7 Reasons to Care about Gender Equity, Diversity, and Inclusion

Introduction:

In this final article of the three-part series, we explore the significance of gender equity, diversity, and inclusion (gDEI) and the reasons why organisations and leaders should care.

As with both other articles in the series, the format includes a short summary first, followed by a longer more detailed explanation.

Summary - 7 Reasons to Care:

1. Increased Compliance and Reporting

• The first episode highlighted over 200 non-compliant employers listed by WGEA, signalling a lack of commitment to DEI. It also showed the risk to complying employers of not providing the Executive Summary and Industry Benchmark reports to the Board ASAP and also providing their Employer Statements linked to the gender gap publication on February 27th.
• The second episode outlined upcoming changes to 23/24 reporting, including the publication of average (mean) gender pay gaps, incorporating CEO salaries and new requirement for strategies and policies for all six gender equality indicators by larger organisations.

2. Enhanced Financial Performance

• Research demonstrates that gender diversity, equity and inclusion not only increases organisational strategic performance including revenue, innovation, customer acquisition but can also substantially reduce risk.
• Whilst social benefits of DEI are widely accepted, stakeholders are increasingly understanding the bottom-line sustainable advantages and expecting organisations to reduce the opportunity cost of missing out on these benefits.

3. Purpose, Value and Culture Alignment

• It is now commonplace for organisations to communicate their stakeholder commitment to DEI through purpose, value, culture, and policy statements.
• However, the data within the Workplace Gender Equality Agency Gender Equality Scorecard report demonstrates massive inconsistency between stated DEI commitment of organisations and their actions, paving the way for the emerging risks associated with gender and diversity washing.

4. Improved Strategy

• Whilst many leaders believe in the strategic importance of DEI, few are incorporating it into their group strategic objectives.
• Furthermore, most organisations are not currently achieving all their strategic objectives, using outdated exclusionary top-down strategic frameworks that are missing the benefits of ‘open strategy’ that incorporates inclusion and transparency within the framework for analysing, formulating, implementing and reviewing their group ?strategy.

5. ESG Integration

• DEI should be viewed as integral component of the “S” in Environmental, Social, and Governance (ESG) frameworks, contributing to sustainability and ethical practices.
• Achieving gender equality is linked to improved national productivity, economic growth, and social sustainability in addition to the organisational benefits.

6. Talent Attraction and Retention

• Organisations with positive gender reputations attract and retain diverse talent. Negative perceptions can reduce the potential talent pool.
• A lack of inclusion can result in candidates turning down job offers and employees leaving, incurring high turnover costs.

7. Reputation and Risk Management

• Positive gender DEI behaviours enhance both internal and external reputation and demonstrate social impact and governance to stakeholders.
• Failure to address gender-based biases pose strategic, governance, and operational risks.

Expanded - 7 Reasons to Care:

1. Increased Compliance and Reporting

It’s clear from the first two episodes of this three-part series, that not every leader nor organisation cares about gender diversity, equity, and inclusion.

The first episode (WGEA Gender Pay Gaps: 7 Important Dates), highlighted the 200+ employers who have been identified by WGEA on the non-compliant list. Whilst some questions were raised on the inclusion of businesses that are no longer (or struggling to remain) going concerns, it is clear that a number of businesses – including associations with some major international brands – just didn’t manage to complete the reporting required for compliance.

We also expect to see many missed opportunities from organisations, who have not recognised nor prioritised providing a link to their Employer Statement to accompany the publication of their gender gaps on February 27th.

The second episode (WGEA Gender Equality: 7 Upcoming Changes), looked at the increased reporting requirements in a number of areas, including the provision of CEO salary data, which will contribute to the publication of average (mean) gender pay gaps in 23/24, in addition to the median shown for 22/23.?

We also highlighted the requirements, for large (500 plus employees) organisations to provide policies or strategies for each of the six gender equality indicators, and a few other questions we believe are designed to find those organisations confusing a policy and a strategy. We would not be surprised to see a few larger organisations end up on the non-complying list for 23/24 and some of them probably don’t care... yet.

2. Enhanced Financial Performance

There is a growing set of research and statistics that demonstrates the role of DEI, particularly gender diversity, equity and inclusion in improving bottom-line results for organisations in addition to non-financial benefits. These include:

• Research by 麦肯锡 in 2020, demonstrates that executive teams with more than 30% women are more likely to outperform those with fewer or no women.
• In 2018, a 波士顿谘询公司 study shows that companies with more diverse management teams have 19% higher revenues due to innovation.
• The work of one of Australia's greatest diversity voices, Dr Juliet Bourke GAICD shows that the value of diverse thinking can increase innovation by 20% and reduce risks by 30%. )
• Further research by the American Sociological Association found a further link between a gender diverse workforce and the organisational performance using measures such as sales revenue and number of customers.

3. Purpose, Value and Culture Alignment

Most organisations communicate their reason for being through their carefully crafted purpose and values statements, which when bonded with strategy (see below) epitomises the company culture.

There is however, already a massive internal disconnect with purpose.

• A 2021 study by Gallup showed that less than half of employees (41%) strongly agree they know what their organisation stands for. p
• According to a report published in the Harvard Business Review , less than one third of senior executives’ direct reports clearly understand the connections between corporate priorities.
• Research by Root, part of Accenture revealed that less than half (48%) of employees think their executives are committed to the company’s vision.

Most organisations are now including gDEI within purpose and values statement, alluding to it being an integral part of the company’s culture.

However, the cold hard truth as evidenced through the WGEA data is that many organisations have failed to lift their commitment to gender DEI off the paper and into body of their organisation. Commitment to action is hidden within a range of (sometimes hard to find) policies with no teeth, reactionary box-ticking compliance processes, and some occasional operational training programs.??

The Evidence:

Of the 5,135 reporting employers representing 4,822,194 employees:

• 73% of employers had a gender pay gap of more than 5% in favour of males.
• Less than one half (47%), consult with their employees on gender equity less than one-third (31%) have a formal policy or strategy to do so.
• Although 70% of employers reported they had a 'policy' or 'strategy' to achieve equal remuneration only 61% of those (i.e. less than half (43%) of all organisations had pay equity objectives as part of the policy.

Only 45% of employers did not analyse their pay gaps. Of the 55% that did, there is little evidence to suggest meaningful analysis incorporating gender representation, remuneration and the relativity of gender to other organisational biases such as age, geography, scale, incongruence and functional bias.

Furthermore, of the 55% that analysed their pay gaps:

• only 60% [less than one third (33%) in total] took any action as a result of the analysis.
• only 47% [i.e. just over one quarter (26%) in total] reported pay equity metrics (including gender pay gaps) to the executive.
• only 32% [i.e. less than one-fifth (18%) in total] reported pay equity metrics and only 20% [i.e. 11% in total) specifically reported gender pay gaps to the board.
• only 10% [ i.e. 6% in total] reported pay equity metrics (including gender pay gaps) to all employees.
• only 7% - [i.e. 4% in total] reported pay equity metrics (including gender pay gaps) to external stakeholders.

Our Interpretation:

There is a small minority of organisations demonstrating a caring commitment through meaningful analysis to gain the required data, information, knowledge, understanding and wisdom for gender diversity, equity and inclusion. Less than 10% are going further to set meaningful objectives.

Only 9% of organisations set targets to reduce any organisational wide gender pay gaps.

4. Improved Strategy

Diversity, equity, and inclusion can improve strategy itself.

Many organisations have stated a commitment to diversity, equity or inclusion. The importance is highlighted in a recent study by Harvard Business Review where almost two-thirds of organisational leaders (65%) say diversity, equity, and inclusion (DEI) is a high strategic priority for their organisation. Yet few organisations have meaningfully integrated this purpose into their strategy, objectives, and actions.

Organisations are not only missing out on the benefits of gDEI, but through their inaction are creating emerging increasing incongruence risks between what they say and do. The publication of organisational gender-based composition and gender pay gaps, will only increase the visibility of this incongruence for organisations and leaders, with increased scrutiny by stakeholders and increased potential for gender and diversity washing commentary and stakeholder action.

Internally, many organisational staff already feel disconnected to the organisations strategy and question the ability of their leadership.

Current strategy is not working effectively.

The research is piling up to convey that traditional top-down exclusive opaque strategic processes just aren't working.

• Research by Bridges Consulting shows that only 5% of organisations are achieving at least 90% of their strategic objectives.
• Furthermore, only 2% of leaders are confident that they will achieve 80-100% of their strategic objectives.
• The Research by Root, part of Accenture?also shows that only 40% of employees strongly feel their manager really understands their organisation’s strategy or goals.

Open Strategy is a way of improving this through an increase in both inclusion and transparency.?

69% percent of senior executives stated that strategic openness increased both the number and diversity of ideas.

See: Open Strategy - Mastering Disruption from Outside the C-Suite by Christian Stadler , Julia Hautz , Kurt Matzler and Prof. Dr. Stephan Friedrich von den Eichen (SFvdE)

Strategic inclusion, and gDEI is an opportunity to improve some of what is currently wrong with the strategic framework itself, by incorporating inclusion and transparency within not just the organisational strategic objectives but throughout the entire strategy process and journey including organisational analysis, planning, embarkment and navigation of strategy.

5. ESG Integration

The ESG framework combines three main pillars (environmental, social and governance) to assess the organisational sustainability and ethics via its performance, practices, benefits, and risks, including non-financial.

Through a focus on ESG, both internal and external stakeholder groups (including employees, customers, government regulators and shareholders) are increasingly demanding organisations to be good financial, environmental, and social capital stewards with the governance framework in place to support this.

In most industries, the majority of focus is still on the “E – environmental” components and “G - governance therein”, with the “S – Social” component of ESG lagging behind. gDEI needs to be viewed as an integral part of ESG, considering the social impact on all stakeholders, the wider community and the contribution towards improved national productivity and economic growth.

Organisations need to do a better job of communicating both the bottom-line and social benefits of the "S" in ESG to stakeholders (including shareholders) more effectively. As stated above so far in this article, they include better performance, the alignment of purpose, value & culture, improved strategy and long-term shareholder benefits through the sustainability of ESG.

Forget the "S" in "ESG" and sooner or later, you may end up with EG on your face.

6. Talent Attraction and Retention:

Two of the most commonly cited benefits of gDEI are the improved ability for organisations to both attract and retain talent.

Talent Acquisition:

Those workplaces who fail to provide an equally appealing employee value proposition to both men and women, may be shrinking their talent pool from the start. Statistics such as the WGEA gender composition and gender pay gaps will make it even far more difficult with gender diversity laggards, having to work extra hard to turn this perception around.

This is even more so for the younger generations, who according to a 德勤 study, Millennial and Gen Z, opinions on what diversity itself is, are quite diverse and less than half of them believe their leadership teams are diverse.

A recent study by 麦肯锡 found that Nearly 40 percent of respondents have turned down or chosen not to pursue a job because of a perceived lack of inclusion at the organisation. )

Talent Retention:

There are many reason why employees (including leaders), may choose to remain or exit an organisation.

• Research by Australian HR Institute (AHRI), showed that a positive workplace culture was the second most important reason for retention, after effective management and leadership. Both of these have implications for the important of gender DEI within an organisation.
• Research by Kaplan, Wiley and Maertz shows that employees are more likely to stay with an employer demonstrating a proactive diversity ‘climate’.
• A study by the Society of Human Resource Management suggests that the total costs associated with employee turnover can range between 90% and 200% of the annual salary, depending on the type of job.

Alarmingly, further research by AHRI almost two thirds (63 per cent) of organisations do not measure the cost of turnover. At the senior level, remuneration itself can play a much larger influence in retention. there is however, a lack of science and bias analysis in many executive remuneration benchmarking processes.

Many organisations are not realising the opportunity cost that both candidate exclusion and employee retention have for an organisation.?

In contrast, when evidence of a gender positive environment are effectively shared both within and outside the organisation, these practices can have a favourable perception from external stakeholder reputation and reduce risks.

7. Reputation and Risk Management

Gender positive behaviours as part of DEI plays a strong role in demonstrating the social impact and governance to a wide range of external stakeholders including potential employees, customers, regulatory bodies, and shareholders.

Recent joint research by 德勤 and the Australian Human Rights Commission , show that diverse customers are three times more likely to avoid an organisation and dissuade others from their potential interactions, because of an organisation’s negative reputation on diversity.

When implemented correctly, gender diversity, equity and inclusion offer opportunities for organisations for better financial performance, aligned purpose, values, and culture, improved strategy, stronger ESG, and an enhanced reputation amongst both internal and external stakeholders.?

The inverse is that poor gender-based composition and pay gaps are causing (largely unmeasured) opportunity costs for organisations who are failing to effectively gauge the likelihood and impact of gender based strategic, governance and operational risks.

On the eve of the publication of the WGEA median pay gaps organisations need to understand how these risks are urgent, can be divergent and personal.

urgent:

With the publication of the WGEA gender composition and gender pay gap data on 27th February, and the opening of the 23/24 reporting period shortly thereafter, organisations have a tiny window to act swiftly in demonstrating their commitment to closing the gender pay gap.?

divergent:

Gender representation without fair remuneration can limit equity in an organisation. The WGEA gender pay gap reporting will bring such divergence to light, making it evident for all stakeholders. This transparency may also pose emerging risks for those organisations with obvious incongruence between their communicated commitment to gDEI when contrasted with their strategy, tactics, and results, including their gender pay gap.

personal:

As a leader, your organisation's gender pay gap may be both a nominal and relative competitive weakness when compared to industry peers. This could pose incongruence risks between the organisation's communicated purpose and values when contrasted to the actual strategy and actions. Likewise, this may conflict with an individual leader's sense of personal purpose. Extreme cases of incongruence between personal market-place branding and company gender pay gaps, could influence key person risks for the organisation.

Conclusion:

In summary, gender equity, diversity, and inclusion are not just moral imperatives but strategic imperatives too. Organisations that prioritise DEI benefit from improved performance, aligned purpose and culture, enhanced strategy, and better risk management. These efforts also positively impact ESG, attract and retain talent, and bolster external reputation.

As we approach the publication of WGEA median pay gaps, organisations need to act, recognising the urgent, divergent, and personal dimensions of the risks and opportunities presented by DEI. It's not just about compliance; it's about aligning organisational values and strategy with actions for a sustainable and inclusive future.

For urgent assistance with upcoming 23/24 compliance reporting (including gender pay gap remuneration analysis) and development of gender DEI policies or strategies, contact us today.

You can book a chat now, or email us for an alternate discussion day or time.

To learn more about urgent, divergent and incongruent gender-based risks, download our brief discussion on our gender equity remoDEI service.

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Cheers,

John Myers

Founding Director

perple - people performance pty ltd