Our industry is engaged in an important dialogue to improve sustainability through ESG transparency and industry collaboration. This article is a contribution to this larger conversation and does not necessarily reflect GRESB’s position.
Diversity, Equity, and Inclusion (DEI) have become the center of focus for employment best practices in the last decade. The ULI Global Real Estate DEI Survey, conducted in 2021, found that 92% of commercial real estate firms have implemented at least one DEI initiative, either formally or informally. Considering the global commercial real estate industry employs over 18 million people worldwide, that’s substantial. Recruitment and hiring have gained traction in building a diverse entry-level workforce; however, the degree of representation thins significantly as the level of leadership gets higher. In Europe, 86% of board members, 84% of executive management, and 77% of senior level professionals are men. In North America, 87% of board members, 85% of executive management, and 85% of senior-level professionals are white. It appears that the diverse junior-level employees being brought in aren’t making it up the leadership ladder. To reverse this pattern, companies must take a systematic approach and bold steps to strengthen retention and diversify executive leadership.
In addition to the intrinsic importance of DEI, retention is a chief concern for HR departments worldwide. High turnover is costly, usually half to two times the cost of the previous employee’s salary. Investing in your workforce through DEI initiatives is not only cheaper than turnover, but it also leads to higher productivity and employee satisfaction in the office. DEI and retention have proven to be inextricably connected – a diverse workplace is a welcoming and inclusive one: one where employees will want to stay. It’s one where employees are empowered to voice their opinions and address their concerns rather than feel compelled to seek another job. It can create a greater sense of purpose within the workplace, which can lead to higher levels of engagement and retention.
While it is one thing to integrate DEI into your hiring practices and get diverse potential employees through the doors, it requires an entirely different mindset to figure out how to retain a diverse workforce. Diverse hiring practices ultimately have little impact on workplace culture if there isn’t a concerted effort to integrate the E and I of DEI into the systems of the company. After all, if employees don’t feel included and empowered at their workplace, why would they stay? Further, a diverse workforce shouldn’t just look diverse, it should feel diverse. Superficial diversity does nothing for a company outside of PR, whereas diversity of thought changes business trajectories and expands market opportunities. Hiring from diverse backgrounds, degree programs, and cultures is overlooked and undervalued – but it could be a key to a successful business.
Best practices for ensuring retention at a company include DEI in onboarding and trainings, accessible workspaces, flexible work arrangements, wellness programs, daycare options, employee recognition schemes, transparent promotion procedures, equitable wages and benefits, and employee feedback forums. Even enacting a small number of these practices, as opposed to the entire menu, have proven to have a significant impact on retention. The bottom line is companies that take real steps to ensure their employees are valued, comfortable, and supported will reap notable benefits and outperform those who don’t.
Benefits not only accrue by retaining diverse talent but also by focusing on increasing executive-level diversity. Like other ESG principles that are proven to be profitable and drive market value, McKinsey found that companies that scored in the top quartile for gender diversity on executive teams were 25% more likely to have above-average profitability than companies that scored toward the bottom. This suggests that DEI in leadership is a meaningful way to gain talent and that the lack thereof can harm a company’s bottom line.
DEI is typically seen as a bottom-up approach when building a diverse workforce at a firm. Although this is important, when it comes to DEI, a top-down approach can also be effective in creating a shared commitment to the initiative. Companies should focus on advancing not just executive-level diversity but also middle management, technical, and board member positions. In the process of developing these diverse leaders, companies ought to place the DEI initiatives not only on HR professionals but also include their leaders and managers at the heart of the DEI effort. A leader’s visibility and active participation in DEI sets an example for all management levels and assists in sustaining momentum.
Leadership engagement in a firm’s DEI initiatives is the first stage in driving positive organizational change and holding leaders accountable for those initiatives. The second, often more challenging stage is transforming the composition of the top: the C-suite and the board. Significant hurdles to improving diversity in executive leadership may include the lack of mentors and diverse circles typically recruited from and race and gender bias. Overcoming these barriers requires more than recruiting diverse talent for entry-level positions. More people from historically underrepresented groups are obtaining graduate degrees and are gaining management experience to be qualified and recruited for executive-level roles. Expanding mentorship programs that promote DEI internally fosters promotions from within, helping underrepresented employees pursue executive positions. When creating a mentorship program, it’s essential to include women and people of color at all program levels but not overburden those minorities in leadership. Increasing diversity at the top can produce powerful results when people with different perspectives work together to create business solutions.
When we think of Diversity, Equity, and Inclusion (DEI), a company must not only design programs that proactively recruit diversified individuals but must also be reactive in their policies of providing equal and inclusive opportunities for progression into management or executive leadership. The business community is beginning to recognize the benefits of diverse leadership and talent retention. Similar to other business sectors, commercial real estate will likely face intense scrutiny in the near future relating to DEI, making now the perfect time for the industry to make a serious effort to be proactive in its policies and boost its DEI initiatives.
This article was written by Emma Beck, Senior Consultant, and Sydney Flores, Sustainability & Energy Analyst, at Longevity Partners.
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