The recent billionaire back-and-forth about diversity, equity and inclusion initiatives is a great opportunity to look at why we’re doing DEI, how we’re doing it — and how we can do it better.

Bill Ackman and Elon Musk have pilloried DEI as racist, shameful, even illegal. And, done wrong, diversity efforts can open themselves up to that critique.

But “when companies do DEI well, you see a well-run, successful company,” Mark Cuban maintains. DEI-focused recruiting doesn’t close the door to candidates that fit the traditional straight, white, male model. Done right, it opens the door to everyone with the talent, experience and skill to excel in a given role.

Historically, DEI initiatives have been pivotal in addressing inequities, but their implementation often overlooked certain groups, inadvertently sparking debates over reverse racism. It’s time to transcend the conventional discourse on racism and focus on the urgent need for businesses to adapt in a conflicted world.

The Role of Corporate Leadership in DEI

For corporate board directors and CEOs, understanding the importance of DEI extends beyond employee attraction and retention. It is a crucial aspect of enterprise risk management and profitability. Every business entity, created under state law and subject to common principles of business and ethics, may face legal scrutiny in discrimination lawsuits, focusing first on the company’s internal processes and procedures.

The board, bound by duties of loyalty, care and fiduciary responsibility, plays a significant role in driving organizational governance. The CEO, responsible for the company’s vision, mission and profitability, acknowledges the correlation between inclusively diverse leadership teams and increased innovation and profitability.

The focus on specific racial or ethnic groups limited the scope of traditional diversity initiatives. Inclusionary DEI practices ensure participation and fairness for both historically underrepresented and represented groups, aligning with the organization’s vision and goals.

Implementing DEI as a Sustainable Business and Enterprise Risk Strategy

Inclusive, socially responsible anti-bias recruiting represents a pivotal shift in DEI practices. It embodies principles of fairness, balance, transparency and accountability, while actively mirroring the diverse demographics of all society. This method not only requires a solid framework for implementing actionable strategies and ensuring clear reporting but also highlights the profound impact on enterprise risk management and business sustainability if overlooked.

For privately held companies, adopting socially responsible anti-biased recruitment aligns with a deep commitment to DEI within their corporate governance and operational frameworks.

Public companies, in contrast, face additional mandates under Securities and Exchange Commission regulations. These organizations are encouraged to incorporate DEI into their corporate governance, potentially as a key facet of their environmental, social and governance criteria.

The SEC’s role is critical here. By requiring disclosures related to DEI initiatives and outcomes, the Commission can make these efforts an essential aspect of regulatory compliance. Such measures not only enhance corporate transparency but also position companies at the forefront of the profitability and governance curve, providing them with a competitive edge in today’s dynamic business environment.

Bias, Profitability and Leadership

Bias does more than treat people unfairly, it undermines profits. Companies with diverse leadership simply do better. Studies by organizations like Boston Consulting Group, the Wall Street Journal, McKinsey & Co. and the Peterson Institute for International Economics have consistently shown that companies with diverse leadership teams and workforces outperform their less diverse counterparts. Above average executive team diversity can result in 19 percent higher innovation revenue, and the 20 most diverse companies in the S&P 500 index had a 12 percent higher net profit margin.

The Future of DEI in the P/C Workforce

The P/C insurance industry, like others, is facing significant workforce upheaval. By 2028, approximately half of workers are projected to retire — with nearly half a million planning to clear their desks in the next few years. At the same time, P/C insurers are in a hiring mood — with 65 percent planning to boost their staff numbers in 2024. With such dramatic shifts on the horizon, attracting Gen Y and Z talent is crucial — and a diverse and inclusive culture is high on the list of must-haves for these values-sensitive workers.

DEI Done Right

DEI isn’t checklists and quotas, and it should never result in the hiring of someone who’s unqualified. As Cuban clarified to Musk: “DEI doesn’t mean you don’t hire on merit…Diversity means you expand the possible pool of candidates as widely as you can. Once you’ve identified the candidates, you hire the person you believe is the best.”

As fundamental as that sounds, putting it into practice can be challenging. The key is a bias-busting talent acquisition process that levels the playing field for candidates. Because DEI starts with adding diversity where there is none, transforming how you recruit is the first step. We’ve found that an inclusive, completely masked approach works best. Masked recruiting ensures that managers hire based on qualifications and potential fit for the organization rather than on demographic factors.

Conclusion

Performance-transforming DEI is built on the recognition that companies reap cultural and economic benefits when they welcome talent that reflects the diversity of their customer base.

It involves acknowledging hidden biases in recruiting practices and committing to finding and hiring inclusive, qualified candidates. There is much work to be done, and the industry must rise to the challenge.

*This article was originally published by Insurance Journal, CM’s sister publication.