This article originally appeared on Forbes.com.
But research I conducted with colleagues at Bain & Company indicates that times of transition and change like the current economic cycle are exactly the wrong moment to scale back on diversity commitments. If anything, companies should be reinforcing these efforts.
These recent findings build on work from 2021 that described how to measure a company’s ability to change. That research found that companies with high “change power” have better financial performance, stronger culture and leadership, and more engaged and inspired employees. The new research focused on the drivers of change power, and found them to be strongly connected to diversity, equity, and inclusion (DEI). Change power is 80% higher among companies that Glassdoor has given the highest DEI scores than other companies.
This connection is consistent with 2019 research by The Wall Street Journal that found the 20 most diverse companies in the S&P 500 had better operating results on average than those with a lower score, and that the stocks of those companies also outperformed. Their conclusion: Diversity aids innovation, which in turns boosts profit and sales.
This is just as true in hard times as it is in good times. A recent study by Great Places to Work found that during the Great Recession of 2007 to 2009, the stocks of companies with inclusive workplaces gained more than 14% while the broader S&P 500 dropped more than 35%.
In a 2021 Harvard Business Review article, we outlined nine elements that contribute to a company’s change power. Our recent work found that DEI correlates with all of them, though the strongest statistical connection was to the element of purpose. Purpose guides decisions and inspires action while creating a sense of belonging. By building inclusion, DEI efforts strengthen an organization’s purpose. And when an organization can unify around shared commonalities, leaders are better able to align and push forward meaningful organizational change.
Mastercard’s experience shows how DEI and changeability can build on each other. Over the years, as Mastercard has expanded beyond its original credit and debit cards into new businesses including digital-payment ecosystems, cybersecurity, and data services, the company has had to diversify its workforce of nearly 30,000 as well.
Michael Fraccaro, Mastercard’s chief people officer, sees the company’s ability to change and its mission of “doing well by doing good” as mutually reinforcing. Guided by that purpose, which aligns well with DEI, Mastercard has created new products focused on financial inclusion for the unbanked and underserved.
While it’s hard to draw a straight line from any individual DEI effort to a specific impact on change power, it’s clear that Mastercard has built a strong record on both DEI and change power. We calculate its change power score to be in the 90th percentile, and at the time of the research, its Glassdoor DEI score was 4.4 out of 5, and its Just Capital score 114, compared with 56 for its peers.
Internally, the company tracks and reports to its board on a scorecard of ESG and gender-diversity goals that are linked to executive compensation and annual reviews. One result: Today female employees at Mastercard are paid as much as men, a level of equality many companies are still struggling to meet.
Diversity and inclusion like this takes time to build. Companies that lay off without regard to these priorities jeopardize employees’ and customers’ belief in their commitment to inclusion and risk losing years of slow progress expanding the talent pool.
They also risk falling behind on innovation. Diverse teams introduce realistic and constructive friction, mitigate groupthink, and reduce errors. In addition, Bain research has found, they are five times more likely to innovate.
Innovation is exactly what companies need to navigate times of change and come out stronger on the other side.
Everyone recognizes that individual change is hard. It requires discipline, understanding, and often courage. Organizational change can feel even harder, and yet, in today’s dynamic environment, increasingly important. Thoughtfully harnessing the power of diversity, equity, and inclusion gives companies a valuable advantage that should not be thrown away.