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Why DEI matters in small businesses

From customer engagement to decision-making, studies show that companies committed to diversity lead the pack.

Whether you're running a Fortune 100 company or one with 10 employees, it's important to incorporate a culture that stresses diversity, equity and inclusion (DEI). Experts say there are many reasons why this is a win-win for businesses.

A willingness to foster diverse opinions and perspectives allows for enhanced creativity, outside-the-box decision-making, and strategic solutions to difficult problems, according to many industry observers and business owners. The more comfortable employees feel at work, the more willing they are to reach their full potential every day.

DEI is also top-of-mind for job seekers, especially when talent appears to be in short supply. This is critical for small businesses, "So they can better compete for talent against larger [organizations] that have DEI programs — and so they can benefit from the creativity and innovation that a diverse workforce can provide," says Laurie McCabe, cofounder and partner at SMB Group.

Customers are diverse, too

When a company demonstrates commitment to DEI, McCabe says, "People can be themselves and be more comfortable at work, which leads to better employee engagement and productivity.'' Customers also prefer working with people who are relatable to them, she adds. 

DEI needs to be a priority for businesses in order to better serve their customers and communities, agrees Marie Roker-Jones, co-founder of Essteem, a social impact startup that helps companies and employees act on causes they care about in the DEI space.

"By building their business on the foundation of DEI, they demonstrate their commitment to engaging with customers from diverse backgrounds and experiences,'' Roker-Jones says. "It also allows them to innovate and provide products and services that appeal to a wider customer base," such as adding accessibility features to products, as one example.

Consumers want to support businesses that are socially and environmentally conscious and care about social justice, she stresses.

From a hiring perspective, small businesses have fewer resources to invest in for hiring new talent, so it should be a priority to retain talent and reduce attrition rates, notes Dr. Isaac Addae, an assistant professor at Tennessee State University.

"By focusing on DEI initiatives, small businesses can ensure that their organizational culture supports employees from diverse backgrounds as a measure to reduce turnover,'' says Addae, who is also chief strategy officer of the Pivot Technology School, whose mission is training minority students for tech careers, and a managing partner at HBCU Impact Capital private equity firm.

Addae points out that Gen Y and Gen Z workers place a high value on DEI: "Focusing on DEI initiatives is a way to appeal to younger generations that may help the small business better compete from a hiring perspective."

More than three in four employees and job seekers (76%) report that a diverse workforce is an important factor when evaluating companies and job offers, according to a 2020 workplace survey by Glassdoor. The study also found that about one in three employees and job seekers (32%) would not apply to a job at a company where there is a lack of diversity in the workforce.

Susanne Tedrick, author of "Women of Color in Tech," says that businesses with diverse and inclusive talent pools are more innovative and tend to meet or exceed financial targets. For businesses to reap the benefits, they need to, "ensure that they are creating environments that allow employees to feel welcomed and valued, and they are receiving equitable compensation/advancement opportunities."

How to demonstrate a commitment to DEI

It's not enough to walk the walk—employees also want to see real steps taken to implement DEI strategies. This starts at the top and requires business leaders to look inward as well as at all levels of their organizational structure to identify and address biases, reshape policies, and implement meaningful steps.

Leaders should initiate conversations and make it comfortable for diverse employees to express their concerns and grievances. They should also hold themselves accountable to gaps within their organization. 

You should also be open to ideas others might have -- and ask for feedback.

Since not all small businesses can afford an HR team, there should be at least one person charged with ensuring objectives from the DEI plan are met, experts say.

Consider how you can improve your hiring process to be more inclusive, says Flynn Zaiger, CEO of digital marketing company Online Optimism. "Representation in your messaging is also important, as it shows that you understand your customer base."

McCabe echoes that, saying that business leaders should consider lowering/removing some job requirements. Instead of requiring that candidates have done a job, for example, ask whether they can do the job and whether they want to do the job, then offer more on-the-job training and advancement opportunities. 

Her other tips:

  • Identify where your business is today and start working to make improvements

  • Educate everyone on the value of DEI, involve them, and get their support

  • Make it easier for all people to apply for jobs—for example, remove unnecessary paperwork and hurdles

Says Zaiger, "DEI is not just a moral imperative, it's vital to small business success."