Last week, it was reported that 84% of DuPont investors voted in favor of the chemical giant publishing data about the diversity of its workforce despite management recommendation that shareholders vote against the disclosure. Coupled with new SEC regulations mandating the disclosure of “material human capital information” for all publicly-held companies (citing the significance of human capital - not just financial capital - to enterprise valuation), this new focus on diversity, equity and inclusion (DE&I) metrics signals a serious shift from nice-to-have to must-have when it comes to the financial implications of DE&I.
The data is uncontroverted, long-standing and voluminous that DE&I increases financial performance. Companies with diverse executive teams are 35% more likely to see better-than-average profits according to McKinsey’s report, Delivering Through Diversity. Additionally, McKinsey's 2020 report, Diversity Wins: How Inclusion Matters, highlights that top-quartile companies for ethnic and cultural diversity outperformed those in the fourth-quartile one by 36% in profitability in 2019.
There is nothing new to see here. But the current cultural climate has jettisoned DE&I to the forefront: internal (employee) and external (remember the Starbucks boycott?) demand for enterprise action is causing shareholders to focus on connecting the financial dots when it comes to DE&I as a business driver.
But it is not just shareholders. While the mandate for public companies is clear, and the DuPont vote supports that investors themselves believe DE&I is a business and performance priority, private companies must also take heed. Private investors and lenders too want to know what your company is doing to attract, retain and develop diverse talent because they understand that enterprises that strategically and successfully make the DE&I journey will unequivocally perform better. Middle-market companies that commit to assessing, analyzing and adopting DE&I solutions that lead to measurable outcomes will be the ones with capital-providers and other growth opportunities banging down their doors, not to mention the best diverse talent in the market. Those that don’t make the commitment will simply fall behind.
Moving along the DE&I maturity model and turning intention into action requires organizations to measure their metrics and set KPI’s that map to enterprise financial performance. If your enterprise wants to achieve the next level in performance in your industry vertical, please reach out to me.