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Three big threats to diversity and inclusion for 2023

Diversity and inclusion have rightfully been topping the agenda for a while. This time last year, DE&I positions were among the most-hired People team roles.

But despite years of promises, pledges, and pithy statements, progress has been disappointing. And, worse: worrying data is emerging that suggests today’s challenging business environment is seeing many organisations slide backwards.

That’s not good enough. And it’s not sensible, either.

In a difficult economic landscape, businesses need a competitive edge more than ever. The edge that diversity and inclusion has been proven to deliver, time and again:

• Companies in the top quartile for racial and ethnic diversity are 35% more likely to financially outperform their industry median

• Companies in the top quartile for gender diversity are 15% more likely to financially outperform their industry median

If other organisations are starting to regress on their DE&I pledges, now is exactly the time to move forward with yours.

Here are the three biggest threats to diversity and inclusion for 2023. Is your business doing enough to protect your DE&I agenda and provide an inclusive environment where different perspectives lead to business value?

1. Layoffs

Late 2022 and early 2023 have seen global mass layoffs across almost every industry. Globally, more than 200,000 tech workers have been laid off in the past year, for instance. From micro-businesses to huge global enterprises, few organisations are comfortably immune from danger.

But layoffs’ promise of short-term cost reduction comes with the threat of long-term culture and brand damage. Leaders must protect against those risks or layoffs could ultimately fold the business, not save it.

The data shows many organisations aren’t doing a good job here – and diversity and inclusion is one of the biggest victims.

Recent research from workforce intelligence organisation Revelio Labs found that many organisations have seen sharp declines in their share of diverse new hires. TripAdvisor, for example, has suffered a 7% decrease in the share of diverse hires since July 2022.

This decline in diverse hiring could suggest improving representation has taken a backseat for many organisations.

But whether intentional or not, it’s an inevitable consequence of layoffs, when layoffs disproportionately hurt DE&I professionals: in December 2022, Revelio Lab’s same research showed that the attrition rate at layoff companies was 57% higher for DE&I roles than non-DE&I roles.

The problem extends far beyond the immediate loss of talent. What message does it send, disproportionately laying off the people charged with furthering your DE& goals? What culture are you left with?

Hint: it’s not an inclusive one. McKinsey observed this connection between diversity and inclusion back in 2020, but it seems many organisations haven’t heeded the warning:

“The dynamics around inclusion are a critical differentiator for companies. An emphasis on representation is not enough. Employees need to feel and perceive equality and fairness of opportunity in their workplace. Companies that lead on diversity have taken bold steps to strengthen inclusion.”

If your organisation is forced into layoffs, ask: how are we ensuring those layoffs don’t disproportionately impact diverse employee demographics?

2. High turnover among women and women of colour

Turnover is a costly issue, irrespective of employee demographic. Conservative benchmarks put the hard costs at 1.5x to 2x annual salary, and that’s before you consider the increasingly difficult recruitment landscape.

But turnover isn’t just expensive in the financial sense. It’s also a major lever for perpetuating inequality, hurting your representation and damaging your culture of inclusivity and belonging.

McKinsey’s Women in the Workplace 2022 report says we’re experiencing a “Great Breakup”, as “women are demanding more from work, and they’re leaving their companies in unprecedented numbers to get it.”

Their research shows female leaders in particular are switching jobs at record-high rates, which has profound implications for culture.

High turnover is also pronounced among women of colour, with over 200,000 Black and Latina women disappearing from the US workforce altogether since the pandemic.

In other words, there’s a flow of gender- and ethnically-diverse talent away from many organisations: declining representation that sends a clear message on inclusion and belonging.

(And this outward flow isn’t being balanced by inward recruitment. 81% of HR professionals say their company haven’t increased racially diverse hiring efforts since 2020. In the US, 85% of business owners are freezing hiring.)

If you have high turnover among diverse employee groups, ask: how do we recognise and accommodate unique challenges these employees might face? How do we build a workplace and culture that’s better for everyone?

3. The rising cost of living

The world over, employees are struggling with rising costs. The rising cost of living is the most pressing worry for 93% of employees across Europe, for example, and 67% of Americans are increasingly worried. (That’s why poor financial well-being is one of the big three drivers of turnover right now).

In theory, rising costs impact everyone. But in practice, the cost of living crisis is far from equal.

There’s robust evidence that the cost-of-living crisis disproportionately hurts ethnically diverse communities, for instance. Ethnically diverse people are a third more likely to struggle to afford their bills, rent, or mortgage each month than people from white backgrounds.

And women are also disproportionately impacted, given they’re typically already earning less than their male counterparts. With less financial buffer, rising costs are harder to bear.

(New analysis from the Trade Union Congress shows that the gender pay gap sits at almost 15%, widening dramatically after women have children. At the current rate, the gap won’t close until 2044.)

If your employees are facing rising costs (they are!), ask: how are we protecting our people? Do we understand the pressures different employee groups face financially? What are we doing to ensure the cost of living crisis doesn’t cause long-term inequality?

Are you backsliding on your diversity and inclusion pledges?

2023 could be catastrophic for DE&I, because all these trends play into one another:

• Organisations are letting their DE&I leaders go, demonstrating a step-back from diversity and inclusion commitments.

• Inequality is increasing but there are fewer dedicated people to steer you through it and protect your culture of inclusion and equality.

• Women and people from ethnically diverse backgrounds are leaving workforces that don’t particularly work for them anymore.

• Recruitment is getting harder as talent pools shrink and because employees don’t want to join workforces that don’t represent or include them.

The result is a powerful negative force: if this situation is allowed to unfold unchecked, we could be looking at years of regression for DE&I. Leaders must act now, to protect culture and ensure your big DE&I promises are more than hollow statements. And if you do, there’s a big opportunity to step ahead of your competitors.

To that end, the big questions are: Do you understand the biggest threats to diversity and inclusion for your business? Do you know at a granular level what’s really happening for different employee groups? And do you have a systematic way to improve experiences and build an inclusive workplace?

Winningtemp’s employee engagement platform gives accurate, detailed, and up-to-date insight into how your people experience work, so you can build an intentional culture. Read our step-by-step roadmap to using employee insights to improve DE&I.


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