&I factors that have the greatest impact on your company. We analyze the current situation within the company regarding D&I performance and mirror these with the demands and expectations of employees, in both an industry-specific and occupation-specific context. Our combination of microeconomic and macroeconomic approaches enables us not only to highlight the most important D&I factors, but also to evaluate their effects from a business perspective.  

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