Diversity among middle market manufacturers: A pivotal talent priority

It is time to implement DEI initiatives strategically

Mar 18, 2024

Key takeaways

A clear DEI strategy can improve operational efficiencies and drive innovation.

Diverse perspectives among teams can make for better decision making.

Diversifying vendors enables supply chain flexibility and aligns with ESG metrics.

Diversity, equity, inclusion Manufacturing ESG

Diversity, equity and inclusion (DEI) initiatives have become more prominent for companies across all sectors in recent years, and businesses embracing DEI efforts stand to reap numerous benefits well beyond diverse workforce statistics. In fact, “businesses with diverse executive teams and boards continue to show a competitive edge,” a 2023 McKinsey report on diversity found. “Such companies are significantly more likely to outperform financially, while the impacts of lagging in this area grow.”

Having a clear DEI strategy can help companies acquire and retain talent, improve operational efficiencies and drive innovation and growth. Recruiting and retaining talent are already top challenges for middle market companies, according to RSM US Middle Market Business Index data, and manufacturers are no exception. Companies in this sector grapple with how best to recruit, retain and upskill workers, especially as manufacturing roles evolve with the implementation of advanced technologies. As a result, we’ve identified the battle for manufacturing talent as one of the top 2024 trends for the sector.

For middle market manufacturers, embracing DEI initiatives can ultimately foster success.

“It’s no secret that a diversity of perspectives makes for better decision making,” said Kendra Blacksher, RSM US industrials senior analyst, during a January presentation in partnership with the New Jersey Manufacturing Extension Program. “I think where sometimes we get lost is, how do we logically implement that within teams and processes?”

Below we look at key considerations companies should address in three areas to weave diversity priorities and initiatives throughout the fabric of the organization.

Recruiting and retention

Compensation and benefits remain foundational to companies’ recruitment and retention efforts; other talent-experience components—such as flexibility, workplace culture and professional development—are also shaping the labor market, according to the MMBI workforce report. In addition to how wages affect recruitment and retention, the employer-employee life cycle comes into play. 

Ahead of recruiting efforts, companies should address the following key questions: 

  • What does the current pool of talent look like? How diverse is the recruiting pool?
  • Do our recruiting efforts involve community colleges, technical education programs and diverse college settings?

Community colleges and high schools develop specific trade skill set programs that can be an incredible opportunity for your organization to connect with these institutions to build your talent pool. Additionally, manufacturers may have opportunities to co-create curriculums with career technical education programs. This type of relationship can strengthen the talent pipeline.

To retain existing talent, manufacturers should focus on the following:

  • Build more diverse teams with different cultures, backgrounds, skills and educational experiences.
  • Assess team structure to maximize value and determine the appropriate role for an individual when hiring.
  • Develop a career path that's most meaningful to individuals; this will empower them to be well-rounded professionals to contribute more effectively and efficiently.
  • Be intentional about creating a sense of belonging for your talent pool.

Having employees from diverse backgrounds is an asset because their varied professional and life experiences can generate unique ideas and ways to solve problems.

“That diversity of thought and perspective provides you with that adaptability and resilience against changes in market conditions,” RSM management consulting supervisor Juan Villafrade said during the presentation.

The diversity of thought and perspective provides you with that adaptability and resilience against changes in market conditions.
Juan Villafrade, RSM US management consulting supervisor

Operational efficiencies

The true return on investment in diversity lies in the magnitude of its impact on organizational processes. Companies should start by asking themselves: How do the organization’s processes and products reflect the diversity of its teams? Villafrade shared the story of one New Jersey manufacturer that experienced a communication disconnect between factory floor employees and corporate office teams because those on the factory floor primarily spoke Spanish. Addressing that language barrier was key to improving disconnected processes.

Manufacturers should also explore opportunities to diversify vendor relationships, especially with small vendors that offer additional capital during market shifts. Diversifying the vendor network enhances supply chain flexibility and helps align with environmental, social and governance (ESG) metrics, showcasing a commitment to community investment and environmental awareness.

Innovation and growth

The business case for gender diversity and ethnic diversity on executive teams was clear in McKinsey’s 2023 report. In a dataset of more than 1,200 companies across 23 countries, “companies in the top quartile for gender diversity are 39 percent more likely to outperform peers, continuing an upwards trend from 15 percent in 2015,” the report found. Similarly, “our analysis indicates a 39 percent increased likelihood of outperformance for the top quartile in ethnic representation versus the bottom quartile.”

Diverse teams bring a wealth of varied ideas, which, in turn, can yield new products that reach new markets. However, DEI goes beyond new ideas; employees from different backgrounds can help challenge long-held assumptions that the business may need to reassess.

That diversity of thought is important at every level of the business, including the board of directors. In 2021, Nasdaq introduced rules requiring companies listed on the exchange to disclose board diversity, and the U.S. Securities and Exchange Commission followed suit. Such standards for public companies can often become the de facto standard for private companies, too, Blacksher said, making it all the more important to address board diversity.

“Do people in decision-making positions reflect your consumers, your market, your talent?” she asked. “You want to embed diversity in the fabric of everything you do.”

Do people in decision-making positions reflect your consumers, your market, your talent? You want to embed diversity in the fabric of everything you do.
Kendra Blacksher, RSM US industrials senior analyst

Starting your DEI journey

Organizations should assess the diverse talent pool and seek ways to enhance and improve inclusion practices. They should recognize that DEI strategies are evolving, and organizations are at different stages of adoption.

RSM contributors

  • Kendra Blacksher
    Industrials Senior Analyst
  • Juan Villafrade

Diversity, equity and inclusion at RSM

Being an equitable and inclusive firm where diverse talent excels is a critical part of RSM’s culture—it’s one of the things that sets us apart.

Thousands of personalities make up RSM. Our inclusive workplace celebrates the differences among our talented people, while enabling their success at work and in their personal lives. Diversity is a journey, not a destination.