Recessions typically haven’t been part of the corporate conversation around diversity and inclusion.
But new research shows that D&I efforts present a potent source of strength for organizations as they weather tough times.
Great Place to Work, the global experts on workplace culture, discovered that publicly traded companies with highly inclusive workplaces thrived before, during, and after the Great Recession, and gained a 4x larger stock return than the S&P 500.
The new research comes as Great Place to Work and Fortune unveil the 2019 list of the Best Workplaces for Diversity. Medical device-maker Stryker ranked No. 1 on the list of 100 companies, followed by technology giant Cisco Systems, Progressive Insurance, professional services firm Accenture and financial services company Synchrony. The ranking recognizes organizations of 1,000 or more employees where underrepresented and historically disadvantaged groups have a consistently positive experience and are represented at every level of the organization.
Inclusive Companies’ Returns Thrived During and After the Great Recession
The methodology of the Best Workplaces for Diversity list focuses on the experiences of women, people of color, LGBTQ workers, generational representation, and people who have disabilities. The ranking is based on what employees report in Great Place to Work’s Trust Index survey about the trust, pride, and camaraderie they experience in the workplace, and how those experiences compare to their colleagues’.
Great Place to Work also considers employees’ abilities to innovate, the company’s values, and the effectiveness of their leaders. In addition, the ranking measures the diversity of the company’s overall workforce as well as across management, senior leadership, and its board of directors.
The latest research adds to the evidence that workplace equity isn’t just the right the thing to do—it’s better for business. For example, Great Place to Work previously documented much higher revenue growth at organizations where all employees have a great experience, no matter who they are or what they do for the organization. We call these businesses great places to work For All. We found that these inclusive organizations enjoy more than three times the revenue growth of less inclusive peers.
Amid predictions that a business downturn could hit in the next year or two, the new study dives into what can help organizations do well during recessions. We sought to discover new links between employee experience and company results. Does a consistently inclusive, positive culture predict stock outperformance?
The answer is a resounding yes.
Great Place to Work examined publicly traded companies just prior to, during, and for several years after the Great Recession of 2007-2009. The data shows that the experience of certain groups of employees—including historically disadvantaged groups—predicted whether organizations flatlined, merely survived, or thrived during the last major downturn.
While the S&P 500 suffered a 35.5 percent decline in stock performance in the period between 2007 and 2009, companies whose key employee groups had very positive experiences posted a remarkable 14.4 percent gain.
For that group of “Thriving” companies, the good news wasn’t limited to the recession. Their gains started before the downturn and continued well past it as competitors lagged. From Jan. 3, 2006 to Feb. 1, 2014, the Thriving group saw their stock performance increase 35 percent, while the S&P 500 had just a nine percent gain. That’s nearly 4X outperformance.
The key groups of employees are women, people of color, front-line workers, hourly male workers and long-tenured employees.
Why do these often-marginalized groups turn out to be bellwethers when the business climate turns bad?
For one thing, historically marginalized groups are often first to feel the effects of a business running into trouble—whether those impacts are wage cuts or the threat of layoffs.
What’s more, employees in the key groups we identified play vital roles in a business in good times and bad. They often serve customers directly and are plugged into the reality of how the business is doing. And they are a source of good ideas that many companies overlook—whether those are ideas for cutting costs or generating revenue in new ways.
The research also found it was important for businesses leaders to create positive experiences for the key employee groups in a number of particular areas: inclusivity, innovation, fairness and integrity.
In effect, an inclusive culture enabled organizations to soar over the recession chasm—the deep decline most companies experienced during the recession.
One of the companies in the “Thriving” group in the study was Salesforce, No. 25 on this year’s ranking of the Best Workplaces for Diversity. The San Francisco-based business software firm has led the industry toward better pay parity. It also has named “equality” as a company value—one that the organization puts into practice.
Molly Ford, the Senior Director of Global Equality Programs at Salesforce, tells a story about how the company has developed a strong sense of belonging by encouraging employees to act as “allies” for one another. She notes that in 2017, about 100 employees attended the Martin Luther King, Jr. march in San Francisco. Most of the company’s participants were employees who identified as black.
“Then two years later, after evangelizing the message of ally-ship — by educating our employees on what it means to be an ally, teaching them how to ask, listen, show up, and speak up, and emphasizing that being an ally doesn’t always mean you agree, it means that you support each other — 1,200 employees showed up, mostly allies,” Ford says. “This was a significant moment, and many employees felt this support created a deeper sense of belonging for them at work, driving home the power of ally-ship.”
Great Place to Work’s new research is part of a wider report on how the diversity and inclusion field can advance. Hidden Pieces of the D&I Puzzle focuses on three little-mentioned issues that have major implications for equity efforts within organizations. Apart from examining the role D&I can play in helping a company prosper amid economic downturns, the report highlights the impact of restructuring events on perceptions of fairness, and why it matters that one in eight employees chooses not to reveal some aspect of their identity, such as gender, sexual orientation or disability.
The forthcoming report, which includes recommendations for CEOs, CHROs, D&I leaders, and other business executives, will be published by Great Place to Work in January, and will be a large part of the conversation at the 2020 Great Place to Work For All Summit, scheduled for March 3-5, 2020, in San Francisco.
Click here to sign up to receive a digital copy of the Hidden Pieces of the D&I Puzzle report.
See the full list of the 2019 Best Workplaces for Diversity.
Nancy Cesena is a data scientist at Great Place to Work. Ed Frauenheim is the senior director of content at Great Place to Work. The two are among the co-authors of the forthcoming report, Hidden Pieces of the D&I Puzzle.