Have we been looking at DEI all wrong?
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Have we been looking at DEI all wrong?

Embracing diversity with an equitable mindset aimed at creating an inclusive workplace has been held up as a way of improving performance. But is that right?

Summary: Research from Edmans, Flammer and Glossner challenges common perceptions about diversity, equity and inclusion (DEI).

Why this is important: Unless we understand what constitutes DEI in practice, we cannot really know whether our actions are increasing it or whether it is having a positive impact, both financially and from a social perspective.

The big theme: A key facet of sustainability is getting the most constructive impact for society as a whole with the most appropriate resources that we have. That is often people. Those people can have different backgrounds, different ways of thinking and different starting points. With an equitable view point we can create a culture that includes these diverse viewpoints and skills for the benefit of all.

The details

Identifying and understanding the consequences of DEI

In a working paper for the European Corporate Governence Institute (ECGI), Alex Edmans (London Business School), Caroline Flammer (Columbia University) and Simon Glossner (Federal Reserve Board) identify what the determinants of an environment of diversity, equity and inclusion (DEI) in the workplace are and then look at the consequences of that environment on profitability, valuation and stock returns.

They used proprietary data from the Trust IndexTM which is an extensive employee survey that forms the basis of the '100 Best Companies to Work For in America' list identifying 13 out of a total of 58 questions that cover DEI. Aggregating the responses from those 13 questions produced a measure that the authors believe is a "grass-roots" or bottoms up measure of actual DEI. Forget policy statements, how are actual values being lived out? i.e. what is the DEI culture?

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