Why DEI should be treated like finance

Even before showing how inclusion is linked to financial performance, I want to explain why leaders should think about and manage DEI very much the same way they think about and manage their finances.

Leaders use a variety of tools and indicators to monitor the financial health of their organisation and to support their decisions. In an ideal world, DEI should provide tools to help leaders monitor and make decisions about the ‘people health’ of their organisation. After all, people are the most expensive budget item and arguably the most valuable asset of every organisation.

In this context, diversity is like the organisation’s balance sheet, a core financial statement that tracks the organisation’s assets, equity and liabilities. The balance sheet is a snapshot in time that helps you understand the current financial strength of the company and to identify potential problems.

But the balance sheet does not capture all the dynamic factors that influence the generation or use of resources, from sales and investments to salaries and equipment expenditures. This is why organisations also measure and track the cash flowing in and out of the company through the cashflow statement. This additional financial statement is critical in helping leaders understand and manage what is happening in the organisation. Without proper cash management, an organisation will struggle.

Trying to make decisions about human assets using only diversity metrics is akin to trying to run a company using only the balance sheet

Similarly, the organisation’s diversity is a snapshot in time that helps you understand the ‘people health’ of your organisation and to identify potential problems. But it does not capture all the policies, processes, and systems that influence the day-to-day workplace experiences of every employee, nor does it show how these experiences shape the organisation’s overall performance in recruiting, hiring, advancement and retention of its people.

Trying to make decisions about human assets using only diversity metrics is akin to trying to run a company using only the balance sheet. You may be able to see that there are overall imbalances, but then you have to try to figure out why these imbalances exist, and this is where most organisations struggle.

Measuring inclusion is analogous to developing a cashflow statement. It helps you track all the day-to-day experiences that impact the satisfaction and motivation of your employees, and it helps you understand how these experiences ultimately shape the resulting levels of diversity. Without proper inclusion management, an organisation will struggle.