Companies are losing diverse talent at one unrealized inflection point

Diversity, equity, and inclusion within the workplace are undeniably important in today’s competitive job market. But it’s not just about keywords for reputation building and checking off diversity boxes — workplaces with a diversified employee workforce capitalize on a multitude of benefits, from increased creativity and innovation to boosted employee performance and productivity, to improved decision-making. As an added incentive, businesses with diversified teams are more likely to financially outperform their peers.

Having a diverse workforce is more impactful when those in leadership and critical roles reflect that diversity. Diverse representation brings multiple perspectives and ways of understanding to the table that can be very helpful, if not necessary, for decision-making. It also fosters a growth mindset and an open learning environment, both necessary for building stronger relationships with employees, clients, and potential clients. Tangentially, employee morale, trust, and sense of safety increase in parallel as corporate leadership diversifies.

There are roadblocks to building diverse leadership, though.

Current systems for hiring and promoting are often built around archaic archetypes and leadership attributes that are traditionally only deemed “acceptable” for men. While a female employee may have the same leadership skills and qualifications as a male counterpart up for the same role, they will be overlooked for a promotion because women are expected to lead differently. Similar values in men and women are perceived differently: they are assets for men and drawbacks for women. Combined with the “motherhood penalty” — the assumption that mothers can’t maintain the same professional footing as male colleagues or women without children — and it is harder for women to achieve leadership roles.

Another key roadblock to leadership diversity is that many companies don’t offer adequate, if any, paid parental leave (PPL). This greatly impacts women already in high positions and often hinders them from pursuing career advancement in the first place.

54% of women with a master’s degree are waiting to have children until after age 30, meaning they are entering the motherhood life stage further along in their career, often when they are already in critical leadership roles. A lack of adequate PPL often forces these professional women to choose between their careers and starting a family.

Many employers do not offer robust, inclusive paid parental leave, instead only offering mothers paid maternity leave since they are the “primary caretaker.” Fathers, as the “secondary caretaker,” often get little to no paid paternity leave. As a result, women are forced temporarily — and sometimes permanently — to leave the workforce as the primary caretaker. In fact, 50% of women without access to PPL will quit their jobs within a year of having a child.

BIPOC women have to work twice as hard to earn the same advanced positions—and lack of PPL has a more drastic negative impact on their lives.

2020 saw 85 white women to every 100 men being promoted to a managerial role, a ratio that was even larger for Latina women (71 for every 100 men) and Black women (58 for every 100 men). This comes at a time when women of color make up the largest percentage of the workforce — Black women alone were 58.8% of the workforce in 2020, but are disproportionately reflected in corporate leadership structure.

BIPOC women are more likely to be the sole or primary earners of their household, while simultaneously earning less than white men and white women. The 2020 Current Population Survey revealed that Black women typically earn 63% of white men’s earnings, Native women earn 60%, and Hispanic women earn 55.4%, compared to the white woman earning 78.7% of a white man’s earnings.

Women of color are also more often the sole parent responsible for handling all housework and childcare; Latina mothers are 1.6 times more likely than their white counterparts, and Black women are twice as likely. This becomes a key deciding factor in whether mothers of color stay or leave the workforce. Nearly 50% of AAPI mothers, 43% of Latina mothers, and 33% of Black mothers named rising domestic and childcare responsibilities as the main considerations when debating leaving the workforce.

Additionally, working mothers of color without access to adequate PPL are more likely to experience untreated postpartum depression, complications during labor and delivery, and other health issues, as a result of interpersonal, systemic, and structural racism.

In totality, these factors make it financially impossible for working mothers of color to take unpaid leave after having a child — especially if the father does not receive paid paternity leave. Even if working mothers do get some partially paid leave, it often is very short and combined with vacation and sick days; additionally, the partial salary is typically insufficient to make up the difference in wages, forcing mothers to prematurely return to work.

Access to paid leave is beneficial for both the employee and employer.

Adequate PPL provides BIPOC working mothers with the time and resources to receive much-needed treatment and fully recover before returning to the workplace. It also gives them more time to arrange for childcare when they do return to work full-time.

Offering equal PPL to both parents can also significantly reduce emotional stress on the mother. Access to paid time off yields better birth outcomes, including an 80% reduction in the risk of C-sections and birth complications, and it has been linked to improved mental health. A less stressed mama leads to fewer pregnancy and birth complications, making for a healthier mom and baby — and creates an opportunity for mothers to return to work full-time, with no interruption in their career trajectory or earning power.

Employers also benefit from offering paid parental leave. PPL significantly reduces turnover rates, as 86% of U.S. millennials are less likely to quit if paid parental leave is offered. Additionally, 75% of employees said their companies’ paid parental leave policy made them more loyal to the company. As employee turnover costs continue to increase, averaging 33% of the annual salary, retaining diverse employees is critical.

Paid leave is also extremely beneficial to DEI initiatives. For one, companies can retain their female talent pool. States that implemented paid leave policies saw a 20% reduction in female employees leaving their jobs in the first year post-birth and up to 50% reduction after 5 years.

For another, offering paid leave shows your company cares about its employees, which in turn attracts more diverse employees. 83% of millennials, who are now in their mid-30s and starting families, are more likely to join a company that offers comprehensive parental leave benefits. A competitive paid leave policy helps build an employer’s brand reputation and can be leveraged during recruitment.

Not having adequate paid parental leave is a big contributing factor to companies losing out on diverse talent.

Diversity, equity, and inclusion are important, and women and women of color are critical to creating truly diverse and inclusive workplaces. But as many companies are learning, not having PPL policies in place makes it much harder to attract and retain a diverse pool of talent, especially for leadership.

Dirk Doebler is the founder and CEO of Parento.