Diversity Equality and Inclusion | Do you have an Inclusive Culture
Odds are that you’ve heard of diversity, equity, and inclusion. Also known collectively as social responsibility or DEI, these initiatives have a disproportionate impact on the health and growth of small businesses precisely because of their limited size. Unfortunately, in the United States especially, the movement toward diversity and inclusion is progressing slowly. Several key factors influence this slow shift toward
diversity. Most significant, perhaps, is that changing a company culture takes time and, even once hiring practices and operational standards change, requires years of adjustment to shifting mindsets.
Of course, it’s worth noting that DEI is also progressing at an inconsistent rate. Occasionally, events will stimulate a temporary acceleration. For instance, the Black Lives Matter movement is associated with a corresponding acceleration in racial minority representation in business leadership in 2014 and heightened awareness of the fallout of systemic injustice. On the other hand, this boost in funding for DEI was also one of the first things to disappear as the COVID-19 pandemic lockdowns forced budget cuts. Minority-owned small businesses were disproportionately impacted by the pandemic, too, with drops of 41% and 32% in black and Latinx businesses respectively, compared with 17% in white-owned businesses.
That said, post-pandemic DEI initiatives are also proving to be more effective than earlier efforts, given their focus on incorporating remote work into the sudden need to reexamine policies and even business models. Large businesses, in particular, have been encouraged to make strategic DEI decisions that visibly combat systemic injustice and also increase their access to larger markets. Where possible, small businesses are following suit. Increasingly, this involves bringing employees into the development of DEI solutions, resulting in far more practical approaches.
Regulation, however, is not yet dictating small business practices in terms of diversity. Laws regulating company board diversity are targeted toward larger corporations, and even these are new. Small businesses are not required to, for instance, seat at least one director from an underrepresented minority group by the end of 2021, as determined by a recent California law. With increased awareness of the research that supports the lucrative impacts of the workforce and executive leadership diversity, change is happening, if slowly. For example, in 2020, Latinos composed approximately a fifth of the U.S. population but made up only 3% of Fortune 1000 company board members. If this difference seems dramatic, consider that in 2011, the statistic was 1.5%, meaning representation doubled in less than a decade. In fact, the push toward formalized DEI began to gain visibility and traction only within the past fifteen years or so.
Still, in terms of leadership, most small businesses continue to fall short. Even in companies with more diverse workforces, decision-making is often in the hands of a less diverse or inclusive executive board, which dictates company policy. For any business to pursue true diversity, it must prioritize change, which often means hiring an external DEI consulting firm or another professional.
So, the short answer is, small businesses don’t measure up; at least, not yet. But this answer is incomplete and doesn’t provide a complete understanding of the current state of the industry in terms of DEI. To accomplish this requires understanding exactly how small businesses benefit from introducing social responsibility initiatives, potential drawbacks, and roadblocks to implementing these changes, the resources involved in shifting corporate culture, and how to determine where focused effort is required
The Benefits Of DEI And Why It Matters
Why do diversity, equity, and inclusion matter to a small business? Setting aside questions of cultural or ethical imperatives, socially responsible business structures, practices, and culture provide a competitive edge. Practically speaking, creating a diverse and inclusive workplace has a direct and proven impact on your business’s success. Studies show a direct correlation between the financial performance of a business
and the diversity of its staff. In fact, research links gender and ethnic diversity to a 35% higher probability of greater returns, according to research by McKinsey, a global consulting firm. Small business workforce diversity influences the rate of growth of the business, and its resilience to market changes, too.
Inclusivity within a business culture reflects in the customers it attracts, as well. In fact, you increase your company’s appeal when you demonstrate
that you value diversity. According to McKinsey, more diverse companies are better able to attract the highest-level talent, individuals who are driven to excel and who are more aware than most of where the industry is headed in terms of inclusivity. Such businesses also demonstrate improved awareness of customer needs, higher employee satisfaction measures, and overall better business decision-making.
You may be asking yourself why inclusion is so critical as part of diversity and equity initiatives. Regardless of the diversity of the individuals who
make up your company, without equal voice and visibility given to each of these individuals, no company can benefit from the diverse range
of perspectives. It doesn’t matter, for example, how many women sit on your leadership board if their voices are ignored or drowned out. The same
is true for any minority or underrepresented group.
Inclusive company culture is crucial before any small business is capable of its highest potential growth rate. Lack of diversity limits innovation and,
in many cases, prevents a business from fully understanding its target audience or customers. Studies show that business teams make better
decisions 92% of the time when they identify at least seven options. More diversity means more creativity and sources for unique ideas since diverse
teams make better decisions 87% of the time.
Before you dismiss social responsibility initiatives as a fad or phase, keep in mind that trends toward more inclusivity and positive associations with
increased diversity are not new. By now, you’ve likely heard some trend or another referred to as “transformative.” Social responsibility is one such
trend. Over the past decade, social awareness and responsibility in business have been on the rise and are truly transforming the way
businesses look at and interact with people, within and outside their business structures. Failing to incorporate such initiatives into your
business model can result in stagnation and reveals an absence of awareness of current industry standards and best practices.
Current State Of Small Business
Given these significant benefits, you might easily assume that small businesses are climbing over one another to capitalize on diversity, equity, and inclusion opportunities. Unfortunately, the statistics still suggest otherwise. Though the number of socially responsible small businesses continues to rise, the pace is slow and, in some cases, reversed. In 2018, Fortune 500 companies had a total of three black CEOs; in 2007, there had been
seven; in 2020, there were four. With any single-digit numbers, fluctuations are likely to appear more dramatic, but statistics like these still cause concern because they reflect company culture, which is a far more accurate measure of diversity, equity, and inclusion. However, the pandemic has shaken the global economy and brought a certain level of instability into this statistical progress, in the form of both spikes and dips in different
areas of DEI. Different types of businesses are experiencing new and unexpected opportunities to access DEI tools even amid the struggles of recession, particularly in the areas of remote work expanding their reach.
Though small businesses within the United States and the United Kingdom have steadily improved racial and gender diversity over the past ten years, they continue to be slow to improve ethnic and cultural diversity at an average annual increase of only 1%. Black women, in particular, are disproportionately underrepresented in executive management positions, as the result of what is known as a double burden of bias.
Because of tighter margins and more limited scope, small businesses have lagged behind larger ones in introducing social responsibility initiatives. This may be in part because of the perception, however false, that diversity, equity, and inclusion are impractical goals that require the investment of more resources than they are worth. In addition, creating lasting change takes time. Because developing diversity means focusing on hiring practices, it can take years for businesses to become truly representative in terms of diversity, equity, and inclusion.
Studies as recent as 2017 attribute this hesitation to adapt DEI to uncertainty about how to effectively leverage diversity, equity, and inclusion into hard outcomes or “value.” What many businesses fail to recognize is that these outcomes are naturally tied to increased social responsibility. In effect, inclusion parameters don’t need to be forced to behave in a certain way to generate results. Implementing protocols that support diversity and inclusion at the executive level, specifically, is correlated with higher business profitability.
While this doesn’t necessarily mean that nothing else needs to be done to achieve an increase in profit, it does indicate that diverse and inclusive business cultures are far more likely to generate a greater profit because of their DEI decisions. This makes DEI, essentially, one of the simplest means of improving the performance of a small business. That said, this is not an overnight change with immediately tangible benefits. Resources put toward DEI initiatives are, ultimately, a long-term investment, which is often a stumbling block for small business owners operating on tight budgets.
As it turns out, perhaps unsurprisingly if disappointingly, introducing diversity in corporate leadership is one of the most significant hurdles to introducing DEI in large companies and corporations. This is where small businesses are at a distinct advantage. There are far fewer mindsets to change to alter an entire executive board’s perspective on DEI within a small business when compared to a corporate board.
In larger institutions, director boards tend to be composed primarily of older white men with years of experience serving in such positions, so even as the numbers do begin to reflect more diversity, the weight given to newer voices tends to be muted. Within a small business, it’s often actually easier to amplify diverse voices, once the commitment is made to do so. It’s also easier to move current employees from underrepresented groups into leadership positions where they can, in turn, spread and implement DEI.
Limitations Of DEI Initiatives
Within any organization, but more dramatically within small businesses, shifts toward social responsibility are top-down initiatives. If company leadership isn’t driving diversity, equity, and inclusion initiatives and establishing new systems or routines to maintain them, lasting change in the company culture and practices are far less likely.
For small businesses, especially, one of the roadblocks to creating and maintaining a diverse workforce is the size of that workforce. Small businesses are, by definition, small. They employ fewer people and have smaller budgets to commit to marketing campaigns that might promote change by reaching a more diverse range of clients or customers. They may also be less capable of hiring DEI professionals to help them assess their businesses’ specific diversity needs and helping them make actions plans to introduce changes. Perhaps the simplest way to cut down on overall costs in this area is to require this training at the upper level of management first and follow up on the results.
Several studies also suggest that increasing diversity in teams increases both innovation and friction, since introducing more ideas means that these ideas are more likely to conflict or compete. This, in turn, means that DEI is most effective when paired with strong leadership that can best direct this innovation in the most productive ways. Here, too, progress relies on complete DEI, rather than the superficial pursuit of diverse statistics. Basically, a business can’t claim to be diverse, equitable, and inclusive unless both its leadership and employee base meet these standards.
Finally, instituting DEI requires endurance. For a small business, this means that leadership is continuing to push for consistent adherence to DEI standards over years, rather than making a concentrated effort for a month or two. Small business owners, generally, don’t have much time or
energy to spare, so dedicating any of it to DEI means making compromises elsewhere, especially at first. Change is hard, but in this case, the evidence suggests it is also well worth the effort now for the results, several years down the road. Any small business planning for growth and scale, therefore, is smart to begin implementing these changes now.
How To Implement DEI And Change Company Culture
As indicated, corporate social responsibility requires effort and can be difficult to implement within a small business. This doesn’t mean it isn’t worth the effort, however. A few key strategies can help any small business move toward a more diverse and equitable workforce, which in turn accelerates business growth and resilience. Formal training sessions not only educate employees, but also serve as a platform to encourage open conversations around issues of respect for ethnicity, age, gender, and religion. It’s much easier to address unconscious bias when employees are aware of how it might be influencing their behavior. Fostering an environment where each individual feels that they are respected and their voice is equally valued involves a commitment to open communication, too. Establishing regular, recurring meetings where inclusion is a formalized line item on the agenda is a good start, particularly when discussions involve crafting specific diversity goals through internal examination and reflection on current business practices.
In day-to-day operations, consider whether each individual speaks during such meetings, and for how long. Analyze why certain individuals might not be speaking up or why others tend to dominate discussions. Considering how your business measures up in terms of DEI and identifying areas for improvement is the first step before change can happen. This also means making DEI a central concern, rather than a peripheral one. While a DEI committee is a useful tool to help implement change, it can also be a means of shuffling these concerns to the side rather than incorporating them into business culture with clear and enforced accountability measures. Reexamine and correct your brand’s marketing and messaging to increase its
inclusivity. If possible, hire a DEI consultant to help identify problematic messaging. The language and images you use convey how your company as a whole views people, whether they be employees or consumers. Part of reshaping a company culture involves reshaping its standards at every level, particularly in communication, which includes interpersonal, marketing, and B2B.
A small business must consider how hiring practices might limit the diversity of applicant pools or even introduce bias in the interview process. Studies show that men, as a group, tend to have an advantage in the traditional application process, largely because they are more likely to overstate or exaggerate their skills and experience. Performing the same interrogation of your internal promotion processes is also worthwhile. In small businesses, especially, where only one or even a handful of people are responsible for the process from identifying applicants to the final offer, it’s much easier for unconscious personal bias to influence who is ultimately hired and at what rate of pay.
No small business stands alone, either. When working to support DEI, small business owner has to keep in mind whom they choose to work with, as much as whom they work for. This might involve researching suppliers and thinking about whether the business can support more diverse businesses instead or work with a broader range of representative businesses.
That’s not all, however. Small businesses must consider the needs of their target market or local community and how their business and products address those needs. As a small business owner, you might ask yourself whether your business is providing goods or services that effectively meet the needs of a fully diverse community. You might realize that there are new products or features you can introduce that will increase accessibility, for instance.
Again, change trickles down. DEI starts at the top. The more diverse, equitable, and inclusive an executive board or other leadership teams, the more this pattern will be recreated and represented throughout the rest of a small business.
Working from the top down helps small business owners define priorities with specific business strategies that drive inclusion, diversity, and equity. Essentially, small business owners should know exactly what their diversity goals are and have a concrete plan for how to reach them. One of the advantages a small business has in this arena is the ability to easily tailor these strategies to produce a positive impact on the local community.
While studies demonstrate the financial benefits of established social responsibility within a business, these cultural shifts don’t happen overnight. It takes years of focused effort to solidify inclusion and diversity within any organization. Planning for this slow but steady shift will set a business up to succeed in DEI.
Acting To Improve Diversity , Equlity , And Inclusion
At the end of the day, size matters. To what extent it matters, and how it informs DEI change depends largely on the direction of the movement. Shifting a business culture is simpler in a smaller business, but it also requires complete buy-in from the top level of management for it to have any hope of lasting.
Slow adaptation also means that the faster a small business is to commit to social responsibility initiatives, the more competitive it becomes. More
than ever, the shift toward remote work caused by COVID-19 continues to expand the potential for social responsibility in hiring. Especially in
areas with historically limited diversity, the pandemic has created opportunities to expand pools of prospective employees and reduce interview bias. With a little focused research, small business owners can determine how a specific industry or business can make the most of remote opportunities and broaden engagement more effectively.
The U.S. Small Business Administration, or SBA, includes an office dedicated to diversity, inclusion, and civil rights with the stated purpose “to champion a diverse workforce and inclusive culture in small business.” The office provides access to resources to help equip small businesses to
maintain compliance with laws that prohibit discrimination in the workplace, which is an important foundation for any DEI initiative and helps small businesses evaluate just how much change is needed.
DEI change will not be complete until all businesses, of all sizes, are committed to correcting issues of diversity and inclusion and have access to the resources necessary to implement change. Collective action is not unheard of within corporate business culture, of course, but it is rare.
The benefits of early adoption are familiar to most business owners. So, though creating a company culture of diversity, equity, and inclusion takes time, acting sooner rather than later can result in significant advantages over competitors. If you don’t want to get left behind, assess your own small business for gaps in social responsibility and begin making positive changes, for your bottom line and our shared society.