Most companies measure DEI wrong—focusing on diversity instead of inclusion. Paolo Gaudiano explains why inclusion drives profitability, how exclusion costs billions in lost talent, and why DEI backlash happens. Fixing the root causes of inequity, not just the symptoms, is the key to a better workplace and stronger business results.
Why Do Companies Get DEI So Wrong?
Diversity, Equity, and Inclusion (DEI) has been a hot topic for years, yet many organizations still struggle to get it right. Leaders say they want a more inclusive workplace, but their efforts often feel like vague corporate checkboxes rather than real, measurable strategies. Hiring targets, unconscious bias training, and diversity committees all sound good on paper, but what happens when none of it moves the needle?
That’s where Paolo Gaudiano comes in. He’s one of the smartest people I’ve ever met—quite literally about as close as you can get to both a brain surgeon and a rocket scientist. With a background in neuroscience, aerospace engineering, and complexity science, he has developed a completely different way of thinking about DEI. And his approach isn’t based on buzzwords or feel-good initiatives—it’s about hard numbers, business impact, and financial returns.
Paolo argues that most companies measure DEI the wrong way, focusing on diversity as the goal rather than inclusion as the process. That’s why so many DEI efforts fail or face backlash—because they don’t fix the underlying issues that drive inequality in the workplace.
And if companies want to stop losing top talent and leaving money on the table, they need to change their approach.
The Problem: Measuring Diversity Instead of Inclusion
Most DEI efforts focus on increasing diversity—setting hiring quotas, tracking demographic data, and aiming for more “representation” at the top. But that approach is like putting a bandage on a broken arm.
Paolo explains it this way: Diversity is the outcome, but inclusion is the input.
Think about it. If a company hires more women, but those women aren’t included in key meetings, passed over for promotions, or leave at higher rates than their male colleagues, did the company actually make progress? If a business brings in more people of color but doesn’t address pay gaps, microaggressions, or limited career growth, has anything really changed?
The problem isn’t just who gets hired—it’s how people are treated once they’re there. If inclusion isn’t measured, diversity won’t last.
The Business Case: Inclusion Drives Profitability
Most leaders don’t wake up in the morning looking for ways to be unfair. They just don’t have a clear way to measure whether their workplace actually works for all employees.
Paolo has spent years quantifying the financial impact of inclusion. And the numbers are staggering. When employees feel included—when they have equal access to opportunities, resources, and respect—companies see higher retention, increased productivity, and stronger financial performance.
On the flip side, exclusion is expensive. When employees feel undervalued, they disengage. Their performance drops. And eventually, they leave.
Replacing an employee costs anywhere from 50 to 200 percent of their salary. And when certain groups—women, people of color, LGBTQ employees—consistently experience exclusion, companies lose billions in turnover and lost productivity.
One internal memo from Amazon estimated that unwanted turnover cost the company $8 billion per year. And yet, many businesses still don’t track the costs of losing employees due to a lack of inclusion.
That’s why inclusion isn’t just a “nice to have.” It’s a business strategy.
The Backlash: Why DEI Gets a Bad Name
Here’s the tricky part—when DEI efforts focus on diversity alone, it often creates resentment and backlash.
Paolo has seen this firsthand. White men in organizations start to feel like they’re being passed over for opportunities. Employees assume that promotions are about hitting diversity targets rather than rewarding true performance. And suddenly, DEI becomes a dirty word—something companies are afraid to talk about because it’s too politically charged.
That’s why companies need a data-driven approach. Instead of setting arbitrary diversity goals, they should be measuring behaviors that create (or prevent) inclusion.
And when leaders focus on removing barriers instead of simply moving numbers around, everyone benefits—because the workplace actually becomes more fair, efficient, and effective.
Three Ways Companies Can Get DEI Right
So, what should businesses do differently? Here are three clear, prescriptive takeaways.
1. Measure Inclusion, Not Just Diversity
If you only track diversity numbers, you’re missing the point. Instead, start measuring who gets opportunities, who feels included, and where inequities exist.
Paolo’s research shows that measuring specific workplace experiences is the key. Ask employees:
- Do you have access to the same career-advancing projects as your peers?
- Are your ideas taken seriously in meetings?
- Have you faced unnecessary roadblocks that others don’t seem to encounter?
By collecting real, behavioral data, companies can pinpoint where inclusion is failing—and fix it.
2. Treat Employees Like a Business Asset
Companies track every dollar spent on marketing, every efficiency gained in operations. But when it comes to employees, they often rely on gut feelings and outdated HR processes.
Paolo argues that businesses should treat people strategy the way they treat financial strategy. Think of DEI like managing an investment portfolio. If you wouldn’t blindly cut costs in your best-performing department, why would you allow unnecessary turnover and disengagement to drain your workforce?
When organizations optimize inclusion, they optimize their workforce. And when they optimize their workforce, they make more money.
3. Fix the Causes, Not Just the Symptoms
Pay gaps? Promotion disparities? Unequal retention rates? These are all symptoms of a deeper problem.
Companies that simply increase salaries to fix pay gaps or hire more diverse employees to meet quotas are treating the thermostat, not the temperature.
Instead, leaders should focus on the root causes:
- Are managers providing equal mentorship and growth opportunities?
- Are performance evaluations based on clear, fair criteria?
- Are workplace norms and policies unintentionally favoring one group over another?
Fixing the processes that create inequities will naturally improve diversity—without causing backlash.
Rehook: The Cost of Doing Nothing
The biggest mistake a company can make? Ignoring the problem.
Exclusion is costing businesses real money—whether they measure it or not. Employee turnover, lost innovation, and low engagement are all hidden drains on profitability.
But there’s a way forward. When companies stop focusing on diversity as a number and start treating inclusion as a strategy, they see measurable business results.
Paolo’s work proves that higher profits and happier employees go hand in hand. The question is, will companies start paying attention?
Final Thought: A Smarter Approach to DEI
Inclusion isn’t about politics, checkboxes, or corporate buzzwords. It’s about running a better business.
Companies that measure the right things—who gets opportunities, who feels valued, who stays and why—will outperform those that don’t.
And in a world where talent is the greatest competitive advantage, businesses can’t afford to get this wrong.
The companies that figure this out will thrive. The ones that don’t? Well, they’ll keep wondering why their best people keep walking out the door.
Want to learn more? Listen to my full conversation with Paolo Gaudiano on The State of Work Today podcast.
