Cracking the Code for Employee Happiness and Retention

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New research reveals how business leaders can build more inclusive workplaces that drive genuine business value.

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The demand for workers in the US greatly exceeds supply, with almost two job openings for every unemployed person,<a href="https://www.bloomberg.com/news/articles/2023-03-02/top-us-ceo-concern-is-lack-of-workforce-commerce-chief-says" target="_blank">according to Bloomberg</a>. Globally, the labor market is also tight, even by historical standards,<a href="https://www.weforum.org/agenda/2023/01/the-outlook-for-2023-is-uncertain-but-here-s-what-we-know-about-the-global-labour-market-davos23/" target="_blank">according to the World Economic Forum</a>.This job growth has been great for employees, giving job seekers options and leading to strong wage growth in certain markets. But for business leaders, attracting and keeping workers, especially diverse ones, has become a top concern.However, business leaders have a powerful tool to retain workers: improving employees’ feelings of inclusion leads to higher retention.<a href="https://sponsored.bloomberg.com/immersive/bcg/cracking-the-code-for-employee-happiness-and-retention" target="_blank">BCG’s BLISS Index</a>, which is based on a survey of 27,800 employees across 16 countries, reveals that senior leadership and direct manager behavior as well as the diversity of the leadership team are deciding factors in whether employees choose to stay or leave a company.

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Senior leadership diversity and behavior, together with direct manager behavior, are the most influential factors driving inclusion at work, accounting for two-thirds of employees' overall sense of inclusion, according to this new research from Boston Consulting Group (BCG).Senior leaders may not fully realize the impact they have on employee inclusion through their own actions as well as through the composition of their leadership teams. Companies with diverse leadership teams are much more likely to have inclusive cultures, directly impacting retention.Front-line managers also play a significant role in whether employees feel included, which BCG’s BLISS Index demonstrates is a key element in increasing employee retention rates."It is astounding how strong the correlations are between aspects of leadership and employees' feelings of inclusion," says Gabrielle Novacek, a Managing Director and Partner at BCG. "When you look at how much of inclusion is driven by the messages senior leaders communicate, the actions they take, and the cultures they nurture, it's a profound call to action."

Here’s how senior leaders and direct managers can create a psychologically safe and supportive workplace:<ul><li>Model inclusive behaviors that make employees feel seen and included, which builds inclusivity.</li><li>Build a diverse leadership team that reflects different identities, experiences and backgrounds, which foster authenticity.</li><li>Prioritize a culture where employees feel free to express their authentic selves and make mistakes, which creates psychological safety.</li><li>Promote Diversity, Equity, and Inclusion initiatives and encourage mentorship programs, two of the most effective ways to promote inclusion.</li><li>Be open about your own personal challenges and vulnerabilities to help build a more authentic and inclusive work culture.</li></ul>

The Surprisingly Powerful Role of Senior Leaders in Employee Inclusion

Diverse employees—including LGBTQ+ workers, people with disabilities and those from different cultural or socioeconomic backgrounds—often face barriers to feeling included at work, according to new research from Boston Consulting Group (BCG).&nbsp;For all of these groups, BCG’s research has shown that being mentored can increase feelings of inclusion and engagement—and ultimately retention.

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Strong relationships with colleagues, particularly mentors, are essential to fostering a sense of belonging. Building relationships not only helps employees connect with the organization's purpose, but it is also a huge driver in career advancement and outcomes. Mentorships can be critical to employees’ long term-success and to their experience of inclusion.&nbsp;Mentorship programs are an effective tool to boost workplace experience—with benefits for participants of all identities, according to <a href="https://sponsored.bloomberg.com/immersive/bcg/cracking-the-code-for-employee-happiness-and-retention" target="_blank">BCG’s BLISS Index</a>. In 2022, BCG&nbsp; surveyed 27,800 employees across 16 countries and found that mentorship programs are highly effective in increasing an organization’s inclusion score, which the research found drives employee happiness, motivation and ultimately increased their retention.Gabrielle Novacek, Managing Director and Partner at BCG, emphasizes that mentorship programs can be a powerful tool for promoting diversity, equity and inclusion (DEI) in the workplace.“When employees have someone who cares about their experiences, who has their back and shows interest in their personal and professional growth, they feel more connected to their work and they are able to see a longer-term future for themselves in their career and company,” says Novacek. “Creating meaningful mentor-mentee pairings that lead to authentic and durable relationships doesn’t have to be costly. It’s about being thoughtful and intentional.”

It is critical that frontline managers and leaders across all levels of the organization take the initiative to mentor new and established workers. Mentorship is one of the most effective and least expensive ways to build feelings of inclusion in the workplace. Here’s what leaders should remember:&nbsp;<ul><li>Mentoring connections do not have to be based solely on shared demographic identities, but rather can be based on authentic connections across any number of dimensions like common interests, professional goals or learning needs</li><li>Leaders must consciously avoid placing additional burden on a small number of diverse individuals to carry the mentorship load. Serving as a mentor should be a widespread expectation, and one shared across leadership of the company.&nbsp;</li><li>Mentorship programs are a powerful tool for promoting diversity, equity and inclusion (DEI) in the workplace, creating a culture of caring and accountability, helping employees navigate their career growth and increasing long-term retention.</li><li>Mentees have reported increased happiness and motivation at work, while mentors can give back and create a more inclusive workplace for all.</li></ul>“Employees all have different backgrounds and experiences. Mentorship is effective because it’s custom-fit to the individual. When we look at the cost-benefit analysis of mentorship, it’s one of the best returns on investment leaders can make,” says Novacek.

The Hidden Power of Mentorship

The corporate layoffs that have impacted technology, consumer discretionary and financial companies in 2023 are gutting diversity, equity and inclusion (DEI) departments and could threaten companies’ efforts to increase underrepresented groups in their ranks and in leadership roles.The urgency to navigate immense financial pressure can overshadow the long-term advantages of cultivating a diverse and inclusive workforce.However, reduced investment in DEI programs results in reduced employee experiences of inclusion, according to BCG’s BLISS Index, a comprehensive and statistically rigorous tool that identifies factors that influence feelings of inclusion in the workplace.

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Corporate investment in comprehensive DEI and employee-centric programming offers significant long-term value and is a powerful catalyst that drives employee satisfaction, boosts retention and builds stronger business outcomes, according to BCG’s BLISS Index. Companies that heavily invest in DEI programs have a 31% higher impact on making workers feel included than companies who invest less.Gabrielle Novacek, a Managing Director and Partner at BCG, stresses the urgency for organizations to continue prioritizing the day-to-day employee experiences and workplace culture they foster within their companies. In addition to DEI programs, organizations should also focus on integrating inclusive behaviors and interactions into their everyday work practices.“Effective DEI initiatives have a transformative, cascading effect within organizations,” says Novacek. “Investing in these day-to-day interactions can yield powerful results and significantly impact the environment that leaders create every single day when people come to work.”BCG’s BLISS Index shows that cutting DEI resources can have a significant negative impact on business and culture, leading to increased turnover and lower employee satisfaction.The solution lies in maintaining investments in DEI programs and policies, such as anti-discrimination and anti-harassment policies, paid parental leave, diversification of leadership teams and tracking of DEI metrics. This approach has a proven track record of fostering company growth and yielding tangible benefits through a more engaged workforce, a stronger reputation and increased employee retention.

Investing in DEI should continue to be a top priority for organizations looking to gain a competitive edge in today’s global business landscape. Reinforcing positive workplace behaviors helps to optimize DEI initiatives.Organizations simply can’t afford to ignore the importance of DEI investment. To make substantial progress in DEI, BCG’s BLISS Index has identified three critical steps that leaders should take:<ol><li>Allocate resources strategically: Despite financial pressures, leaders should make strategic decisions to prioritize investments to create comprehensive, employee-centric packages. The long-term benefits of employee satisfaction and retention and their positive effect on innovation and growth can help guide these decisions.</li><li>Share the business case for DEI: Leaders need to clearly communicate the business case for DEI to stakeholders. By highlighting the positive impact on employee retention and market competitiveness, leaders can build support for sustained DEI investments.</li><li>Build an inclusive workplace culture: Organizations should focus on creating a workplace culture that values and respects all employees. This includes building a culture where employees feel safe to make mistakes and be their authentic selves, which can be achieved by fostering diverse and equitable hiring, providing opportunities for advancement, regularly tracking retention rates and proactively examining any hiring disparities.</li></ol>“Investing in DEI allows leaders to attract better talent, retain employees longer, generate more creativity, and deliver greater long-term results,” says Christoph Schweizer - CEO, Boston Consulting Group.