By: Gina Sherock, Senior Consultant, and
Rachel Disko, SHRM-CP, Senior HR Business Partner
Over the past several years, there has been an increased and sustained focus on workplace diversity. If this has not been something focal to business strategy in the past, leaders are wondering where they should start and why. The answer to this depends on several factors, but the evidence is becoming impossible to ignore − an intentional workplace diversity effort is critical.
Banks and financial institutions covered by FDIC insurance are considered government contractors and therefore must develop a formal Affirmative Action Plan (AAP) to ensure equal employment opportunity for race, gender, disability, and protected veteran status if they have at least 50 employees. These requirements are enforced by the Office of Federal Contract Compliance Programs (OFCCP) to comply with Executive Order 11246 (covers race and gender); Section 503 of the Rehabilitation Act of 1973 (covers individuals with disabilities); and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, aka VEVRAA (covers protected veterans).
For those organizations that must do so to remain in compliance, the case for developing a formal AAP is clear. However, even for organizations not required to do so, there is a strong business case for ensuring equal opportunity and embracing diversity and inclusion.
Relevant Laws and Risk Management
Having a workforce that lacks diversity could increase risk from a legal standpoint. Discriminating against a job applicant or an employee because of the person’s race, color, religion, sex (including pregnancy, transgender status, and sexual orientation), national origin, age (40 or older), disability, or genetic information is illegal. Even if discrimination was not intended toward an applicant or employee, poor optics can lead to a complaint being filed with the Equal Employment Opportunity Commission (EEOC) and a potential lawsuit. If that happens, an organization risks a loss of productivity, incurring legal fees (including compensatory damages), and its reputation as an employer. Without strong documentation as evidence that discrimination did not actually occur, intentions are left open to interpretation and the organization could be at a disadvantage.
Lack of workforce exposure to a diverse population can also inadvertently lead to implicit bias among employees, leaders, and other decision makers. Implicit bias occurs when a person holds an unconscious prejudice, attitude, or opinion about others. This type of thinking increases the risk of a discrimination lawsuit, even if harm was not intended.
Benefits of ED&I
Many of us know there should be diversity and inclusion in the workplace, but not necessarily the benefits associated with a focus on diversity. Here are some reasons why equity, diversity, and inclusion are beneficial to not only businesses but also their employees.
Businesses with more diversity generally thrive when compared to companies that are less diverse. Employees from different demographic groups have different talents, experiences, and skill sets; and are therefore more beneficial for companies to increase creativity and innovation. Increasing the diversity of leadership teams can help improve financial performance. According to a Boston Consulting group study, “companies with above-average diversity on their leadership teams receive a greater payoff from innovation and higher EBIT (Earnings Before Interest and Taxes) margins.” Additionally, diversity also helps to attract and retain talent for the organization by promoting that you are an organization that prioritizes ED&I in the workplace. A study from Washington State University states, “by 2025, 75% of the workforce will be millennials, 32% of millennials and Gen Z believe businesses should try to improve their diversity.” Finally, workplace diversity boosts a company’s reputation, brand, and overall morale. This helps the organization to increase employee engagement and ensures a well-rounded culture.
The benefits of diversity do not stop at the employer level. Employees are proven to benefit from a diverse workforce as well. Workplace diversity can lead to better decision-making. According to Washington State University, “a study that analyzed 600 business decisions made by 200 teams found that the decision making of diverse teams outperforms individual decision-making up to 87% of the time.” Along with better decision making, diversity is proven to lead to faster problem-solving. A study published by the Harvard Business Review found that higher comprehensible diversity correlates with better performance. Additionally, diversity in the workplace may increase employee engagement and help employees to feel more included.
Whether through a formal Affirmative Action Plan or other ED&I initiatives, employers are seeing the benefits both in meeting compliance obligations and increasing the overall bottom line with a more diverse workforce. We are seeing more businesses become aware of ED&I in the workplace because candidates wonder how they will fit into an organization, if they will be given equal opportunity, and if they will feel included and welcomed.
While developing an Affirmative Action Plan or ED&I initiative may be difficult to navigate, Young and Associates is here to help. We offer a wide range of HR services for banks and financial institutions to take the guess work away. For more information on this article or how Young & Associates can assist with your HR efforts, contact Dave Reno at 330.422.3455 or firstname.lastname@example.org.