Newcomers to diversity, equity and inclusion may find the conversation intimidating; using specific terminology is key in order to avoid misinterpretations or confusion.
An effective statement on diversity, equity and inclusion can enhance a company’s image while helping attract talented employees. But it is essential to recognize that these three terms don’t correspond one with another.
1. Diversity in leadership
An organization may hire employees from diverse backgrounds, but without diverse leadership roles it will be hard for these workers to feel included. Minorities who see that they don’t represent in management might feel disenfranchised from the workplace and search elsewhere for employment that provides more inclusive environments.
Inclusive leaders demonstrate their dedication to diversity and inclusion through both actions and words. They understand the challenges associated with equal rights in the workplace and strive to make it more equitable. Inclusive leaders communicate their intentions to employees and seek feedback while encouraging employees to be part of solving organizational issues themselves.
Companies led by diverse leaders can serve as role models for their employees and help them to appreciate that every person brings different viewpoints and backgrounds to the table. Such leaders also help their workers apply their skills across a variety of situations to increase performance while creating an enriched working environment.
Diverse leadership can also address recruitment and retention challenges. Hiring processes may be subject to unconscious biases that result in underrepresented candidate pools; to combat this issue it’s crucial that interviewers include diverse team of interviewers from diverse backgrounds as well as targeting historically Black Colleges/Universities or underrepresented communities when possible.
Diverse leadership within your company can also address a lack of mentoring and advancement opportunities for employees, which may make retaining talent difficult and reduce employee churn. Gen Z and millennial workers in particular tend to leave jobs that don’t align with their personal values more readily than older generations do.
According to McKinsey research from 2020, diversity-rich companies boast higher productivity and are more innovative than their counterparts without such diversity. Therefore, businesses should prioritize hiring leaders from various backgrounds in order to remain more competitive while keeping employees satisfied with the work environment.
2. Diversity in the workforce
when people with different backgrounds and experiences collaborate, the result can be an energetic and creative workplace that fosters innovative ideas. Their different viewpoints may also help businesses overcome issues that would have been challenging to tackle in an all-male environment and generate increased revenues for themselves.
Diversity within a workforce can provide companies with a more complete picture of the market, which is invaluable when expanding into new markets or products. By hiring employees who understand the needs of specific demographics, businesses can more efficiently develop products and services likely to succeed there.
Diversifying a company’s workforce can also help it sidestep potential issues related to bias, discrimination and harassment. Employees from underrepresented groups can be more at risk for these kinds of issues; therefore it’s crucial that companies create an inclusive workplace culture in which all employees feel welcome. Furthermore, organizations should become familiar with unconscious biases and microaggressions so as to take appropriate measures against them.
Companies that do not prioritize diversity can suffer as a result. A recent study determined that companies in the top quartile for gender diversity had a 48 percent greater chance of outperforming those in the bottom quartile; similarly, ethnic diversity saw 34 percent greater odds.
Companies looking to maximize success should ensure their diversity goals align with business objectives, so as to better measure progress. Doing this may also serve as an incentive for employees who desire a diverse work environment.
While the benefits of diversity in the workplace are undeniable, many companies struggle with implementing it effectively. To be effective in this endeavor, businesses should develop and communicate an effective plan of action with all employees and consider creating programs such as anonymous suggestion boxes where employees can express their thoughts and opinions regarding diversity policies without fear of reprisals from upper management.
3. Diversity in the boardroom
Board diversity has become a strategic business imperative, with investors, employees and other stakeholders demanding it of businesses. Many organizations are increasing the percentage of women and minorities on boards (though progress slowed slightly between 2022-2025). Although such progress is encouraging, more needs to be done if corporate leadership truly changes for the better.
At our firm, we believe it is time to move away from solely focusing on demographic diversity and focus on expertise, skills, and experiences diversity instead. Too often boards lack the diversity in professional backgrounds and experiences needed to meet governance and strategy challenges effectively; as an example, we have invested in food manufacturers without directors with professional experience in their industries; casual dining restaurants without directors with relevant food industry knowledge; specialty apparel retailers without directors with retail/merchandising experience – among others.
We believe boards that commit to diversity must also be prepared to embrace new ideas and perspectives from diverse directors, regardless of their recruitment practices or boardroom dynamics. One approach could be having committee chairs serve as moderators during meetings so all directors can participate and make contributions, or seating least-tenured directors, such as new or minority members near CEO and CFO during meetings so they can easily engage during breaks or ask questions when necessary.
At our firm, we believe that an approach to diversity in the boardroom should include an in-depth knowledge of its ability to enhance board effectiveness. Although some reports claim teams with greater gender diversity perform better than those that are homogenous, rigorous research shows the correlation is minimal at best.
At the core, boards that prioritize diversity in their boardroom will make better decisions. By offering different perspectives to the table and working to engage management on difficult issues more effectively, gender-diverse boardrooms may also prove more adept at making sound judgments.
4. Diversity in the community
Diversity and inclusion efforts of companies should extend far beyond their walls, and one effective means of doing this is community engagement. By building diverse workforces, companies can help foster communities that recognize diversity as valuable and provide a welcoming space for people from different walks of life.
Millennial and Gen Z employees are becoming more selective of the companies they work for, preferring companies with diverse leadership roles and which support causes they care about. According to Gen Z respondents, 56 percent of whom consider a lack of diversity a deal-breaker when considering taking up new employment. A diverse workforce can also help companies become more innovative; according to research published in Harvard Business Review teams with greater levels of diversity are better at anticipating consumer demographic shifts.
To truly embrace diversity, it’s critical that employees understand inclusivity and how it affects all in the workplace. A culture of inclusion means creating an atmosphere in which all individuals feel like they belong – this means celebrating differences among age, race, gender, sexual orientation religion socioeconomic status parenting choices etc and accepting lessons learned from experiences of other backgrounds/perspectives when making decisions.
Teaching employees the value and respect for all individuals in an inclusive culture is also key, since all individuals may not share identical beliefs and values; some people may enjoy more resources or privileges than others, for instance a wealthy individual having more influence than someone with less resources.
Organizations must establish goals related to diversity, equity, and inclusion to track their progress and ensure all employees feel included in the work environment. Beyond setting DEI performance goals, organizations should also provide ongoing education on inclusivity to employees so they can contribute towards creating an environment of inclusion at work.