3 DEI hiring lessons (from a transgender CEO)

There are some titles that are well known in the business world. CEO, for example, needs no explanation. COO and CFO are also well known. But what about CDEIO? For those who are not familiar with that one, it stands for Chief Diversity, Equity, and Inclusion Officer, a position that is becoming common in the C-suite as more companies realize the potential that DEI has to impact their bottom line.

DEI entered into the corporate conversation in the 1960s, as legislation began to appear in the US aimed at discouraging discrimination in the workplace. Initially, DEI efforts were seen as something that was done to comply with regulations rather than compete with rivals. After nearly 60 years of development, DEI is finally coming to be understood as an initiative that helps businesses to have a competitive advantage.

For those businesses seeking to understand how DEI can help their bottom line, here are some areas where it plays out in a positive way.

Enlarging the talent pool

Discriminatory hiring practices simply shrink the talent pool from which companies have to draw. Conversely, establishing, promoting, and supporting clear policies that allow for the widest possible diversity in candidates broadens the pool. With more applicants to choose from, the chances of finding the right applicant increases. To make this a reality, businesses must clearly communicate, in both word and deed, that available positions are open to anyone, regardless of their culture, race, religion, age, gender, gender presentation, sexual orientation, or any disabilities they may have.

Empowering innovation

With diversity of talent comes diversity of thought. One of the benefits this brings to companies is a greater capacity for innovation. Companies that fail to welcome new perspectives cut themselves off from new ideas, which are the lifeblood of innovation.

In addition, companies that authentically encourage diversity, equity, and inclusion create a safe space in which employees can bring their true selves and their best thoughts without fear of judgment. New ideas, products, and initiatives for supporting the business and its customers are more easily offered, discussed, and developed in such an environment.

Statistics show that companies with below average diversity draw only 26% of their revenue from innovative initiatives. For companies with above average diversity, 45% of their total revenue is derived from innovation. Building a diverse workforce creates an environment that supports innovation, which in turn drives profitability and positions a company as a market leader.

Building brand value

Whereas the early days of DEI efforts were driven by regulators, in 2022 consumers are the ones who expect brands to value diversity, equity, and inclusion. In February 2022, McKinsey and Company released an article, entitled “The rise of the inclusive consumer,” that warned retailers they must move to implement meaningful DEI policies or risk losing customers. One of the findings presented in the article was that 45% of shoppers believe businesses in the retail space should actively support Black-owned businesses and brands. Businesses that turn away those “inclusive consumers” lose more than 100 million potential shoppers.

One clear takeaway from McKinsey’s findings is that brands that demonstrate a commitment to DEI elevate themselves above their competition in the eyes of consumers. Findings released in late 2020 revealed that when comparing brands that offer identical products, 34% of consumers consider commitment to DEI as a deciding factor when choosing which to purchase.

As brands seek to leverage the power of DEI to build brand value, they must be careful not to confuse performative initiatives with authentic efforts that contribute to meaningful change. In essence, performative initiatives call attention to the need for DEI without actually affecting any change in that area.

Related: Don’t overlook people with disabilities in your DE&I efforts

For example, acknowledging National Disability Awareness Month without addressing issues in the workplace that limit inclusiveness for those with disabilities is an example of a performative initiative. A brand that wants to build a reputation for supporting DEI must be able to show that it honors its values by taking steps that make a difference. Statements that are not clearly supported by action have the potential to erode trust in the brand rather than engender it.

Truly embracing DEI within an organization requires more than simply a change in policies and programs. At the heart of authentic DEI is a change in mindset. Appointing a CDEIO is not enough. To be a standout company in 2022, all of the leaders must embrace the belief that the most innovative, most respected, and most profitable businesses are those that are committed to diversity, equity, and inclusiveness.

Wynne Nowland is the CEO of Bradley & Parker. She came out as trans to her entire company in an email—featured in the WSJ—saying “You’ve all known me as Wayne, but tomorrow morning I will arrive to work as Wynne.”