How to Calculate the Financial Value of Inclusion

This article is part of a series that draws from my book, Measuring Inclusion. It focuses on the Inclusion Impact Calculator we have developed at Aleria, which estimates the financial losses that a company incurs when its inclusion is not optimal.

The backlash against Diversity, Equity, and Inclusion (DEI) is making headlines across industries. What was once seen as a necessary step forward has, for many, become a divisive topic. Amid this polarization, one thing remains clear: business leaders cannot afford to ignore the realities of workplace culture. But to move past the noise, organizations need more than good intentions—they need data, and they need tools to help them make the right decisions.

This is why I wrote Measuring Inclusion: Higher Profits & Happier People, Without Guesswork or Backlash, and it is why my colleagues and I developed the Inclusion Impact Calculator. In the face of growing skepticism, the ability to quantify the link between inclusion and financial performance is not just helpful—it is essential.

Why Inclusion Drives Business Success

Before discussing the Inclusion Impact Calculator, it is crucial to understand an underlying principle: inclusion is not a feel-good concept; it is a strategic advantage. Our work shows that focusing on inclusion can yield measurable benefits for any type of organization:

• Employees are more satisfied and engaged.

• Productivity improves.

• Turnover decreases, reducing costly rehiring and training expenses.

• Legal, operational, and reputational risks decline.

As I explain in Chapter 1 of Measuring Inclusion, the business value of inclusion lies in its direct impact on employee experience. When employees feel valued and supported, they contribute more effectively. When they encounter barriers—whether through policies, processes, or interpersonal dynamics—their performance suffers, and they are more likely to leave.

Introducing the Inclusion Impact Calculator

The Inclusion Impact Calculator is a tool designed to help organizations estimate the financial impact of inclusion. It is built on a simple but powerful assumption: inclusion drives satisfaction, which in turn drives productivity and retention.

A simple version of the Inclusion Impact Calculator is available on our website. The calculator is interactive: you adjust its parameters to reflect the situation in your organization, and the calculator estimates how much money your company is losing invisibly because of sub-optimal levels of inclusion. Specifically, the losses are estimated based on two factors: reduced productivity and increased costs of replacing employees who quit.

Here is how the calculator works:

1. Input Your Organization’s Data: This includes revenues, number of employees, representation levels, and inclusion or satisfaction levels for each group. Note that the public version has four identity groups (white women, white men, BIPOC women and BIPOC men), but the calculator can be customized to match whatever identity groups you use in your organization.

2. See the Financial Impact: The calculator estimates the costs associated with reduced productivity and increased turnover resulting from lower levels of inclusion. These costs are shown as three bars in a chart: loss from reduced productivity, loss from reduced retention, and total loss. Each bar has three or four “layers” corresponding to the identity groups. The losses are also shown in the text below the bar charts.

3. Experiment with different scenarios: As you adjust the various parameters and sliders, you will see that the bars change size, and the numerical values are updated in the text.

What the Results Reveal

The calculator uses a number of simple assumptions about the portion of revenues per employee that are impacted by the employee satisfaction, and the average cost of replacing employees who have quit.

In the default settings when you first visit the online calculator, you see a company, ACME, Inc., with 2,000 employees and $500 million in annual revenues. ACME has 55% white men, 30% white women, 8% BIPOC men and 7% BIPOC women. The calculator also defaults to satisfaction/inclusion levels of 90% for white men, 82% for white women, 80% for BIPOC men, and 75% for BIPOC women. These numbers reflect typical averages across companies we have worked with.

Based on these parameters, the calculator shows that ACME is losing an estimated $7.9 million per year, of which $4.1 million is from lost productivity and $3.8 million from the cost of replacing employees who quit. If ACME has 10% net profit margins, or $50 million, this means they are losing roughly 16% of their net profits because of sub-optimal inclusion.

We find that a typical company is “invisibly” losing 15-20% of their net profits. These numbers are not hypothetical. In late 2022, a leaked internal memo from Amazon revealed that unwanted attrition was costing the company $8 billion annually, against net profits of $33 billion.

The cost of focusing on identity alone

In an earlier article I suggested that the current anti-DEI climate has been partly fueled by the single-minded focus on diversity targets that has characterized many recent DEI initiatives.

The Inclusion Impact Calculator shows another interesting unintended consequence of focusing on diversity targets: if you move the sliders to increase the representation of any of the Historically Underrepresented Groups (or HUGs), the losses actually increase! This makes sense: if a workplace is less welcoming, say, to women than to men, and you increase the percentage of women, you will have a larger proportion of employees who are less satisfied, which means you will lose more money.

The hope in DEI had been that increasing diversity would lead to greater inclusion, but in reality this has not happened. In fact, what our data shows clearly from multiple Inclusion Assessment projects is that, in the last two years or so, the level of satisfaction of white men has declined significantly, with several of them complaining specifically about DEI. This means that, because of the misguided focus on diversity, companies risk losing more money as the satisfaction of white men declines.

As the saying goes, “the road to hell is paved with good intentions.”

Flipping the conversation on its head

I want to underscore an important difference between the approach I describe in my book, and more traditional approaches to DEI.

Most DEI proponents have argued that creating greater diversity will lead to superior performance through factors such as greater innovation, increased team performance, the ability to reach broader markets, and so on. However, it is nearly impossible to quantify how traditional DEI programs actually lead to these improvements. When companies spend significant amounts implementing initiatives, and don’t see the anticipated results, it creates even more problems.

The approach I describe in my book, and which is captured by the Inclusion Impact Calculator, flips that argument on its head: instead of promising unclear benefits, we show how suboptimal levels of inclusion are causing organizations to lose money. Creating a more inclusive organization improves the bottom line by reducing the invisible losses.

When you couple this with the fact that Measuring Inclusion provides a wealth of additional data, clear guidance on what can be done to increase inclusion, and no backlash, you will see why the Measuring Inclusion approach is so appealing to leaders.

Final Thoughts

The backlash against DEI is a wake-up call. It is not a reason to abandon efforts toward inclusion and equity, but an opportunity to get smarter about them. By shifting the focus from diversity targets to employee experiences, and by using data to demonstrate financial impact, organizations can build more inclusive workplaces as a key part of their strategy.

Curious to see how inclusion is affecting your bottom line? Try the Inclusion Impact Calculator and start measuring what truly matters.

About the author: Paolo Gaudiano

With degrees in aerospace engineering and neuroscience, Paolo jokes that he had already done rocket science and brain surgery before facing a really complex problem: convincing business leaders they can make more money by creating more inclusive organizations.

Paolo is founder of DEI tech company Aleria and the research nonprofit ARC. A former tenured professor, he is an adjunct at NYU and chair of the annual D&I Research Conference.

Paolo is a sought-after speaker, and author of the award-winning book Measuring Inclusion. He has received numerous awards for his work, including a Moonshot House Fellowship from the Kravis Center for Social Impact.

If you would like to invite Paolo to deliver a compelling, engaging presentation to your next leadership meeting, offsite, class, or conference, or if you'd like to learn more about Measuring Inclusion for your organization, please fill out our contact form and someone from the Aleria team will get back to you.