In the business world, much of the focus is on the bottom line. Executives and leaders strive for a high return on investment for every strategic decision they make, ultimately seeking to create value.
However, when it comes to initiatives around diversity, equity and inclusion, businesses often pursue these initiatives to improve their reputation. Take, for example, the number of corporations that pledged to ramp up DEI efforts amid the pandemic and the height of the Black Lives Matter protests last summer, demonstrating to customers their support for the movement during a critical time.
While pursuing the goals of DEI is certainly the right thing to do from a moral standpoint, these decisions can also significantly boost a company’s bottom line. Across the Broad College at MSU, faculty are helping to make the business case for DEI, showing the returns for embracing these values and exposing current issues in the workplace that inhibit positive outcomes.
The ROI for DEI
From employee productivity to innovation, DEI makes good business sense. Faculty across the college’s multiple departments are working to help illuminate these benefits.
Productivity improves with diverse and inclusive teams. For instance, Sriram Narayanan, Kesseler Family Endowed Faculty Fellow and professor of supply chain management, and Edward Terris, fixed-term faculty of supply chain management, partnered with Peckham Inc., a Lansing-based nonprofit organization, to study the inclusion of disabled workers in an apparel manufacturing facility. Their findings revealed that the more disabled workers there were on a team, the more productive the team was.
Revenue goes up when equitable practices are in place. For many years, Ranjani Krishnan, Ernest W. and Robert W. Schaberg Endowed Chair in Accounting, has worked to help small farmers in developing countries grow, thrive and climb out of the poverty cycle. Her work helps break down technical, economic, policy and societal barriers, which in turn enables millions of farmers to reap sustained business success.
Financial performance and organizational functioning are enhanced when companies embrace DEI. Quinetta Roberson, John A. Hannah Distinguished Professor of Management, focuses on the “so what” — the value of DEI for leaders, organizational capabilities and the bottom line. Her work has shown that beyond simply generating more revenue, diversity helps companies reach and understand new markets, drive innovation and engage in environmental scanning, which lead to superior performance. Roberson has examined everything from the benefits of building a diverse board of directors to the spillover effect that happens when employees feel valued and pass that value on to customers, improving customer satisfaction and brand outcomes.
This month’s episode of the Broad Matters podcast features Roberson discussing her work and the strategic advantage of DEI when businesses invest authentically.
Exposing current workplace issues
To make progress, business leaders must understand the issues that are currently preventing growth and change. And Broad research does just that by examining workplace practices that constrain the benefits of DEI.
Discrimination takes on many forms and is still prevalent today. Research from Christy Zhou Koval, assistant professor of management, found that Black women with natural hair — styled in braids, afros, twists, dreadlocks and cornrows — are often seen as less professional and less competent and are less likely to be referred for job interviews. Her work helps increase awareness about this type of discrimination and inform new policies that dismantle harmful workplace standards and embrace freedom of expression.
Gender imbalances can be resolved when structural barriers are addressed. A working paper from Alex Scott, assistant professor of supply chain management, looks at why women are underrepresented in blue-collar jobs — like truck driving — especially in higher paying, more desirable positions. Scott’s research outlines practical ways for industry to improve gender equality and ensure that women can advance through the “blue-collar pipeline,” covering everything from altering the design of trucks to be ergonomically friendly for women to embracing gender-based training and retention methods.
Hiring who you know can limit a diverse talent pool. The reality is that when we hire who we know, it often means hiring people who look like us. Work from Charles Hadlock, Frederick S. Addy Distinguished Chair in Finance, found that hiring based on connections from your network could result in superior talent and performance, but not because of race or ethnicity. In one study, for instance, hiring based on ethnic similarity resulted in lower performance than hiring based on a shared alma mater. His work helps to shed light on the impacts of policies that encourage hiring via referrals.
Performance can also suffer when employee status equality isn’t reinforced. Ongoing research from Nick Hays, associate professor of management, explores how status hierarchies — differentiation based on how respected people are — play a role in team performance. For instance, classic demographic categories, like gender, race and age, tend to produce status differences that can lead to a competitive team climate instead of a collaborative one. As businesses continue to rely on teams to accomplish tasks, leaders must reinforce that all team members are equally important and respected to maximize performance.
As noted by many of the researchers, removing barriers to DEI is no small task. These barriers are often systemic and require significant investment to create a work environment where everyone is valued and can do their best. This could involve specialized consultants, systematic approaches to workforce development and the hiring of diverse talent, ongoing collaboration with individuals and constant experimentation to assess best fit for employees. However, if the resources are invested to do it right, DEI can pay off, ensuring that all employees are respected.
While these examples of Broad’s DEI-related research partly demonstrate our commitment to these values, they are not exhaustive. As a whole, our academic pursuits help to further this important work and enable leaders to fully embrace values that truly transform the future of business.