Lack of Inclusion Is Costly. Humanizing the Workplace Pays off

5 Ways Organizations Pay for a Lack of Inclusion and 3 Cs to Turn the Corner

Image by Gerd Altmann

Image by Gerd Altmann

According to estimates by Gallup, one disengaged worker costs a company around 34%. And replacing an employee with a $140,000 comp package costs $350,000 on average, according to SHRM. Replacing three means paying over a million dollars.

I recently worked with 2 clients who urgently wanted to leave their organizations. They were desperate for an environment with better opportunities for career advancement, an environment where they’d be respected and valued.

One of them is a woman in her late 30s who was extremely frustrated about the lack of advancement opportunities and about not being taken seriously. It wasn’t just the circumstances that concerned her; she was also worried because her self-esteem was starting to suffer. She realized that she was beginning to doubt herself and the value of her skills. As a result of our work together, she was able to turn her situation around: She found a new opportunity in a different organization, where she was up-leveled twice in the first year for her outstanding contributions and was promoted into a higher leadership position after 16 months. She is currently one of the most respected leaders at her level, and her team was recently acknowledged with an internal achievement award. The one thing that had changed was culture.

The other client is a smart young Caribbean man, who was constantly overlooked for high-profile projects and even openly discriminated against. He was eager to share his genius but discouraged by a toxic workplace. We prepared him for his job interviews and he quickly found a more inclusive environment, where his creative talent is acknowledged and properly compensated. He’s now much happier at his job, and he’s making 150% of what he was earning before… But here’s what his new employer is getting: Tenfold engagement and loyalty.

Losing talent is costly. Losing top talent even more. Many organizations pay a high price for their lack of inclusion. Let’s look at five ways of how they pay for it:

1.       The Cost of Disengagement

When employees experience a shortage of opportunities for career development and advancement, or when their work environment is not positively challenging, their enthusiasm to contribute their best work diminishes. They are no longer excited about what they are creating. They experience a lack of meaning and they feel less fulfilled at work. Therefore, their engagement goes down, and with it their commitment to the team’s success. As a result, both team relationships and output suffer, and overall team productivity drops.

If the condition persists, frustration and burnout are next, and employees are more likely to be late, to take sick days, to miss workdays whenever they find an excuse. Productivity decreases further.

According to a 2018 study by Gallup, only 34% of the U.S. workforce is engaged. With a headcount of 5,000, this means that your organization may have 3,300 disengaged employees.  The cost of disengagement per employee, according to Gallup, is 34%... $34,000 of a $100,000 salary blown in the wind... if the person stays. Because they may get so frustrated that they leave, which leads us to cost #2:

2.       The Cost of Attrition and Replacement

According to SHRM, the replacement cost of a technical employee or an employee in some manager or leader position is about 250% of their salary and benefits. With an annual salary & benefits of $140,000, that’s $350,000! For an entry-level, this cost goes down to 50% but that’s still substantial: With a $70,000 package, that’s $35,000.

These numbers speak for themselves.

But the cost of losing a top performer isn’t just about their salary. There’s also about what they could be contributing but aren’t contributing due to lack of encouragement or fear.

3.       The Cost of Unused Talent and Opportunities

Diverse teams are only potentially more innovative. Trust is often the missing piece. When there’s a lack of trust, team members are hesitant to share their creative ideas. When they’re not encouraged to bring their whole selves to work, they will leave their best selves at the door. When there’s no sense of trust, when it doesn’t feel safe to share, when it feels risky to speak up, when we operate in an environment where it’s not ok to make a mistake, that’s when we play it safe and we don’t have an incentive to show the best we have to offer. We hold back.

Organizations miss out on so much hidden talent just because they don’t set the stage for employees to share the best of what they could bring to the table. We get too hung up about job descriptions, rigid processes, and our own assumptions. And so we fail to look behind the façade, to uncover people’s unique genius and brilliance, or as I call it, their distinctive uniqueness.

The cost is missed creativity and therefore missed opportunities for innovation. But again, this also leads to a lack of job satisfaction with the employee, and eventually to frustration and a possible departure of the underused talent, which now becomes lost talent. And what if that person takes her or his next million-dollar idea to your competitor?

And then, of course, employees leaving your organization for reasons of poor inclusion management will also negatively impact your brand image, which takes us to cost #4:

4.       The Cost of Affected Brand Image and Market Share

News travels faster than ever before, and a brand that’s known for a non-inclusive culture will have difficulty attracting top talent. The cost of talent acquisition goes up. In the meantime, the company’s market share could go down.

By 2050, people of color will outnumber other groups, according to the U.S. Census Bureau. When your talent, your staff, your leaders don’t represent the market, you will not understand what’s going on in the marketplace and it becomes harder to lead the market. Therefore, failing to recruit, retain and promote diverse talent will result in a loss of market share. An inclusive culture, on the other hand, will attract this diverse talent, and the best share of it.

Do you know what your ROI is or could be if you were able to not only attract but also retain and promote diverse talent all the way up to the top leadership ranks? Do you know? – Most organizations don’t because they have never experienced it, which brings us to… cost #5:

5.       The Cost of Lost Opportunity

If you want to stay relevant in the marketplace, stay ahead of other players, you need sustainability. Part of this is covered in cost #3 and #4: missed creativity, innovation and market share.

It’s no secret that inclusion drives engagement, engagement leads to greater productivity and creativity and therefore to more innovation, which in turn benefits the bottom line. Studies to corroborate this statement abound.

But keep reading because there’s another lost opportunity: The opportunity to make an impact for important causes like equity, inclusion, better communication between genders, races, ethnicities, people with different abilities, backgrounds and sexual orientations. Yes, there is a business case. It’s undeniable; it’s all over the internet, and…

What would it be like to leave a legacy that goes beyond the business case? – You don’t have to create a foundation for that. You can start with and in your current organization. Start by being the change you say you want to create. Corporate responsibility starts within, and it pays off:  You’ll get all the “business case” benefits as well.

You may say, ok ,but how? Let me share 3 Cs that can put you on the right path:

1.       Connect

In order to create a powerful connection between employees and teams, between employees and the organization as a whole, we first need to create a safe, trust-based environment. An environment where all are welcome to bring their whole selves to work, where they feel encouraged to share their creativity and where it’s ok to make mistakes.

We want to ask questions, and the right questions. Questions such as:

  • What’s your vision for yourself and why?

  • What lifts you up?

  • What do you need?

  • How can we best support your success within your team?

  • Do you need us to accommodate any specific needs?

As a leader, sharing your story as a leader with your team and encouraging your team members to do the same can be tremendously powerful. Story sharing strengthens bonds between employees; stories connect. Transformational stories inspire. Stories allow us to reduce the risk of stereotyping and to increase our understanding for each other, raise cultural awareness. Stories pull people out of their boxes and into their humanness. They have the power to enhance the quality of team relationships.

Connecting is about exchange. Take time for regular team meetings and one-on-one meetings. Team meetings don’t replace one-on-one meetings and vice versa. Connecting requires time to connect, but this time investment always pays off. Bonding the team together and building trust isn’t the only benefit. It also allows team leaders to uncover hidden talents within their teams, which leads us to C #2:

2.       Challenge

Your employees want to continue to learn, grow and advance. This is only possible when they are given new challenges. Interesting work, a variety of projects, an upgrade in responsibility… that’s what driven employees are looking for. They dread being stuck in the same old routines. Top talent team members want to experiment with their skills, maximize their strengths, showcase their creativity and have an active role in the development of new products and services, or processes and management tools.

Career- and purpose-conscious employees who feel stuck at the same level will start looking for growth opportunities outside your organization, and they should. 

In order to avoid this and make the best of a team’s combined creativity, we must find a way to bring its valuable complementary skills and capabilities together:

3.       Co-Create

Individuals in organizations still waste far too much precious time on useless competition rather than focusing on effective co-creation. Rising stars want to be seen. Many are led by the misperception that competition is the fastest way to the top (and a corporate culture that reinforces this misperception).

When talent leaders take the time to uncover their team members’ natural strengths and hidden talents, their complementary genius and brilliance, or as I call it, their Distinctive Uniqueness, that’s when they are setting the ground for fruitful co-creation in a setting where all can thrive.

When leaders have a clear idea of all the talents on their teams and assign projects, tasks and responsibilities that are aligned with each individuals’ natural strengths and passions, rather than rigid job descriptions, that’s what I call smart human resources allocation that leads to better and faster results.

The result is less need for competition, as it becomes more obvious what the role of the individuals’ complementary strengths is and how they fit into the bigger organizational puzzle. It gets easier for people to be recognized for what they bring to the table. Less energy and time will be wasted on competition and more on productive collaboration and co-creation.

And almost paradoxically, greater inclusiveness and co-creation combined with less competition within your organization will increase your competitive edge with regards to other market players.

Download our complimentary white paper Diversity and Inclusion Initiatives Thrive with Maximum Leadership Support.