Stay in the know. Subscribe to Currents
CurrentLead

Diversity, Equity and Inclusion Smooth the Way for Investors and Buyers

3 Mins read

Policies promoting a diverse, equitable and inclusive (DEI) workplace have been far from the silver bullet hoped for by their most enthusiastic supporters, as systemic inequalities still hinder growth and development across the United States. Despite their shortcomings and less than ideal pace, however, DEI policies warrant a closer look from executives still weighing their options, especially as measures like these become more popular among younger and more progressive business owners and investors.

In addition to the obvious moral and social benefits of implementing and genuinely transforming company culture through thoughtful DEI blueprints, there’s a growing body of evidence that points to commercial advantages—particularly among small and medium businesses.

While managers and leaders are familiar with the value of upgrading their technology or evaluating and revamping their workflows, they’re unfortunately reluctant to introduce bold improvements to their company culture. But inaction has a cost. Executives considering or planning an exit in the next five to ten years are finding that their business becomes more attractive to new talent—and more valuable to potential buyers—after bettering their workplace culture. Implementing a DEI policy is the perfect place to start.

Attract Long-Lived, Growth-Friendly Talent

The best employees want to work with colleagues who are growth-minded and innovative. They want to hatch their best ideas for a company that values diversity, creates an inclusive work environment and promotes transparency and equity when hiring, offering promotions or putting forth rewards for a job well done.

A 2021 survey from job review website Glassdoor showed that 76% of employees and job seekers pointed to a diverse workforce, when asked to evaluate companies and job offers. Companies that reported above-average diversity on their management teams also reported innovation revenue at 45% of revenue—19 percentage points higher than that of companies with below-average leadership diversity, according to a BCG survey on diversity and leadership.

To successfully build a multifaceted, multi-talented roster of employees, hiring managers can start small and lean into their successes. Breaking down the idea of DEI into smaller pieces, including re-evaluating the biases that exist in typical hiring or job review questionnaires, can be a simple place to start. Sprinkling new thinking into common practices is the mental and cultural emollient needed to update and relieve yesterday’s business customs.

Homogeneity is Risky

If diverse leaders support diverse ideas that outperform the competition when enacted by a diverse workforce, sticking with homogeneous practices, colleagues and leadership can be incredibly risky and expensive.

While few employers operate on the scale of the U.S. military, six years of its “Don’t ask, don’t tell” anti-LGBTQ policy at the Department of Defense reportedly ended up costing taxpayers $193 million in lower productivity, additional recruiting expenses and loss of talent. For employers in the private sector, a 2020 McKinsey study found that the most diverse companies are more likely than ever to outperform less diverse peers on the bottom line.

Moreover, diverse teams can mitigate and counteract instances of “groupthink,” where risks or business threats are overlooked due to a homogenous approach to problem solving.

Hiring employees with diverse backgrounds and perspectives reduces company-wide mistakes and costly oversights by up to 30%, according to one study. Workplaces with strong DEI policies succeed, because they have a more robust collective intelligence and a variety of skill sets and social connections.

Change is Valuable

Small- and medium-sized enterprises account for around 90% of global businesses, and more than 50% of global employment. Introducing and encouraging DEI policies within this business segment will continue to play an important role for owners and help them position their firms for successful and rewarding exits and investments.

“Organizations that are most successful at fostering DEI focus on making systemic changes,” notes a report from the Society for Human Resource Management “That includes…operating DEI ‘as a business function, not a set of HR initiatives, with a well-defined strategy that is owned by everybody in the organization and supported by capable experts.’”

With investor interest in small- and medium-sized businesses at all time highs, prioritizing DEI initiatives can be the push that turns a proposal into a deal, according to a report from Middle Market Growth. Strategic investors want to see workplaces that reflect the society in which they operate and conduct business.

In order to make their companies attractive to the most well-positioned buyers and investors, business leaders would be well-advised to create a workplace that fosters diversity, equity and inclusion from top to bottom.

Lulu Xu Zappy is the Vice President and Financial Advisor at UBS Financial Services Inc. 

UBS Financial Services Inc. and its affiliates do not provide legal or tax advice. Clients should consult with their legal and tax advisors regarding their personal circumstances and before they invest or implement. This report is provided for informational and educational purposes only. Providing you with this information is not to be considered a solicitation on our part with respect to the purchase or sale of any securities, investments, strategies or products that may be mentioned, including estate planning strategies. In addition, the information is current as of the date indicated and is subject to change without notice.

© UBS 2023. All rights reserved. The key symbol and UBS are among the registered and unregistered trademarks of UBS. UBS Financial Services Inc.is a subsidiary of UBS Group AG. Member FINRA/SIPC. Code: IS2302483 Exp. 4/30/2024

DEI stock image by iQoncept/Shutterstock

Related posts
CurrentTrends

America on the Move: Homebuyer Insights

2 Mins read
The just-released 2024 Bank of America Homebuyer Insights Report reveals some interesting demographically-based trends. Younger Americans are worried “about the long-term consequences…
CurrentManage

Data-Driven Decision Making is Table Stakes: Here is How to Leverage it to Make Better Decisions 

3 Mins read
Data-driven channels are poised for significant growth, as recent findings suggest. Spending on data, data services, and data infrastructure is forecast to…
CurrentManage

5 Space-Saving Ideas for Your Business's Storage System

2 Mins read
If you’re a small business owner, maximizing storage space effectively can be a game-changer for your operations. Efficient storage solutions not only…