Transition to Business HUMAN RESOURCES

By Paul Falcone

What is the DEI Movement All About?

You’ve no doubt heard of diversity, equity, and inclusion (or DEI, for short). But there are many misunderstandings about what it is and what it represents. No, it’s not “affirmative action” like we saw in the 1970s. And it’s not simply a “nice to have” because it’s “the right thing to do.” It’s very much about inclusion and belonging, making it safe for all employees to do their best work every day with peace of mind. But that’s only one aspect of DEI. There are other key factors that make this “movement” a critical factor in any organization’s long-term strategic planning. Here’s a quick overview of why DEI has become and will remain so critically important to corporate America.

• Proven and Tested Business Results

Millennial and Gen Z Demands

Gen-Y Millennials (43 and under) and Gen-Z Zoomers (25 and under) are the most studied generational cohorts in world history. Employers know their priorities and would be wise to direct their workforce planning and cultural enrichment efforts to accommodating their desires and goals, which include:

1. Diversity of thoughts, ideas, and voices

2. Career and professional development

3. An ethical employer and a management team that cares about employees personally

4. Work-life-family balance, control, and equilibrium

5. Corporate social responsibility and environmentalism

• The Ethical Imperative

Diversity and ethics in the workplace strive to make people of all socio-economic backgrounds feel comfortable and welcome within an organization. Ethics further promotes equality of opportunity among all employees or prospective workers to be hired and promoted based on merit—not race, gender, or creed. Ethical companies produce thoughtfully diverse and inclusive workplace communities that strengthen internal relationships with employees and external relationships with customer groups.

Multiple studies show that organizations with diverse boards, leadership teams, and workforces continue to outperform companies with more homogeneous boards and senior executive constituents. In fact, according to McKinsey & Company, the most diverse companies outperform their less diverse peers by 36% in profitability (https://mck.co/3IbWopV). While some of these and other findings have been challenged, respectable think tanks and universities continue to publish DEI success stories and support their importance.

• Demographic Shifts

The Baby Boom began after World War II in 1946 and ended in 1964 with the introduction of the birth control pill. 77 million babies were born over that 18-year period—some 10,000 per day. What occurred in 2011 garnered few headlines but was critical to America’s future labor supply: the first Baby Boomers turned 65, and from 2011 – 2029, 10,000 Americans per day retire. Combine this with the fact that the Baby Boom was followed by the “Baby Bust” (a.k.a. Gen X), a generation only roughly half its size, and you’ve got a formula for massive labor shortfalls. True, the Gen-Y Millennials are actually bigger than the Baby Boomers with 80 million constituents, but there will be a lag before they can fully replace aging Boomers.

• Falling Labor Force Participation Rates

COVID shone a light on talent scarcity, but a declining labor force participation rate adds significantly to the mix and will extend far beyond the pandemic. The labor force participation rate fell from 67% in 2000 to roughly 60% today and is projected to remain at that lower level through 2050.

Declining Global Birth Rates in Industrialized Nations

By 2050, advanced industrial countries will be losing population at a dramatic rate, making this a global phenomenon. While the world population hit eight billion for the first time in history on November 15, 2022, the majority of those births took place in underdeveloped, agricultural societies where newborns are needed to ensure the security of the parents as they age. As George Friedman pointed out in his New York Times bestseller, The Next Hundred Years, “living with underpopulation” will remain the norm for the remainder of this century. By the 2040s, many industrialized nations will be enticing tax-paying foreign workers to enter their borders. Some, like Japan and South Korea, have already begun offering foreign workers financial incentives and fast tracks to citizenship.

• A New Talent Pool

Today, underrepresented ethnic groups account for 30% of the total U.S. population. By 2060, they are expected to reach 60% of the population. These groups have historically been overlooked but have a growing amount of buying power. As such, a diverse talent pool increases the range of human capital available to American companies while also better reflecting the buying habits of a more diverse consumer base. This is likely the most critical benefit of diversity hiring: it represents a concrete and reasonable way to develop internal talent pools going forward.

We can expect to see a growing focus on “talent development” and “talent management” as a result. External “talent acquisition” will remain in demand, but wise organizations will look to “grow their own” by focusing their energies and dollars on developing talent rather than simply assuming that posting a job ad or even calling a headhunter will guarantee them superior results. There’s no doubt about it: tapping into underrepresented and diverse talent pools will likely be America’s lifeline moving forward into the 21st century. Wise employers will capture the opportunity by getting ahead of the game and developing a talent bench that reflects their customer base.