Why DEI Isn’t Just a Trend: The Business Case for Diversity Today

“Go woke, go broke,” or is DEI a key driver of growth? Let’s unpack this!

The phrase "go woke, go broke" suggests that companies embracing diversity, equity, and inclusion (DEI) initiatives are doomed to fail financially. However, the reality is companies that focus on DEI aren’t losing business – they’re thriving. In fact, many of these companies are more profitable than ever before.

A 2023 report from McKinsey, part of their ongoing research into DEI, shows that companies with diverse leadership teams perform better financially, are more innovative, have a stronger social impact, and boast happier, more engaged employees. The idea that diversity drives business success isn't new – McKinsey has been tracking the link between diverse leadership and company performance for nearly a decade. Their data, covering over 1,200 companies across 23 countries, proves that diversity is still a major asset today.

For example, companies with gender and ethnic diversity are 39% more likely to see higher financial returns than those with lower levels of diversity. Forbes finds that companies with diverse leadership also outperform their peers in other key areas: they are 12 times more likely to engage and retain employees, which boosts productivity, and 8.5 times more likely to satisfy and retain customers. Diverse teams make better decisions because they bring fresh perspectives, and are better equipped to understand and serve global markets, which is a major competitive advantage.

If you’re not building a diverse and inclusive workforce, how can you create products or services for customers you don’t understand or interact with? Without diversity, your company risks falling behind as the world changes. Generation Z, for example, is entering the workforce with different values and expectations around diversity and inclusion. As this generation grows in numbers and influence, their expectations will shape the future of work.

The cost of lacking diversity is rising.

McKinsey’s research shows that companies in the bottom quartile, with representation of 30% or less, for both gender and ethnic diversity are 66% less likely to outperform their competitors financially. This is a significant increase from 27% in 2020. In other words, not prioritizing diversity is becoming more expensive in light of missed opportunities and poor productivity.

Still, true progress is not just about increasing representation. To make a real and lasting impact, companies need to create more holistic change and build inclusive cultures where diverse leaders and allies are truly heard.

Despite the ongoing challenges in today’s business world, the case for DEI remains strong, and it’s only getting stronger. Far from being a trend that companies can afford to ignore, diversity and inclusion are crucial drivers of growth and success.

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