Showing ROI of DEI Initiatives

Businesses and organizations worldwide are increasingly starting to prioritize diversity, equity, and inclusion (DEI) initiatives. Beyond ethical and social commitment, more organizations are recognizing that a diverse and inclusive workforce leads to enhanced innovation, improved decision-making, and increased employee satisfaction, all of which drive business success and improved financial performance. For more on the business case for diversity, check out McKinsey’s 2020 Diversity Wins report.

Even in market downturns, investing in diversity, equity, and inclusion remains crucially important for any organization that wants to thrive in the long-term. However, budgets are tighter in a downturn, so it becomes even more vital to demonstrate the tangible returns on investment (ROI) from DEI programs. Tracking metrics like employee retention and engagement, customer satisfaction, innovation, and productivity can reveal how DEI positively impacts the bottom line. Rather than seeing DEI as an extra cost, organizations should view it as a strategic priority that can strengthen company culture, widen the talent pool, and lead to better business outcomes if implemented thoughtfully. The challenges of a recession make it more important than ever for leaders to have hard data that proves the ROI of DEI, guiding cost-effective ways to build a diverse, equitable and inclusive workplace where everyone can contribute their best.

Through a clear understanding of the ROI of DEI efforts, businesses can learn how to use their resources most effectively to maximize their investment in these critical areas. To gain a more holistic understanding of the many ways DEI initiatives can impact an organization, consider the following strategies.

Strategies for measuring ROI of DEI efforts

1. Establish clear objectives and metrics: Just as with any other business investment, it's important to establish clear, measurable objectives for DEI initiatives. Metrics can include the percentage of diverse hires or promotions, employee engagement scores across different demographic groups, or measures of pay equity. Be sure to track these metrics over time to assess progress.
2. Employee surveys and feedback: Employee surveys can provide valuable insights into the effectiveness of DEI initiatives. These surveys can include general questions about perceptions of inclusion and fairness, as well as more tailored questions related to the specific objectives of a DEI program (e.g., skill development, career advancement, retention plans, etc.). Organizations should also solicit employee feedback to identify areas for improvement. Pulse surveys, focus groups, and exit interviews can be particularly helpful ways to collect information.
3. Measure innovation and creativity: Diverse teams often generate more innovative and creative solutions. Although this can be difficult to measure directly, organizations can use proxy measures such as the number of new products or ideas generated, or improvements in problem-solving efficiency.
4. Analyze turnover and retention rates: Effective DEI strategies should improve retention rates, especially among underrepresented groups. By contrast, high turnover rates may indicate issues with equity and inclusion.
5. Customer satisfaction and loyalty: DEI can influence customer perceptions and behaviors. Tracking changes in customer satisfaction scores, brand loyalty, and even market share can provide indications of the effectiveness of DEI efforts.
6. Benchmarking: Comparing your organization’s progress with others in your industry can provide a useful benchmark and context. There are a growing number of indices and reports that provide comparative data on DEI practices.
7. Conduct pre- and post- analyses: Measure relevant metrics before implementing an initiative and track changes over time after launch. Comparing before and after data isolates the impact of the specific DEI program.
8. Use control groups: Compare departments, locations, or demographic groups exposed to a DEI intervention to comparable ones not exposed. Differences may reflect the intervention’s influence.
9. Calculate a cost-benefit analysis: Determine the costs associated with implementing DEI initiatives, including expenses related to training, recruitment, mentorship programs, and any other relevant activities. Compare these costs against the benefits derived from improved performance, increased productivity, reduced turnover, enhanced brand reputation, and other positive outcomes. This cost-benefit analysis provides a more concrete understanding of the financial impact of your DEI efforts.
10. Monitor progress and adjust strategies: Continuously monitor and track the progress of your DEI initiatives. Regularly assess metrics and key performance indicators to identify trends, patterns, and areas where improvements are needed. Use this data to refine and adjust your strategies, ensuring ongoing alignment with your organizational goals and objectives.

Measuring ROI of DEI initiatives helps hold organizations accountable, ensuring that DEI is not merely a buzzword, but rather an integral part of their operations and culture that delivers tangible results. The strategies above help provide a framework for assessing the effectiveness of DEI programs, aligning initiatives with broader organizational goals, and driving sustainable change. By leveraging data and metrics, organizations can make informed decisions, cultivate a more inclusive workplace culture, and harness the full potential of a diverse workforce.

About Arbor

Arbor enables leaders to easily capture, analyze, and benchmark DEI outcomes. Through integrations into existing HR and applicant tracking systems, Arbor’s dashboard helps employers easily analyze workforce and hiring trends to measure progress and quantify efforts. Beyond DEI analytics, Arbor enables leaders to compliantly capture employee-disclosed demographic and sentiment data through self-ID and pulse surveys, benchmark outcomes against industry averages, and easily export into reports for shareholders.

‍