DEI as a Core Business Strategy - Michael Bach

Hi, everyone, and welcome to Behind the Numbers. This is a show where we go beyond the data to explore the people, the stories, and insights that drive business success. My name is Dave Bookbinder. I'm known as a business valuation expert and bestselling author, and I thank you for joining me as always.

In today's environment, gang, many companies are pulling back on DEI initiatives, but what if that decision is actually destroying business value? Michael Bach is a globally recognized expert in inclusion, diversity, equity, and accessibility. He joins me today to explain why DEI isn't a social initiative. It's a performance strategy that directly impacts profitability, decision-making, and long-term enterprise value.

Michael, welcome to Behind the Numbers. Thanks so much for having me, Dave. It's a pleasure. Why don't you tell the audience the rest of the story about who you are?

Yeah, so I've worked in the DEI space for 20 years. Prior to that, though, I come from the business world. I'm not an HR practitioner. So when I got into the space, I really approached it from a different perspective, more about this being a business problem and what was the solution.

And that's how we got here today. Yeah. And emphasis on this is a business matter. I want to just state right up front, you and I agree, this is not going to be a political conversation.

Absolutely not. Let's do this. So you have said that if diversity is our strength, inclusion is our superpower. What does that actually mean in terms of business Yeah.

So the basic fundamentals, diversity is a fact. Diversity exists whether you like it or not. Not liking something doesn't make it go away. It's not like we can simply will people of color out of existence.

That's not a thing. So it's not a question of whether or not the diversity exists. The question is, as business leaders, are we going to take advantage of it? Are we going to make sure that we're creating workplaces where all of our potential employees can succeed?

Because when our employees succeed, we succeed as business owners. And if we are not creating workplaces that are conducive to that, then we may be hiring people into environments where we're setting them up for failure. And if they fail, we fail. So inclusion is our superpower as business owners and organizations because we have the ability, it's within our power to create those environments where everyone can succeed.

Yeah. So why is it then that so many leaders are still thinking of inclusion as some sort of a compliance or HR issue instead of a value drive? Oh, that's a great question. A number of things.

I mean, I think historically, the way we've looked at this work, and I'm talking about going back to the Civil Rights Act of 1964, I'm talking about employment equity in Canada in the 1980s, it has been very compliance related. It has been driven by governments creating pieces of legislation that force employers to do things. And employers love to be forced to do things. That is sarcasm.

Businesses don't like to have a gun to their head. But when they look at this through a business lens, their attitude starts to change. And that's what I do with organizations. I go in and I say, this is a business problem.

Here's the problem. Here's the solution. here's how your business can succeed as a consequence of adjusting your behavior. I also think that as human beings, there's a level of self-interest to all of this, where we look at our work environments through that lens of self-interest, what's best for us individually, and then what's best for us as an organization, as a community, etc.

, our shareholders. And sometimes work in DEI goes against self-interest. And let me explain that. In order for, let's say, women to take up more positions of leadership and organization, men have to be willing to give up power.

Because men are the dominant in positions of power across, you know, let's just call for-profit businesses. So there has to be a willingness to give up that self-interest, that self-protection of men as a gender and say, we're going to let women in here. And yes, it's going to change the environment, but it's going to change the environment for the better. Every study that has ever been done on this shows that when you have more women in positions of leadership, organizations outperform their competitors that have fewer women in leadership positions.

So it is a matter of giving up that self-interest for the ultimate goal, which is success. Yeah, and I think you just sort of touched on it when you talk about diverse companies outperforming. And yeah, you're right. There's a lot of data on that and certainly shows it in terms of stock price and profitability and things like that.

But if there's a skeptical business owner out there listening, what's the most compelling economic argument that you can make? No, that's a tough one because it's going to change depending on the organization. And that's the thing about DEI work is it's not a one size fits all. The solution is not going to be the same, nor is the argument.

I mean, I could pull out all sorts of statistics. We talk about women in senior leadership positions. There was a study done by Catalyst that showed organizations with three or more women on their board of directors and executive leadership outperformed their competitors by 47% return on equity. I can start throwing numbers at you all day of the positive results.

There's no negative. There's never been a study done that shows the negative. What I would suggest is that each business owner has to look at their pain points. Where is the pain?

And what's holding you back as an organization? And then figure out how a focus on DEI can help you address those pain points. If it doesn't, if you're looking at this through a social justice, I've got to be a better person type approach, my recommendation would be don't do it. Because that effect doesn't work.

And it hasn't worked and it's not going to work. And we talk about it being the right thing to do. Why? I mean, with all due respect, I believe it's the right thing to do, but not everybody believes it's the right thing to do.

So I think that is a very individualistic argument. And you have to look where your pain points are as a business and then figure out how if DEI can be your solution. Yeah. And you talk about what you refer to as the four fundamentals of inclusive leadership.

Why don't you share with us what they are and where are leaders really falling short on? Yeah. So after decades of doing this work, I came up with a model of what an inclusive leader looks like, because we always say, oh, you just need to lead more inclusively. But we never actually tell you what that means or how to do it.

So I came up with this model of four skills that you need to hone in order to be an inclusive leader. They are bias. So having an awareness of bias. Everybody has bias.

It's how the human brain operates. It's not a bad thing. But in order to lead inclusively, you have to have an awareness of where you may have bias. And is the bias controlling you or are you controlling the bias?

Second is cultural competence. You have to have an openness to difference. I'm not talking about ethnocultural competence. I'm talking about culture in every way, shape, or form.

We're all different. We have different ways of doing things. And inclusive leaders have an openness to difference. They are willing to surround themselves with people of different experiences, different perspectives.

And you have to be willing and open to that difference and see it as valuable. Then, of course, there is just completely blanked on the third one. That's all right. While you're thinking about that, I'll just interject.

Yeah, please. Early in my career, before there was a label on DEI, leadership just, I think, intuitively recognized that the more divergent perspectives that you brought to a conversation, the better the results are going to be. Absolutely. If you've got folks in your organization who've been with the firm for 20 years, they only know one way to do it.

They're kind of got an insular culture, and they don't know what they don't know. So bringing in folks from different backgrounds, perspectives, they've grown up differently, they've seen things differently, and it adds a lot of value. Absolutely. And, I mean, to quote General Patton, if everyone's thinking the same, no one's thinking.

And that diversity doesn't necessarily just have to be racial and gender. It's also about where you went to school, what degree you got. Did you grow up in a rural environment versus an urban environment? Did you grow up in poverty?

Like all of those experiences that we have as individuals change our outlook on life. And if everyone around the table has the same experience, then we don't have the perspective of the other. Coming back to the model that I finally remembered, privilege. Number three is privilege.

And privilege, we always talk about privilege from the perspective of male privilege and white privilege. Yes, those identities come with a level of privilege. When you look at the statistics around, say, pay for women, women make on average about 76 cents on the dollar for men doing the same or similar job. Being a man comes with privilege, but there's also economic privilege.

There's geographic privilege. Consider that in the United States, about 7% of Americans don't have access to high-speed internet. Doesn't matter whether they can afford or not. It doesn't exist where they are.

As a consequence, I don't know if you heard the pandemic, but high-speed internet became a real thing. So that's a privilege. It's a privilege that a lot of people benefit from. Some people don't.

The last is empathy. And empathy is about connecting all of those other three skills to your heart. It's about appreciating the experiences of others. And it was a late addition to my model.

I didn't think we necessarily needed it. But as I've done the work, more and more I've recognized that we have to have a sense of empathy. We have to care about the people we're working with. And inclusive leadership is about honing all of those skills and becoming aware of their own areas of improvement and working on them.

Yeah. So empathy, interestingly enough, is one of the most talked about subjects on this program. It always inevitably comes up when we're talking about good quality leadership traits. And, you know, I'm a valuation consultant and I'm trying to change the conversation about how people are treated, both from a financial reporting standpoint and culturally.

I believe that people are your most diapository. And there's a lot of empirical data that evidences that. So with that sort of backdrop, can you maybe share some examples with our audience where companies are getting it right and actually changing their business now? Sure.

There are lots of them. And unfortunately, there are some poor examples. And I'm thinking of one large retailer that shall remain nameless that did an about face on their DEI programs, and they have plummeted in value. They lost billions in their valuation.

They've lost billions in foot traffic and sales. There is a large bank that has seen significant growth in their retail and commercial footprint, excuse me, where their focus on DEI has brought in new customer dollars. So people are investing in them because they've done things like made sure that their leadership processes are equitable so that they're seeing the diversification of their leaders. The best and the brightest are actually getting into leadership position.

They've made sure that their recruiting process is equitable so that, again, they are seeing the diversification of candidates. And that has a long-term impact on people thinking of them as an employer, that different communities are saying, that's the place I want to work. And so the population is diversifying inside the organization. And in turn, they're able to go to market with different solutions.

And offer more. And clients then are turning around and saying, well, that's the bank I want to deal with. I will tell you one historical story that for a long time was a myth, but I've confirmed it. And it's a story from Frito-Lay, the chip company.

And they had wanted to get into the Latin Hispanic market in the United States. It's worth billions of dollars, probably trillions now. And they had had a couple false starts on different product developments. And so they They developed a guacamole-flavored tortilla chip.

They wanted to get this product into market, but before they did that, they went to their employee resource group called Adelante, and they did some market research with the group. They tested the product. They looked at the packaging. They looked at the advertising.

The employees took the product home to family members, and what happened was they changed the product. They changed the packaging. They changed the advertising, and they had a million-unit launch in their first year. It's the largest launch in the company's history of any product.

So now when they look at a product, they look at it through the lens of different groups that may be the purchaser. So whenever you see a product on the shelf and you think, hmm, that's an odd choice for a flavor, believe me, it went through very rigorous betting for a specific community. There is a community that is going to buy that product. It's not random.

There's a lot of testing involved. And that, in turn, shows value to the company, which in turn then invests more in programs to create an inclusive environment. Yeah, and so much of this just makes intuitive sense. I can't but shake my head.

Business owners, Michael, understand what gets measured gets managed. So how should business owners be thinking about measuring EIA? Right. So the most obvious measurement is demographics.

We collect the demographics of our people and we look at some form of comparison data to say, are we doing well or not? That's part of it. I mean, representation is important. I'm a firm believer in measurement.

For a firm believer in assessing where your organization is today through not only a diversity perspective, but an inclusion perspective, like how do people feel about your organization? Do they feel included? Do they feel valued? That can be done through surveys, focus groups, one-on-one interviews, putting all of that through a demographic lens.

So you make sure you are identifying where there may be a problem with one community or another, because if you conduct an engagement score and you just look at the overall number, you're missing the picture entirely. Looking at all of your activities, what's the measurements of success, and then going deeper and looking at, say, all of your recruiting processes. And I'll just use recruiting as one example because it's pretty robust. And not just looking at who is the successful candidate, but who applies for the job through a demographic lens.

What is their experience throughout the recruiting process? Who gets screened in? Who gets an interview? Every stage of the recruiting process, there's opportunity for measurement and looking for the good and the bad so you know where the problem is.

Because somewhere in your recruiting process, there may be a hole in the funnel where people are exiting, whether by choice or not. And that's your opportunity to fix that hole. But if you just look at the outcome, you've missed the point. So every aspect of your DEI work should have very robust measurement starting at the very beginning.

Yeah. And of those measurements or those metrics that you just referred to, are any of them what you would consider to be leading indicators of future performance? I would say the inclusion metrics are a more leading indicator. Demographics are a lagging indicator, but looking at it from an inclusion perspective.

And then once you get into a place of maturity, you want to talk about leading indicators. Once you get to a place of maturity, you can start to look at things like your customer, about the customer experience, about product development. Those are really leading indicators more so than something like a representation. Yeah.

And you alluded to employee engagement, and that's another thing we talk about a lot in this program. And shockingly, maybe not so much, only about one third of the workforce ever seems to be engaged. Yeah. And we all know that a more engaged workforce is going to result in greater productivity and greater business value.

So with that said, Michael, what are leaders missing about this connection between DEI and how it drives engagement? Yeah, so engagement and DEI are both part of the same family, and it is culture, about workplace culture. I think when it comes to things like engagement surveys, we notoriously get too much data and notoriously think pay is the problem. Pay is the problem in certain environments where people are living at or below the poverty line.

That is absolutely a pay issue. If you're working in retail, food service, that sort of thing, you're not paying your people enough, full stop. But when people are salaried employees, they're making good money, pay is not the problem. Culture is.

They're working in an environment where they don't feel valued, where they don't feel engaged, and where they don't feel included. And if you improve those things, your results, your indices on pay will improve. You can pay people millions of dollars. If they're miserable, it doesn't matter.

So pay is definitely one of the red herrings that I tell employers to avoid. But understand that engagement and DEI are about the culture of your workplace. And it's about how people come to work. Do they feel respected?

Or do they get yelled at? I live in California. There is a candidate for governor right now who has come out. They have berated employees publicly.

They've yelled at them. And I would be willing to wager that their engagement is pretty low. And I'm not saying this to shame any particular candidate. I'm saying it as an example of this is just how to be a bad leader.

And if you're not creating an environment where your people can speak out, they can be honest with you about their opinion, where they feel respected and valued, then your engagement scores are going to suck. And as you said, high levels of engagement equals high productivity equals high profitability. And if you don't have high engagement, you don't have high productivity. Yeah, you just struck a nerve there.

Early in my career, I worked for a Screamer CEO. He was generally a teddy bear, but in meetings, he was known to go off and really just derate people. And I had experienced that firsthand, not being on the receiving end of being in the room when he derated others. I can tell you that is a great way to lose your team.

Absolutely. Yeah. A lot of the conversation around DEI seems to feel like it focuses on the larger company. What should smaller companies be doing and thinking about?

Absolutely. And I think the smaller companies are the ones that need more focus on this than the large ones. The large ones, you know, they have massive budgets and big teams and they've got, you know, dollars to throw around. Small companies are often, you know, going from week to week.

They don't have a lot of money. You don't have to spend a lot of money on this. It isn't about how much you spend. It's about asking questions.

If you're a small company, you know, you've got less than, say, 50 people, you're not going to do a demographic census. It's too small. And there's no way to protect people's privacy when it comes to that. But have conversations and get a sense of what people are feeling in the organization.

You can use a third party for this. You can use an anonymous survey for this. Even something free like SurveyMonkey, excuse me, where, you know, you can just ask some questions about how people are feeling about their experience in the organization. Are they feeling respected?

Are they feeling valued? Get a sense of what people are thinking. You could strike a committee, even in organizations that are small, you can put together a committee of three or four people whose job it is to look at the inclusiveness of the organization and start to introduce some very simple things, whether it's learning, and there's lots of free learning programs out there, whether it's looking at processes and determining if there's a barrier to access. There's lots of things that you can do that are simple, inexpensive, or free that will help improve your culture.

The thing I will tell you is doing nothing gets you nothing. I realize that math is pretty simple. But if you think, oh, I'm too small an employer, I can't do anything. Nothing will change and the problems will continue to exist.

So do something to affect change. And the other message I would deliver is that this is a journey without a destination. This is work that will continue for the rest of time because there will always be a difference that comes up that we weren't anticipating. Five years ago, we were not talking about the inclusion of trans and gender diverse people.

That's a hot topic today. So what the conversation is going to be like in five years? I have no idea, but there will be something. So understand that it's not like you're going to get to the end of the race and be like, awesome, we're inclusive.

We don't need to do this anymore. That doesn't happen. So do something and just prepare for a lifelong journey. Yeah.

And spot on about salary not being or compensation not being the main driver anymore. There's so much data that's available on that topic. And when you talk about the freebie things or inexpensive things like learning, appreciation is another one that really moves the needle. Just a simple gratitude.

Thank you. Gratitude. Yes. That's our conversation.

Getting close to the end of the program here, and I've got so much more I want to talk to you about. But you've been in this space for such a long time. What's changed the most and what hasn't changed enough? How long do we have?

As long as we can go. Right. So I would say what's changed the most is we have now more than ever, we are looking at DEI as a business core business issue. When I started in this field 20 years ago, it was very much a social justice, corporate responsibility, right thing to do approach.

And that never made any sense to me. Because if you take that approach. If the weather changes, and I don't know, the economy goes to hell and tariffs are high and we're living in a situation that we are now, funding gets cut from those programs immediately because it's the right thing to do is not necessarily the right thing for our bottom line or our top line. Whereas if you look at it from a business perspective, budgets don't get cut, right?

This is everybody tightens their belt rather than looking for the low hanging fruit. So now more than ever, we are looking at it through that business lens. What hasn't changed enough is that we are still hearing people say, well, it's the right thing to do. We need to look at this through a social justice lens.

And it hasn't worked. How much evidence do we need that it hasn't worked? I'll give you one statistic that really articulates that the school year in which women graduated with more than 50 undergraduate degrees in this country we always talk about this women take home about 60 of undergraduate degrees in the united states and canada the year that it was more than 50 was 1979-1980 so it's been more than 40 years. And yet, we are still seeing such a few number of women CEOs.

There are more men named John on the Fortune 500, CEOs on the Fortune 500, than there are women. When we look at it through that lens of social justice, we don't make any progress. When we look at it through the lens of a business problem where, hey, we've got a lot of women who are not progressing in their career at the same rate as men. And we are losing them to self-employment.

Women notoriously are more self-employed than men are. Women are business owners and startups more than men are. We're losing good talent walking out the door. That's a business problem.

And if that's the problem, what's the solution? Well, it's making sure that we are equitable paths to leadership positions, that we are developing people equitably, that we're creating opportunity for women, that we're dealing with our bias, et cetera. That's the business problem but people are not enough looking at through that lens yeah last thing i did want to get your perspective on kind of bring bring this whole thing home is for business owners that are listening today you mentioned earlier about doing nothing gets you nothing but for the ones that are listening today if they ignore everything about dei for next slide it's going to be this cost they're going to lose out on talent and they're going to lose out on customers.

And that's just simple math. If you look at the demographic shifts in North America, just North America alone. We have high levels of immigration. We have high birth rates among different racial and ethnic communities, not white communities.

White communities, our birth rate is low and getting lower. We have more women graduating from college and university than men. We have an increase in the number of people with disabilities. That number right now is about 15% of the workforce, but it's getting higher, particularly because of an aging workforce.

We have more people coming out as LGBTQIA+. us, the reality is the world is diversifying whether you like it or not. And if organizations fail to plan for that, then they should plan to fail. Because if you're looking to hire only straight, white, able-bodied Christian men, that population is on the decline and everyone else is on the incline.

And this isn't about the white replacement theory. That's just nonsense. There is no theory or plan. There's just reality that we're living with.

And if you look at the demographic shifts, you'll see what I'm talking about. So plan for that. But it's not enough just to plan for the diversity. You have to make sure that your workplace is inclusive, where you're welcoming people.

You're embracing the difference. Because otherwise, you're sending them into a toxic workplace, and they'll be going out the back door as fast as they came in the front. Yeah, well said. I couldn't agree with you more.

Unfortunately, we're out of time, but Michael, before I let you go, tell the audience where they can find you, connect with you, learn more about you. Absolutely. They can find me at my website, michaelbach.com, and they can also connect with me on social media.

I am The Michael Bach. Yes, you are. And Michael, I really thank you so much for joining me today on Behind the Numbers. Really enjoyed the conversation.

It's my pleasure. Thanks so much for having me. Delightful. Awesome stuff.

And thank you out there for tuning into Behind the Numbers. Really appreciate your support. If you enjoyed today's episode, please take a moment, leave us a review on Spotify or Apple Podcast. As I said before, that stuff really does.

Until next time, I'm Dave Bookbinder reminding you that the numbers tell the story, that people bring it to life. We'll see you next time, gang. Take care.