How Does DEI Affect Employee Retention?

Matt Tenney, Author of Inspire Greatness: How to Motivate Employees with a Simple, Repeatable, Scalable Process

There are a variety of factors that influence employee retention. The top factors leading to mass turnover may vary from study to study, but in a significant number of recent studies, workers in the US have cited several common factors that are driving them to quit: toxic work cultures, a lack of opportunities for advancement, and a poor work-life balance. 

These factors fuel employee dissatisfaction, which leads to turnover. This makes employee satisfaction one of the most important factors to consider when forging effective employee retention strategies. 

Employee satisfaction is closely linked to employee experience, so organizations that want to avoid the costs associated with high turnover should focus their retention efforts on policies that support a positive employee experience and a high degree of employee satisfaction. 

One of the ways organizations can do this is through a commitment to diversity, equity, and inclusion (DEI) in the workplace.

DEI affects retention in a positive way by creating a workplace that is welcoming to all employees and fostering a sense of belonging that boosts engagement, group cohesion, motivation, commitment, and employee satisfaction. It also supports a positive employee experience, which increases employee satisfaction. 

This article will look at the effects of DEI on retention and how DEI policies can be an effective tool leaders can use in their retention strategy.

Employee Retention Explained

Employee retention refers to an organization’s ability to retain its employees. 

Employee engagement and employee experience are viewed as drivers of employee retention. This is because an employee’s feelings about their job—feelings of belonging, commitment, motivation, and the sense that their voice is heard and valued—and their experience of the work and their engagement with it all play a major role in employee retention. 

Maintaining a high retention rate is important for an organization’s long-term success because it lowers turnover and is good for the organization’s performance, productivity, culture, and customer satisfaction.  

Retention can also have a profound impact on an organization’s profitability. Some studies have indicated that every time an organization has to replace a salaried employee, it costs them, on average, the equivalent of 6 to 9 months of salary. Replacing a manager making $60,000 a year can cost $30,000 to $45,000 in recruiting, onboarding, and training costs. 

But the financial impact goes beyond the financial output needed to replace an employee who has left. 

An organization’s overall profitability can take a hit due to the effects turnover can have on productivity, performance, employee engagement, institutional knowledge, recruitment, team morale, and customer satisfaction.

The Principles of DEI

DEI stands for diversity, equity, and inclusion. DEI describes policies and initiatives that support and promote the representation and participation of different groups of individuals regardless of age, race, religion, ethnicity, gender, sexual orientation, or disability. 

Diversity, equity, and inclusion are different but interrelated concepts that function together in ways that support fair and respectful work environments for all.  

Diversity

Diversity encompasses the range of similarities and differences each individual brings to the workplace, including language, race, national origin, ethnicity, gender, age, religion, sexual orientation, disability, and socioeconomic status. It refers not just to physical and social diversity but also to diversity of thought. 

Equity

Gallup defines equity as the fair treatment, access, and advancement of each person in an organization, including fairness in pay, fairness in daily work experiences, and opportunities for advancement. Equity focuses on achieving equal outcomes and helping diverse groups achieve success and a higher quality of life by providing equal access to opportunities.

Inclusion

Inclusion is defined as “the policy of providing equal access to opportunities and resources for people who might otherwise be excluded or marginalized.” Inclusion is about creating an environment where all team members, regardless of their differences, can thrive and fully participate. 

DEI initiatives, strategies, and policies are focused on equal access and equal opportunity for the underrepresented and promoting diverse backgrounds, experiences, and expertise to improve business sustainability and recruitment processes.
These initiatives help organizations identify and eliminate policies, practices, and behaviors that are biased. Research has shown that organizations that promote and support DEI are 2.6 times more likely to increase employee engagement and improve retention, among many other benefits.

How Does Diversity Help with Employee Retention?

Diversity isn’t just about representation; it’s also about diversity of thought. Diverse team members can bring a variety of diverse perspectives that boost creativity and problem-solving efforts, which can improve performance and help all team members engage more with their work. High engagement is conducive to high retention. 

When organizations make diversity a priority and a part of their brand, it can raise their profile with potential hires and increase goodwill with current employees. Why? Because diversity matters to workers. Research has shown that 78% of the workforce says it’s important to work for an organization that prioritizes diversity and inclusion.

When teams lack diverse team members, they may also suffer from a lack of diversity of thought, which is essential for creativity and innovation. Without diversity of thought, it’s harder to generate the sort of ideas that lead to new solutions and products or grow the customer base.

This can cause teams to stagnate, leading to disengagement, job dissatisfaction, and, ultimately, high turnover.

How Does Equity Help with Employee Retention?

When employees feel that they are being treated fairly, they are more motivated at work and team morale is higher. It increases trust and feelings of belonging, making collaboration efforts more successful. 

But when employees receive unfair treatment or are treated differently from their colleagues, it can make them feel as if they aren’t being supported in ways that will help them achieve their full potential. This can hurt their motivation and morale, leading to disengagement. Eventually, they may leave. 

Equitable treatment is essential for a positive employee experience and for maintaining high employee satisfaction, which makes it essential for high retention. Supporting equity in the workplace means investing in the growth of all employees and showing them they are valued members of the team. 

This increases employees’ feelings of belonging with their teams and helps them see a future for themselves in the organization. This will result in team members who are more loyal and less likely to seek out other job opportunities. 

How Does Inclusion Help with Employee Retention?

Inclusion is, perhaps, the most important principle of DEI because, without it, diversity and equity efforts and policies will be less effective. Inclusion helps organizations realize the full range of benefits DEI can offer.

Inclusion creates a culture of belonging for employees and supports psychological safety in the workplace, which is so important to building trust and engagement and maintaining a positive employee experience. 

Employees will leave an organization where they do not feel psychologically safe, heard, or valued. They are more likely to stay in an organization with inclusive policies that support a sense of belonging and an appreciation for the diverse perspectives and needs of all employees. 

An inclusive work culture not only makes employees more comfortable bringing their authentic selves to work each and every day but also increases their loyalty and sense of purpose at work, which is great for retention.

The Future of Retention

Unconscious bias costs US businesses $550 billion annually, a point that is rarely mentioned in the current debate over DEI, but it’s important to consider that figure as we continue to identify ways to make our organizations more sustainable, more resilient, more adaptable, and more profitable. 

Eliminating bias and discriminatory practices from the selection process can open up recruitment efforts to a wider pool of highly qualified candidates and improve the overall quality of hires. 

When we make quality hires and provide a positive work environment that supports belonging, retention improves because we are providing the kind of workplace experience that workers want.
DEI initiatives are valued by most workers, good for business, and essential to building a more equitable future for all workers. As the workforce grows more diverse, DEI will continue to be an important driver of both recruitment and retention across many industries.

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