Is Diversity, Equity and Inclusion bad for business?

The Better Boards Podcast Series - The podcast for Chairs, CEOs, Directors and Company Secretaries

Send us a Text Message.

Recently, there has been a surge on social media stating that diversity, equity, and inclusion (DEI) are bad for business. Some of the world’s largest firms have also significantly reduced their investment in diversity and inclusion. But what does this mean for boards that do believe DEI are good for business? Should they change how they approach this agenda, and if so, how?

In this podcast, Dr Sabine Dembkowski, Founder and Managing Partner of Better Boards, discusses whether DEI is bad for business with Prof Grace Lordan from the London School of Economics, Founding Director of The Inclusion Initiative, economist, and labour market skills expert.

“What boards need to think about is how inclusive are their teams at the micro level, so that when they aggregate, we get those productivity gains”
Grace opens by considering an example – an imaginary scenario where DEI might negatively impact business. Imagine starting a new job and meeting your team for the first time, being different in some way – perhaps gender, ethnicity, or language. You have valuable knowledge and are excited to contribute, but you're repeatedly interrupted or ignored when you speak up. In this situation, you could respond in one of four ways: silence, dissent, quitting and conformity. These responses show how poor inclusion can make DEI detrimental to business.

“The biggest thing we can do is say this board doesn't engage in consensus-based decision making”
Grace notes that boards must consider what's happening in the room and any member’s desire to “fit in.” She attributes many big behavioural risk scandals to groupthink at the team level and board members who are aware of a potential issue but fail to speak up because they don't want to upset the apple cart.

“These good habits, unfortunately, haven't necessarily infiltrated boards yet”
Behavioural changes are vital to advancing diversity, equity, and inclusion (DEI) in organisations, not only at the board level. Grace outlines how to promote inclusive behaviours, starting with establishing clear rules for meeting hygiene. These guidelines will ensure everyone has an opportunity to speak.

“If you invest in an inclusive culture, you should see gains in the fundamentals. You definitely won't see losses”
Grace’s research explores the broader implications of inclusion on fundamental business metrics such as growth, innovation, patent filings, stock returns, return on equity, and return on assets. She established a clear, positive relationship between inclusion and long-term business outcomes. Diversity alone showed gains only after reaching critical mass. However, when inclusion is paired with diversity, the need for a high critical mass diminishes.

“Millions and millions of pounds are wasted each year on diversity equity and inclusion initiatives”
Grace notes that to realise productivity gains, board members must prioritise fostering a culture of inclusion, where diversity is genuinely valued and diverse talents are not pressured into conformity.

The three top takeaways for effective boards from our conversation are:

1. Integrate inclusion with diversity: Ensure that diversity and inclusion strategies are embedded within the business, not confined to HR or external consultants.
2. Audit and enhance boardroom voice: Boards must pay attention to who has a voice in discussions, ensuring that there is sufficient cognitive diversity.
3. Treat DEI as a long-term investment, particularly valuable for companies focused on growth and innovation. Prioritise creating a culture where team members feel comfortable challenging each other, driving real business g