DEI is good business: boost talent abundance and your bottom line.
In a swiftly evolving landscape marked by widening skills gaps, talent scarcity and technological disruption, diversity, equity and inclusion (DEI) continue to be key factors in any successful talent strategy
|6 min read|
An enduring and crucial social pillar, DEI is much bigger than an ethical construct. It’s an essential business strategy to address skills gaps and create a culture of inclusivity, despite shifting regulations and political perspectives.
And the need for talent is dire. The World Economic Forum estimates a global talent shortage of more than 85 million workers by 2030, potentially leading to an estimated $8.5 trillion in unrealized annual revenue in just six years.
According to Randstad Enterprise’s Global In-demand Skills research, talent pools are shrinking due to demographic shifts, changing workplace dynamics and high demand for specialized skills. What’s more, talent scarcity is expected to persist for years to come, creating significant challenges for employers and the global economy.
Yet, while DEI is pivotal to expanding talent pools, its impact is so much broader: With its ability to cultivate inclusion, ignite engagement, fuel innovation, bolster organizational brand and increase profitability, DEI is a powerful catalyst for driving sustainable growth and equitable solutions. Some may ask when we will stop discussing the business case. The answer is once leaders successfully, consistently and unwaveringly acknowledge DEI alongside other business priorities.
DEI: a vital social pillar and business imperative
Investing in creating a culture of equity and inclusion isn't just a matter of social responsibility — it's a smart business move. It's the driving force behind innovation, talent attraction and better business performance.
Equity and inclusion initiatives drive tangible business outcomes, with diverse organizations experiencing increased revenue from innovation and enhanced overall performance. Inclusive workplaces excel at bridging skills gaps, retaining top talent and meeting evolving market demands — making it a must-have for success in today's business world. While HR leaders worldwide (but particularly in the U.S.) have faced DEI challenges over the past few years, even business leaders who identify as politically opposed to DEI recognize its performance-boosting impact on their bottom line.
Countless studies have demonstrated the positive correlation that DEI has on business performance. For example, The Boston Consulting Group noted that companies with above-average diversity in their management team have experienced a 19% higher positive impact on innovation than organizations with below-average leadership diversity.
Secondly, McKinsey's research solidifies the business case for DEI, demonstrating that companies with diverse workforces outperform their peers financially. Companies with diverse teams experience a 19% increase in revenue from innovation, positioning DEI as an ethical choice and a sound business strategy that enhances employee engagement, retention rates and overall profitability in today's competitive landscape.
Businesses in the top quartile for ethnic diversity are 39% more likely to excel than those in the bottom quartile. Those with more women in executive roles exhibit superior financial performance. McKinsey's research indicates that companies where women make up over 30% of the executive team tend to achieve better financial outcomes.
Another key financial advantage of prioritizing DEI lies in employee retention. The cost of replacing an employee can be as high as double their annual salary. By cultivating inclusive workplaces, organizations reduce turnover rates and preserve their investment in talent, leading to substantial savings on recruitment and training expenses.
ignite engagement and enhance the talent experience
At its core, when DEI is part of the organization’s overall business strategy, it creates talent abundance by fostering an equitable workplace where every individual feels a sense of belonging. It enhances the talent experience by boosting engagement and driving a continuum of progress for all that heightens productivity, performance and profitability, all while elevating talent attraction and retention. Inclusive companies have employee retention rates 5.4 times higher than non-inclusive companies, based on research from Great Place to Work.
Randstad’s Workmonitor research uncovers that DEI is especially important to younger generations, such as Gen Z and millennials. In fact, 44% wouldn't consider working for a company that lacks diversity, while 37% wouldn't join if they felt they didn't belong. This means to attract and retain top talent in the face of long-term scarcity, employers must view DEI strategies as critical for positioning themselves as an employer of choice.
fortify skills-based talent models — the future of work
In addressing talent scarcity, organizations worldwide are increasingly adopting skills-based talent models that prioritize human potential. A skills-focused approach assesses individuals on inherent skills, such as critical thinking and empathy, rather than solely on traditional credentials like work experience and formal education. Employers are also considering what motivates individuals — for example, an interest in solving complex problems or a desire to make a difference in the world — as indicators for potential success in a role.
According to the 2024 Randstad Enterprise Talent Trends research, more than one-third of talent leaders expect increased competition for hard-to-find skills (34%), and nearly as many expect to see a growing scarcity of specialty skills (32%), highlighting the urgent need for this shift in hiring practices.
By prioritizing inherent skills, traits and potential over credentials, skills-based organizations will reduce bias in hiring processes. As a result, they won’t rule out talent who do not possess the traditional experience and educational criteria but do have the right core skills and motivations, which attracts a more diverse pool of candidates.
Skills have become the new currency. Research indicates that hiring for skills is five times more predictive of job performance than education and 2.5 times more predictive than experience, highlighting the effectiveness of this approach in selecting candidates best suited for specific roles. Furthermore, research shows that hiring for skills can reduce turnover by 70%, a critical factor in talent retention, especially since 80% of employees are willing to change jobs if not offered development opportunities.
Simply put, employers will not find the talent they’re seeking if they keep looking in the same ways and places that they always have. Taking an approach that prioritizes workforce diversity and skills-based hiring helps them not only unlock pools of talent they overlooked before but also leverage each individual’s full potential, creating greater equity in the hiring process and allowing the organization to reap the full business benefits of a diverse workforce.
fuel innovation and unleash hidden talent
With its ability to break down barriers, empower underrepresented groups and unleash hidden talent, fostering a workplace that values diverse perspectives drives genuine innovation. For instance, diverse workforces are more adept at tapping into new markets and resonating with diverse customer bases.
As noted, research from the World Economic Forum indicates that businesses with diverse workforces experience a 19% higher revenue from innovation. Among other strategic advantages, companies that prioritize DEI are reportedly up to 70% more adept at tapping into new markets and resonating with customers from diverse backgrounds.
When it comes to putting these values into practice, organizations like Made By Dyslexia are helping employers create greater equity and talent abundance by educating organizational leaders on the often misunderstood superpowers of dyslexic thinking in the workplace.
Randstad's Hire Hope program also serves as a strong example. This dedicated program provides career readiness training and support to help underserved and at-risk women gain the skills they need to find sustainable employment and meaningful work with our clients. Randstad’s skilling program, Transcend, exemplifies workforce inclusivity and community development by reducing the gaps in skills and opportunities for underrepresented talent while broadening local talent pools.
And the Randstad Academy for Talent (RAFT) is a program that helps organizations attract and hire individuals who typically face barriers to employment, such as people with disabilities and lower socio-economic status. These individuals receive the training and ongoing career development they need to succeed in their roles, showing how an organization’s focus on diversity, and equity can yield profound benefits.
By prioritizing human potential, you can create a powerful, sustainable and equitable source of talent, something that is essential in today’s transforming global marketplace.
empower your people in a culture of inclusion and achievement
DEI in your organizational and business strategy isn't just a social pillar or default add-on — it's imperative for businesses navigating talent scarcity and disruption. Embracing DEI as an integral part of every business decision enhances employee satisfaction, fuels innovation and unlocks new market opportunities.
By supporting skills-based talent models and fostering inclusive workplaces, organizations can cultivate environments where all individuals thrive, leading to heightened productivity, performance and profitability. Integrating DEI into your business strategy ensures your organization will be poised for sustained success in today's dynamic landscape.
Despite economic and political fluctuations, DEI remains a steadfast driver of organizational success, positioning your business to thrive through changes — making it a fundamental pillar of a modern business strategy.