A diverse array of minds can create stronger, more innovative accounting firms. That’s why, as with many industries, the shift toward diversifying accounting teams is not just advisable but also essential for staying competitive.
There have been significant leaps forward concerning diversity, equity and inclusion (DEI) within accounting firms in the last few decades. Many firms have added diversity and inclusion programs to their agendas, created initiatives to combat unconscious bias in hiring, and built more inclusive practices into their HR departments.
However, while it seems many firms are now dedicating resources toward a DEI strategy, how deep does this go? What kind of impact is this having at every level? And are firms doing enough to improve their diversity, equity and inclusion?
This article will dive into everything you need to know about DEI in accounting.
What is DEI?
Before we go any further, what exactly is DEI?
DEI stands for diversity, equity and inclusion. It refers to the creation of fair practices within organizations and workplaces that objectively view workers regardless of race, sex, background and more. We often talk about DEI when describing training and initiatives on this topic.
Here’s a breakdown of each term:
- Diversity: This is the existence of differences within a setting, group or organization. Differences may include race, sex, sexuality, ethnicity, religion, language, disability, age, socioeconomic background, nationality and political beliefs.
- Equity: This refers to the promotion of equal and fair practices for all, while recognizing the unequal roots and starting points of different groups. Equity should not be confused with the term “equality” — the equal treatment of all individuals. However, equity aims to achieve equality through offering additional help and aid to those at a disadvantage.
- Inclusion: This is the act of including and welcoming everyone within a group or organization. This can be done through offering equal rights, opportunities, resources and treatment to a diverse range of people, particularly otherwise marginalized groups.
The rise of DEI in the workplace
Over recent years, there has been a stronger focus on diversity in the workplace.
Data from a Europe, Middle East, and Africa (EMEA) study by LinkedIn revealed that the number of diversity and inclusion (D&I) employees increased by 67 percent over the last five years. Online conversations around the topic also tripled in the previous year alone.
The industries leading the way in DEI are:
- Consumer goods
- Software and IT
The highly publicized death of George Floyd in the U.S. in 2020, and the Black Lives Matter movement, certainly accelerated the trend. Many companies responded with DEI initiatives and goals, with top companies hiring 242 percent more Black directors in the five months after the event in 2020 compared to the previous five.
DEI in accounting
Traditionally, there has been a lack of diversity within the accounting industry. The “ideal” professional is often biased toward white males, as individuals who seem to have the ability to work long hours, relate to clients and have minimal family commitments. As such, women, BIPOC and LGBTQI+ communities have often been underrepresented.
While significant changes are taking place in accounting diversity, accounting firms have been slow to catch up with other industries in improving their DEI efforts. The 2019 Trends report by the American Institute of CPAs (AICPA), for example, revealed that 91 percent of partners at CPA firms in the U.S. were white, out of a population that is just 60 percent white. This demographic picture shows that progress has been slow in creating an impactful change.
However, many firms are now taking much-needed action to support DEI practices. A 2021 D&I survey by PwC showed that 75 percent of accountancy firms list diversity and inclusion as a top priority. A survey by KPMG showed that 80 percent of firms also increased their DEI budgets in 2022. More and more accounting graduates are female and racially diverse, although hiring still needs to catch up.
The benefits of DEI for accounting firms
Promoting diversity, equity and inclusion in the workplace is more than just a moral concern. Studies show that having greater diversity in organizations and workplaces is highly beneficial in multiple ways. Here’s how DEI can benefit workplaces.
Diversity increases innovation
Hiring a diverse workforce might be your golden ticket to driving more innovation in a company — as well as making more money. Recent studies have highlighted that companies with more diverse teams and management boards generated more revenue through innovation.
Bringing together minds from various backgrounds and experiences leads to more diverse ideas. Harnessing a variety of skills and knowledge also allows teams to share with one another, enriching the group as a whole. The more perspectives you can unite in one place, the more creativity you can bring to your problem-solving.
DEI practices help attract top talent (for longer!)
With the changing nature of work, candidates are beginning to dictate the terms for their preferred working environments. One in three job seekers would no longer choose to apply to work at a company that lacks diversity. This statistic highlights a massive shift in workplace values, with DEI coming at the top. Implementing DEI initiatives can help companies both attract top talent and retain hires for longer.
Gen Z is also beginning to enter the workforce. As the most racially and ethnically diverse generation to date, as well as advocates and drivers of social action, this trend is only set to intensify.
Diverse groups make better decisions
Diversity improves decision-making by 87 percent. Research found that having a broad range of perspectives on a team led to better business decisions. Solid decision-making will lead to increased revenue, business expansion and expansion into new markets.
Diverse teams help companies break out of old mindsets, landing on what is truly relevant.
How the law ensures DEI
So we can see that the tide is turning when it comes to improving diversity, equity and inclusion in accounting. But what are the legal regulations in place to ensure firms are implementing DEI policies in the U.S. and globally?
The U.S. has a series of federal laws that encourage diversity through offering rights to workers and protections against discrimination based on age, sex, disability and more. The Equal Employment Opportunity Commission (EEOC) supports many of these efforts and has had the right to sue employers since 1972. These laws include:
- The Equal Pay Act of 1963
- The Civil Rights Act of 1963 (which made discrimination based on sex, race, national origin, religion or sexual orientation illegal)
- Pregnancy Discrimination Act of 1964
- Age Discrimination Act of 1975
- Disabilities Act of 1990
Many countries have anti-discrimination laws around the world, but some still do not. EU laws have been particularly significant in bringing a continuous positive change to diversity and inclusion throughout Europe since being introduced in 2000. The U.K. The Equality Act of 2010 has played a similar key role in shaping workplace practices.
DEI and HR
So while federal laws lay down a framework for diversity and inclusion practices, further steps and specific procedures are often left to organizations and individuals.
Human Resources departments have a significant role in leading DEI strategies within businesses, companies and accounting firms. HR departments are responsible for creating DEI plans and strategies, which may involve:
- Identifying problem areas that need improvement at the firm
- Creating DEI practices, strategies and training programs to combat these issues
- Introducing the initiatives
- Tracking progress and setting KPIs
The future of DEI
While DEI is a hot topic right now, is the trend set to continue? Will we see a lasting change across workplaces and industries, or is it only skin-deep?
As DEI budgets increase, the hope is that these practices are here to stay. Teams continue to diversify, and so the process of maintaining this balance should only get easier. As Gen Zers fill the majority of open positions over the next 10 years, based on their generational support of DEI, it is likely they will continue to demand diverse practices.
“We’re built to be biased,” said Jacqueline Welch, chief diversity officer of Freddie Mac. “The real question is how do we create an environment where our systems and our processes don’t enable our built-in biases?”
This nods to the future role technology may have in upholding DEI principles. While technologies are still emerging, they will likely play an instrumental part in:
- Assembling and analyzing data without bias
- Blind hiring
- Running inclusion programming and training
Tips for accounting firms to improve their DEI
If you suspect your DEI policies could do with some more work, but you don’t know where to start, here are some useful strategies to consider:
- Conduct an employee survey
- Review your hiring practices
- Make sure your compensation practices are transparent
- Create an inclusive onboarding process
- Introduce unconscious bias training
- Ensure your website, forms and email footers reflect DEI sensitivities and inclusive pronouns
- Create a code of conduct for dealing with racism, sexism and other types of discrimination
- Stay accountable by tracking progress and setting KPIs
Foster greater DEI today
DEI helps build better accounting firms. But implementing and monitoring strategies can take significant time and resources from your administrative and HR teams. To navigate your DEI efforts alongside ensuring efficiency and profitability, learn how Caseware’s practice management technology can help you streamline tasks and meet your practice’s goals more effectively.