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Taking a principled approach to inclusion: A leader’s guide

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Brought to you by Liz Hilton Segel, chief client officer and managing partner, global industry practices, & Homayoun Hatami, managing partner, global client capabilities

As the US remembers Martin Luther King Jr. today, the urgency of working toward social equality comes even more to the forefront. The business case for diversity is well established; studies have shown a correlation between increased workforce inclusion—particularly on executive teams—and the likelihood of improved financial performance. But while many organizations have built diversity, equity, and inclusion (DEI) into their hiring practices, progress remains uneven. Recent research shows that the business case itself, with its emphasis on the economic impact of diversity, can make the very groups that it is supposed to help feel “othered” and devalued. Rather than focusing narrowly on the commercial benefits of DEI, leaders may want to consider taking broader, principled actions to help diverse workforces thrive.

What does a chief diversity officer (CDO) really do? If you don’t know, you’re not alone. “The CDO position may have been created with the best of intentions, but many organizations don’t seem to know quite what it is,” state McKinsey partner Monne Williams and her colleagues. “The scope and nature of the position are often poorly defined, with ambiguity about everything from its purpose to its authority.” CDOs are critical to steering corporate responses to societal issues, but they often don’t have clear objectives or adequate resources; for example, only 35 percent say they have access to the employee demographic data they need. McKinsey experts note that CDOs are best positioned for success when they know the role’s exact mission and scope, its position in the organizational structure, and the talent profile—skills, knowledge, attributes, and experience—that it requires.

That’s the number of practical actions it may take to achieve quantifiable and sustainable DEI impact, according to a new McKinsey report written in partnership with the World Economic Forum, whose annual meeting takes place this week in Davos, Switzerland. One action is to create a meaningful definition of success—a critical step that connects inclusion efforts to an organization’s values and mission. For example, a professional-services company created a five-year, five-point social-mobility action plan with quantifiable goals, such as supporting 100 young people with technology degree apprenticeships and upskilling 250 social enterprises across the US. Another action in support of inclusion is to design solutions suited to the context: a global steel manufacturer launched a program that addressed historically marginalized groups and developed the first-ever transgender hiring effort in its home country.

That’s academics Oriane Georgeac and Aneeta Rattan on why corporations should consider the “fairness” case for diversity—an approach that justifies diversity on moral grounds. In their research, Georgeac and Rattan found that underrepresented candidates who read an employer’s business case for diversity—compared with neutral messaging—reported being 27 percent more concerned about stereotyping and lack of belonging. A fairness case has less of a negative impact, but the authors propose a bolder option. “Don’t justify your commitment to diversity at all,” they say. “If you don’t need an explanation for the presence of well-represented groups in the workplace beyond their expertise, then you don’t need a justification for the presence of underrepresented groups either.”

To make any significant progress on inclusion, organizations must become precise about what it really means, says McKinsey senior partner Bill Schaninger in this podcast. “Most people characterize inclusion on two levels: their own direct, felt experience and the way they perceive their organization more broadly,” he says. There can be discrepancies between the two—for example, employees may feel left out of important decisions even if they perceive an organization as fair (such as in performance evaluations). Managing such situations can be tricky, but leaders can signal their openness to engaging in dialogue, says McKinsey partner Bryan Hancock. “Recognize that you don’t know exactly how to have the conversation and might not say exactly the right thing,” he suggests. “But be curious. Being a curious learner can help start the conversation.”

Lead diversely.

— Edited by Rama Ramaswami, senior editor, New York

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by "McKinsey Leading Off" <publishing@email.mckinsey.com> - 02:54 - 16 Jan 2023