How to secure a DEI budget
Like any other business priority, you need to invest time and resources into DEI if you want to drive impact. You allocate a budget for sales, marketing and R&D, right? If you want to deliver on ambitious goals, DEI should be no different.
Changing your business doesn’t happen overnight, and one-off DEI solutions rarely deliver on their promises. A holistic, long-term strategy is the only way to transform your business.
In times of economic uncertainty, decision-makers might be pulling the purse strings tighter. Therefore, any proposal you make for a DEI budget needs to be economical. To convince leaders to invest in DEI, you’ll need to explain the value it will bring to the business.
Here’s how to put together an undeniable proposal for a DEI budget and invest in solutions that will really make a difference to your business.
Why you need to invest in DEI
There’s undeniable evidence that investing in DEI pays back in dividends. Studies have shown that prioritising diversity and inclusion makes for more resilient, more creative and higher-performing teams:
- Diverse teams are up to 35% more likely to have above-average financial performance. (McKinsey)
- Companies with diverse leadership teams report 19% more innovation revenue. (BCG)
- Diverse and inclusive teams make better business decisions 87% of the time. (Cloverpop)
- More diverse teams are 70% more likely to report capturing new markets. (HBR)
Still, sceptical leaders might think of people processes as “nice-to-haves” rather than business necessities. Because DEI pays off in the long term, it can be harder to prove the return on investment than a marketing campaign for example. And with a recession looming, these doubts might make it harder to secure your DEI budget.
Why is DEI important in a recession?
It’s even more important to invest in your people in times of uncertainty. DEI could even be the critical differentiator between winners and losers during a recession.
Research from Great Place to Work showed that organisations that invested in talent management and development during the 2007-2009 recession had a greater financial performance. They also experienced better growth and were able to adapt faster when the market rebounded.
To prepare for the upcoming recession, we should look to the past. Between 2007 and 2009, the stock prices of the S&P 500 fell more than 35%. But for companies that invested in DEI solutions, their stock prices gained an average of 14.4%.
To build a resilient workforce that can weather crises and come out even stronger, you need a holistic DEI strategy.
Maintaining that competitive advantage in an economic slowdown is even more essential in the tech industry. To win in a competitive climate, your team needs to be adaptive, innovative and feel comfortable taking risks. And evidence shows that diverse and inclusive teams are in the best position to do so.
When weathering a storm of uncertainty, investing in DEI is like reinforcing your ship. To build a resilient workforce that can sail the rough seas and come out even stronger, you need a strong DEI strategy.
How to set a DEI budget
Your DEI budget should set a clear plan of what you hope to achieve along with a justification for the costs. But how do you define this budget? How much is the right amount to spend? There’s no single correct answer. Your spending will depend on your business size, industry, goals and the tools that you’ll employ to achieve them.
Here’s a guide to setting a DEI budget that makes sense for your organisation.
1) Define your goals
Clear DEI goals align your work, focus efforts and motivate change. There are hundreds of things you could do to improve DEI, but with a clear target, you’ll limit your scope to the things that matter.
Goals should focus on what needs to change to make the biggest impact in your business. We’ve written an entire guide on setting successful DEI goals. It’s the crucial first step.
Example: We will improve the representation of women in management levels by 20%, reaching an even gender balance.
2) Define how you will pursue these goals
Once you’ve set your sights high, you need to plan how you’ll get there. Which specific initiatives will you undertake to achieve your goals?
Small companies might want to start with some low-cost, limited-scope initiatives, like revamping your hiring process to improve fairness. More mature organisations might focus on larger projects, like setting up a salary and progression framework or partnering with external organisations to improve diversity.
Whatever your focus, be wary of quick fixes. Companies typically turn to consultancies or one-off training sessions when they’re looking for DEI solutions. These providers might promise sweeping transformations, but that’s rarely the case, especially in a short time frame. In fact, despite over $8 billion spent on DEI training per year, a meta-analysis of over 500 studies concluded that this training doesn’t successfully shift long-term behaviour.
How do you know what works? Fair HQ provides scientifically-backed recommendations suited to your areas for improvement. With in-depth DEI data, it takes the guesswork out of DEI so that you can invest in activities that make a difference. Learn more here.
Example: To improve the fairness of our promotion process, we’ll carry out an in-depth analysis of our current set-up using Fair HQ. The platform will provide us with step-by-step recommendations to improve our policies and processes, and survey employees to learn more about their experiences.
3) Map out the time and cost of your initiatives
Your DEI budget should accommodate the initiatives needed to achieve your goals. Whether it’s speaker fees, training resources, implementing new processes or using a tech tool to help, dig into the cost of each of your initiatives.
You’ll also want to define the time commitment for your initiatives. This will allow you to organise work and measure progress towards your goals.
Here’s a rough guide:
- Unconscious bias training: Upwards of £300 per person for a one-off session.
- DEI consultant: Average salary is £42,500 per year.
- TOTAL for 1000 person company: £342,500+
- Fair HQ does it all for you. The platform manages your DEI process end-to-end, including employee surveys for diversity & inclusion, reports on your company’s equality, and educational campaigns to engage employees.
- TOTAL for 1000 person company: way cheaper than above (contact us 😉)
Example: We will launch our new equitable progression framework by Q2 2023 and embed changes increasing LGBTQA+ inclusion. Using Fair HQ means that our People Team can set this up in record time without help from an external consultant. Fair HQ costs £XX,XXX per year for a company of our size, saving us £XXX,XXX compared to alternative DEI solutions.
Sounds like a no-brainer right?
How to calculate the return on investment for DEI
It’s hard to calculate the value of DEI in exact pennies and pounds. The return on investment is less predictable than, say, a new advertising campaign, but no less valuable to your business.
Still, there’s plenty of research that can get you closer to a number. If your leaders are pushing for a black-and-white figure, here’s how to convince them to sign the cheque:
- An MIT study of over 60 workplaces spanning 8 years found that improving gender diversity can increase revenue by up to 41%.
- Let’s say your ARR is £10 million. By investing in DEI solutions, you could see that figure jump to £14,100,000, an increase of £4.1 million over an 8-year period.
- Calculate the cost of your DEI budget over these 8 years. Let’s say your yearly DEI budget is: £30,000 x 8 = £240,000
- Subtract this cost from your total gains to find the ROI: £4,100,000 – £240,000 = £3,860,000 ROI
Another way to look at it is retention costs. High levels of employee belonging are associated with a 50% drop in turnover risk.
- Let’s say your 1000-person company has a yearly attrition rate of 18%. That’s 180 leavers per year.
- According to Glassdoor, it costs on average £3000 to hire a new employee.
- That means you’re spending £540,000 (180 x £3000) per year just on hiring new employees to replace those that left.
- By investing in tools to improve your inclusion and belonging, you can cut that attrition rate in half, saving you £270,000 per year.
- Subtract your DEI budget from that figure (£270,000 – £30,000) and you have £240,000 in saved attrition costs.
Like any other ROI calculation, this is just a prediction. But it helps to put things into perspective and show how valuable DEI is to your business’s bottom line.
Now you’ve got everything you need to make a strong business case to invest in DEI. All that’s left to do is to make your case to the decision-makers in your business.
How to propose your DEI budget:
Make the business case
DEI is a business essential. Teams with strong DEI are 30% more financially successful and 70% more likely to capture new markets. It’s even more crucial to invest in our people during a recession. Research from the 2007-2009 economic crash showed that the stock prices for companies that invested in DEI gained an average of 14.4%, while others fell on average 35%. To stay at the cutting edge in a competitive economic climate, we can’t afford not to prioritise DEI.
Set out your goals
Over the past 6 months, our rate of attrition has increased by 10%. Exit interviews suggest that a culture of exclusion could be driving employees to leave. By investing in measures to improve inclusion, we seek to lower our attrition rate by 15% by Q2 2023.
Set out the initiatives to achieve these goals.
To improve employees’ sense of inclusion, we will be investing in a tool to measure their experiences. Fair HQ will also reveal inclusion gaps between different employee groups so we can remove barriers of exclusion.
With Fair HQ, we’ll get a clear sense of what we can improve to support our team. The tool will also allow us to audit our processes and company makeup, and provide science-based guidance to help us become a truly inclusive employer. Over time we will be able to measure the impact and ROI of our DEI efforts.
Propose the budget.
For a company of our size, Fair HQ will cost £XX,XXX per year. The guidance we will get will allow the People Team to carry out the initiatives without needing to invest more money in external providers, saving us over £300,000 a year in training and consultation fees.
Explain the ROI using the above guide
By investing long-term in DEI, we could see a return on investment of up to £3.86 million over 8 years. We can also halve our rate of attrition by building an inclusive culture, saving us £240,000 per year in hiring costs.
Show how it will make life easier
Fair HQ takes the guesswork out of D&I. No more expensive training sessions that don’t make a difference. We’ll be able to embed D&I into our everyday operations and show the impact of our work with black-and-white metrics. With engaged, happy and supported employees, we’ll be resilient in the face of uncertainty and reduce our turnover rate.
There are countless benefits to investing in diversity, equality and inclusion. It enriches the workplace, broadens your thinking, strengthens your team and boosts your innovation. You shouldn’t rely solely on the business case — research suggests it can backfire. It’s much better to frame DEI as part of your values as a business.
That being said, in times of economic uncertainty, leaders might be warier of investing in solutions without a solid case for the business value. If you come against resistance, it’s helpful to have some facts and figures up your sleeve to show that DEI is truly beneficial to your bottom line. With this guide, you’ll make an undeniable case for a DEI budget.
Backing it up
Carr, E. W., Reece, A., Kellerman, G. R. & Robichaux, A.(2019). The Value of Belonging at Work. Harvard Business Review.
Dizikes, P. (2014). Study: Workplace diversity can help the bottom line. MIT News.
Forscher, P. S., Lai, C. K., Axt, J. R., Ebersole, C. R., Herman, M., Devine, P. G., & Nosek, B. A. (2019). A meta-analysis of procedures to change implicit measures. Journal of personality and social psychology, 117(3), 522.
Georgeac, O. A., & Rattan, A. (2023). The business case for diversity backfires: Detrimental effects of organizations’ instrumental diversity rhetoric for underrepresented group members’ sense of belonging. Journal of Personality and Social Psychology, 124(1), 69.
Kim, Y., & Ployhart, R. E. (2014). The effects of staffing and training on firm productivity and profit growth before, during, and after the Great Recession. Journal of Applied Psychology, 99(3), 361.
Kirkland, R., & Bohnet, I. (2017). Focusing on what works for workplace diversity. McKinsey & Company.
Powers, A. (2018). A study finds that diverse companies produce 19% more revenue. Forbes Magazine.