When we began our Incorporating Inclusion initiative two years ago, our focus was to determine what businesses needed to engage in more LGBT-inclusive workplace practices and policies. To pursue that, we talked to representatives from over 70 large companies—including CEOs and executives in charge of Diversity, Human Resources, Legal Affairs, Affinity Groups, and Community Engagement. Our goal was to go beyond the economic rationale for inclusion, to look at how inclusion strengthened businesses as an institution.
We learned a lot from those conversations and talked about it at length in our previous report, Business Success and Growth Through LGBT-Inclusive Culture. Those findings are summarized here:
- Almost all the companies in the research have formal policies for non-discrimination and equal benefits coverage, but there are a variety of other LGBT-inclusive practices that companies are starting to implement, including LGBT awareness trainings, management metrics, and broadening the definition of ‘family leave’ to encompass LGBT inclusion.
- Companies embrace LGBT inclusion to cultivate a corporate culture that attracts and retains the best talent. In turn, companies are able to better address internal challenges of LGBT employee engagement and cultivate strong partnerships within and outside the organization.
- To communicate their LGBT-inclusive practices internally and externally, companies need a formal foundation upon which they can build. Companies with an established structure experience an improved and accelerated ability to communicate to employees and drastically improves the authenticity of the company’s external LGBT efforts.
- Supporting the broader LGBT community is important for companies who engage in internal policies—matching inside efforts to outside efforts is paramount to authenticity to both groups of stakeholders. That support can come publicly, including signing onto amicus briefs, writing national-level op-eds, and leveraging more local activity such as supporting cultural events, fundraisers, and NGOs. It can also come more privately, including educating policymakers on the positive benefits of LGBT inclusion, or, occasionally, making a business decision to leave an area that will not reconsider anti-LGBT policies.
After conducting our research on larger businesses, we held forums in Northern Virginia, Columbus, OH, and Orlando, FL. Those forums were held in conjunction with a number of local partners, and allowed us to share not only our findings, but best practices, challenges, and learnings that were location-specific.
Our partnership with the local chambers in organizing these regional forums opened up the conversation to smaller businesses. While we understood that the needs of smaller businesses were certainly different, it was not until panels and informal conversations with smaller employers that really brought into focus just how different their needs were.
Throughout those forums, our conversation began to shift. While we did not, at the time, have systematic or quantitative evidence of how small businesses engaged with LGBT inclusionary policies, we did know the importance of small businesses to local communities and the nation. With that in mind, we made some shifts in the immediate term to respond to that need.
When that round of programming wrapped in Fall 2019, we looked ahead to a greater focus on small business in our next iteration. Based on what we had heard at our forums and what we knew about small businesses already, we realized two things:
- Small businesses are a majority of where Americans works—if we want to reach employers, we need to focus on those with fewer than 250 employees, which constitute 99.3% of all employers in the U.S.
- Small businesses enter and exit the market much more frequently than larger ones, and their number of employees frequently changes. Small businesses need the most help in determining how to pursue inclusionary practices and policies.
These findings drove our decision to shift more formally to a focus on smaller businesses in 2020.
While we continued to concentrate on LGBT inclusivity in the workplace, we started to put that in the broader context of other efforts for workplace inclusivity and equality. Most of the larger companies we researched in 2019 had undertaken LGBT-specific programming because they had the bandwidth and personnel to lead such programming. Smaller companies generally do not, and therefore consider the issues of inclusivity more broadly.
Business Needs for Inclusivity in 2020
Small vs. Large Business Needs for Inclusivity
If a large company is committed to having a diverse workforce, supply chain, or customer base, it can more easily find the necessary resources to achieve them, compared with smaller businesses.
When it comes to inclusive workforces or client bases, however, the playing field levels. A sense of inclusion can be a difficult process for any large institution. The entire employee base essentially never interacts with one another, and siloed departments and levels of bureaucracy can create a structure that makes it difficult to foster the necessary informal and authentic communications required for inclusive workplaces. Small businesses do not have any of these challenges. Communications are swift; an entire employee base can meet in a single room and everyone can be literally heard. A flattened bureaucracy also means that customer and client interactions involve fewer layers of “review” that can remove an inclusive tone from external-focused communications.
It was under these hypotheses, that small businesses both needed and were capable of strong inclusive workplaces, that we kicked off our small-business focused LGBT inclusionary efforts with a Washington, D.C.-based event on March 3, 2020. We covered important topics to small businesses at that forum, including conversations about the LGBT community in Washington, how large trade associations played a role in inclusivity, and how small employers in different types of industries approached LGBT inclusive practices. This was a strong start to our plans to host similar events in Florida, North Carolina, and Texas throughout the spring and early summer, all of it working towards the creation of a short research report and toolkit to help small businesses be more LGBT inclusive.
Within two weeks, we have experienced one of the most severe public health crises of our time. COVID-19 spread quickly around the world, and nowhere more quickly than the United States in the second and third quarters of 2020. The impact on human lives from a personal and community health standpoint will be staggering by the time it is over.
Many small businesses were not resilient enough to remain open for an extended period and had to close their doors. It will be years before we know just how many businesses closed permanently, but one estimate put small business closures at 21%, which is exactly the same rate of business closure in New Orleans after Katrina.
Businesses also play a much deeper role in society now than they did before, and they cannot afford to sit on the sidelines like they may have before. Compared to their parents or grandparents, today’s consumers and employees have stronger opinions about the actions and reputation of companies, and silence or missteps by businesses in these areas can be costly. Engaging in authentic solutions to these inclusionary challenges, like we argued in our previous research on LGBT inclusion, will involve coordinated internal and external efforts by businesses of all sizes.
The U.S. Chamber Foundation and our Incorporating Inclusion initiative are still committed to helping businesses answer some of those questions through research, virtual convenings that will shift to in-person convenings once it is safe to do so, and tools for companies.
While our research questions have become much more difficult to answer in our current environment, our partnership with the Gill Foundation was uniquely situated to continue these efforts. First, we had never predicated the success of LGBT inclusion on economic growth. Our argument is that the positive economic benefits of being LGBT inclusive are externalities—the real benefits in LGBT inclusion are a stronger and more resilient organization. This resiliency is what brings the economic benefits.
Second, we are able to locate LGBT inclusion in its broader context of all multi-social inclusionary efforts. One of the most powerful quotes we heard from a small business owner throughout our research process was “LGBT inclusion is never the fire I need to put out any given day,” and that is even more true now than it was when we first started hearing it in early 2020. But, if we can help companies make their LGBT, and overall, inclusionary efforts stronger and more resilient, we know we can help them keep that fire from ever occurring—inclusionary efforts need to be treated as fire retardants, not just extinguishers.
Third, we know that more small businesses are going to be created. Small businesses tend to be created at a much faster pace than usual immediately following a disaster.3 In some cases, mid-sized companies shrink drastically and have to refocus their efforts. In others, people who lose their jobs, or new graduates who are crowded out of a massively crowded labor market, decide to start their own business when in more normal conditions they would not. Making sure these small businesses can be progressive in their inclusionary work from the start and understand the resources available to them to do so is critical. Being able to leverage already existing structures and understanding around inclusivity will be much more powerful when economic recovery occurs instead of having to create them during the recovery.
Listening to Small Employers
During our programmatic work in 2018 and 2019, we had the opportunity to talk to and work with some small and midsized business owners (less than approximately 250 employees) through our regional events.
We heard from small business owners that they were getting questions from large companies in their value chain about how inclusive they were and they were not sure how to answer them.
We heard from small businesses that were led by those in the LGBT community and had a strong personal attachment to LGBT inclusion in their workplaces, were proud of what they were doing, and wanted to evolve and codify it as their companies grew.
We heard from small business owners who had gone far in their diversity measures and had “checked the boxes” of having non-discrimination policies, supporting LGBT cultural events, and attracting LGBT talent, but were struggling with the “inclusive” part of it.
We heard from business owners who were proud of the inclusive cultures they had fostered, but when they began the process of going public or scaling their operations further, found they were unprepared to present those efforts in a way that satisfied potential investors.
We then decided to conduct focus groups with small business owners—to dig deeper into their approach to LGBT-inclusion, and the challenges and opportunities they’re facing. The needs and experiences of large businesses when it comes to general and LGBT inclusivity are relatively well-understood, but those of small businesses are not.
Between in-person and virtual events, we conducted interviews and focus groups with more than 60 small businesses employers and their associations in places as diverse as:
- Columbus, Ohio
- Denver, Colorado
- Jacksonville, Florida
- Washington, DC
- Grand Rapids, Michigan
- Carrboro, North Carolina
- Phoenix, Arizona
From those conversations, we found eight themes that repeated across those businesses and cities.
Inclusivity Themes for Small Businesses
Taking a Moral Stance
“When I get approached by local press, I want to talk about how inclusive my company is; not a new promotion or product.”
When we talked to larger companies about their LGBT-inclusionary practices, most of them concentrated on market or business-based justification, including employee retention, public sentiment, or economic performance, in addition to the need to do the right thing.
Nearly every one of the smaller companies started their conversations with us by saying they pursued it because it was the right thing to do. They take it as a point of pride to be providing inclusive environments for their staff and being seen as inclusive within their communities. Some had even made hard decisions to do so, including losing clients or staff.
We found that what kept small business owners from going deeper into a moral imperative was a lack of information on how to do it. This not only slowed down efforts to do more, but instilled in many of them a “fear of getting it wrong.” The same sentimentality that drove them to do the right thing was being stymied by another emotional fear of not approaching the challenges effectively or authentically.
And that leads us to the factor that distinguishes small from large companies the most.
Increased Importance of the Owner
“In our experience, small businesses have a more…personal style of management.”
Nearly every successful small business owner has to have at least a hint of the “cult of personality.” It requires significant self-confidence to start a business. It takes even more to get employees, investors, and customers to believe that the goods or services they provide are better than others on the market. Running a successful small business generally requires some combination of charisma, strength of character, extraversion, and fortune.
Once they have established themselves, many small business owners get into conservative mindsets, and that’s understandable. Not many small businesses make it; approximately 12-15% of small businesses fail every year, so to operate a successful one over four years means you have outlived half of all small businesses. Not many small businesses reach that milestone by replacing or reconfiguring the systems that found them success in the first place. Valid or not, this builds a sense that the way they do things is “right.” While this can be constructive when it comes to the importance of inclusion, we hypothesized that this type of conservatism would correlate with a decreased focus on the importance of LGBT inclusion.
We did not find any evidence to support that hypothesis. On the contrary, even business owners who identified as politically conservative understood that the inclusive environment they fostered in their businesses and in their communities was vital to their success as an organization, and knew they had to be authentic in that development.
Granted, we only spoke to small business owners who were willing to speak to us about LGBT inclusion, so there was definitely some selection bias—small business owners who actively disagree with the importance of LGBT inclusion would likely not have talked with us at all. However, both amongst themselves and the geographic communities they represented, many small employers believed that LGBT, and certainly overall, inclusion was instrumental to success.
In our previous work, we argued that leadership was crucial to the success of LGBT inclusion at large businesses. That’s truer for small businesses, and it requires an authenticity from the top leader that takes real understanding that underpins a moral belief. Building that authenticity is where some of the small businesses struggled.
Going Beyond the Pronouns
“What do we do on the days that aren’t Pride?”
A desire to be more inclusive requires an understanding of the necessary strategies and tactics to do so. Since we heard from many small business owners that they have a “fear of doing it wrong,” having an understanding of the current mores surrounding not only inclusionary practices, but LGBT inclusion generally is important for small businesses.
A simple, though not necessarily easy, step many businesses are taking are putting preferred pronouns in emails. It is essentially cost-free, and only asks staff and clients to pay attention and respect those requests. The harder questions came from business operations that either carried a significant cost or touched on sensitive subjects, like reconfiguring bathroom facilities. Other difficult steps included the structures of resource groups, supporting or attacking specific legislative efforts, or interacting with other stakeholders who may not be as far along in their inclusionary journey.
For cultural events that have evolved to mass celebrations, like Pride days or months, businesses getting involved in them is becoming perfunctory. But smaller business owners often wondered how to build long-term systemic engagement in smaller organizations or programs. When pressed on how they address these issues, each of the small businesses who had more experience in the space brought up two different types of resources.
First were local LGBT organizations. In each city, there seemed to be an LGBT-focused organization that while perhaps not explicitly focused on private sector outreach and development, had resources available for understanding how to be inclusive. National organizations were occasionally mentioned in these efforts, but by-and-large small businesses went to local resources first.
Second were local companies in their industry—even if they were competitors—or trade associations. Small businesses are hungry to learn more about being successful, and they consider inclusionary practices part of that development. It seemed to be well known which small businesses in each city had a good reputation for inclusion, and they would help lift other companies up.
Small businesses leveraged trade associations both locally and thematically. While the local trade associations, chambers, and economic development councils were evident in these conversations, we were surprised to see how many small employers were reaching out to national level trade associations for support.
One aspect of becoming deeply inclusive that was important to the small businesses, but difficult for us to quantify based on their responses, was the idea that they wanted to look and operate like a larger business. Being an authentic part of a broader movement for some of them seemed like an important step in maturing as a business. The ability to effectively project externally what they believed internally was seen generally as an important aspect of brand growth and recognition, and seen specifically as earning them a seat at the table with larger companies.
Planning for Deliberate Growth
“We didn’t realize how quickly we needed to take this seriously.”
When it comes to general diversity amongst very small businesses, their biggest liability is that early team members and employees are either family or friends. Starting out, most entrepreneurs turn to their own social networks for early staffing, and if those networks are not diverse, either LGBT or otherwise, then they are unlikely to have a diverse workforce at the start. Especially for companies who grow to around 10-20 employees, we heard a number of them suggest that they suddenly realized they have a sizable team that is pretty homogenous. Attempts to focus on diversity with singular additions of staff even after just 10 employees can be a struggle to translate into inclusivity.
It is certainly a difficult position to tell an entrepreneur, “take a chance on someone you don’t know because you need to be diverse and inclusive,” but it does not have to be that extreme. We found that companies would use their first-degree network to take one more step to find diverse individuals in their broader network.
This is even more impactful in industries where employees are in limited supply because of greater needs of education, training, or certification.
For industries that did not have those labor-supply challenges and relied on consumer-facing interactions—including realtors, food service, financial services, and personal care—focusing on a diverse and inclusive workforce is a requirement to reach an inclusive consumer base. The companies saw that those employees provided them entrees into those diverse communities.
Fostering Safe Spaces
“One of my employees is out at work but not at home. I need to be a safe space for them.”
One of the points that elicited the strongest emotional response from the small businesses we talked to was the fact that they felt strongly about being a safe space for clientele and employees. Even in communities known for their LGBT inclusion generally, offering an inclusive environment was seen as an important mission for a number of the small businesses.
For the clientele and customers, that was achieved by both reputation and by explicit language. Welcoming collateral that were prominently displayed and events that celebrated diversity while remaining inclusive to all served as strong, and inexpensive ways, to send a strong message to the entire community of their location’s inclusive environment.
That environment is only inclusive if employees live by the same standards. While unconscious bias and other trainings were pursued amongst even the smallest of businesses, fostering an inclusive environment amongst staff was seen as the foundation for organizational strength and customer experience.
But doing so did more than just train the employee for their work, it often meant that work may have been a rare space for the employees to feel at ease. We heard a few companies say that they had employees who were “out” at work, but not at home. For those few companies, their conviction was heightened when they understood there were team members who could only be their true selves in the workplace.
In our previous work, we heard from large companies about the challenges of recalcitrant employees, and how challenging it could be to adjust that employee’s attitude or remove them from their position. But for the small businesses we talked to, that option was much more at the ready. At small companies, a single active anti-inclusionary employee is everyone’s problem and leadership usually responded accordingly.
In a world recovering from the COVID-19 pandemic, creating an inclusive culture as a safe space for employees and consumers will be much more difficult. Without the physical proximity to bring people together, companies, at least in the short term, will have to rely on virtual togetherness to maintain their culture. Small businesses we talked to were optimistic they could continue, even if there were concerns over the tactics to do and the bandwidth of employees to engage in workplace culture in a work from home setting.
Communicating to New Stakeholders
“90% of our board has been serving on it for over 30 years.”
“Large companies can afford to take a principled stance. I can’t—losing one of my larger clients could mean closing my doors.”
For companies that have already begun to establish themselves in their community, making a more public shift to LGBT inclusion can, in a lot of ways, mirror the issues that larger companies have when they do the same. These small companies need to convince a wide array of stakeholders (employees, leadership, community, and consumers) that their inclusionary efforts, LGBT or otherwise, are authentic.
The biggest concern about this that we heard from small businesses was the fact that, especially for B2B companies, only a few contracts kept their business vital. Customer satisfaction meant a lot more than just performing a job effectively—it meant keeping those customers happy, and sometimes that may have meant staying quieter about their inclusionary efforts than they would prefer.
For a small minority of smaller companies, a different set of stakeholders—either a small number of less inclusive employees, or less tolerant board members—created internal strife.
Other times, the opposite would happen, and we heard from small companies who had a large customer base help drive them to be more inclusive. While helpful as a reason to continue to push for inclusivity, this situation created some consternation because the smaller companies were not ready to “prove” they were inclusive in a way that translated well to some sort of report. They dealt with this by working with that large corporate customer, or by working with a local consultant or LGBT leader in their community to frame their existing efforts.
Particularly for B2C companies, customers and communities were in many ways the most important group that small companies needed to communicate their inclusivity to. This is where we heard the similar refrains that we heard from larger companies on the importance of authenticity in these efforts. What was different about the small companies was their obviously greater concentration on their local and state communities. The context where they operated had a great effect on how they shaped their efforts and leads us to the next finding.
Reliance of Localized Culture and Policy of LGBT Inclusivity
“We saw what happened in other communities and states—successes, and downfalls, in those places are really informative to how the local business community should approach inclusion.”
Small business owners tend to be provincial—their city or community is superior to other cities or communities, and this stereotype rang true in our meetings. In every forum we had, there were conversations that painted their city in a positive light compared to some other similar city, either nearby or a national rival. It was a point of pride to bring up specific ways that the community had exhibited more inclusive policies and practices than their peers.
That sentiment notwithstanding, as we expected, there were differences in the cities we visited.
First, there were differences in each on the level of representation within the LGBT movement. In some of those communities, a schism within the movement, either based on politics or race, meant that supporting LGBT inclusivity required local nuance that would be difficult for a company of any size to navigate. Especially after the resurgence of racial justice movements, places where the LGBT community was not already well integrated could make it complicated to pursue authentic inclusionary efforts.
In some communities, there were regional differences between cities and suburbs; or dense population centers and sparsely populated areas. In many cases, these were seen as opportunities to work together and bridge differences to reach a common understanding. In others, it was a point of contention that seemed to have little energy towards resolving.
Largely thanks to their local chambers, there was a strong understanding among the business community of how other communities had approached diversity and inclusion in the workplaces, and the positive benefits they had experienced. While this work was done broadly across different demographic groups, many small business owners spoke knowingly of what other nearby cities had done. There does seem to be a nascent, but growing, mechanism for different cities to share their best practices and challenges in developing inclusionary work.
Treating Inclusivity as a Differentiator
“Many people take a pay cut to work at small companies, so we have to use inclusion as a differentiator.”
“Employees are going to remember how their companies treated them during the pandemic.”
One of the more common colloquial statements we heard both through this research, and the past years of covering corporate social responsibility (CSR) efforts generally, is that today’s employees care more about a company’s mission and non-business activities than ever before.
In addition to millennials’ changing attitudes towards work, much of that has to do with labor market realities. Inflation-adjusted wage growth for all but the highest wage earners has been flat over the past four decades. So, even in times of low unemployment (like most of the 2010s), employees have been conditioned to consider non-salary based reasons when selecting a potential employer—when a choice is offered.
In the current economic environment wrought by COVID-19, that conditioning is going to be considerably tested.
Employers, who are growing and hiring, will have no issues finding labor at the price they want. Will under- and unemployed individuals continue to care as much about a company’s mission when unemployment is historically high? Or wages are falling?
It is too early to tell, but most of the small businesses we talked to are betting that for the most part, employees still will. They are optimistic that the investments they’ve made in their communities will pay dividends, and there were certainly plenty of examples that it had —from a massive increase in gift certificate purchases from customers to employee efforts to strengthen the company “off-the-clock.”
The expectation is that the good will that smaller (and all) businesses have engendered with their employees and customers through their community citizenship and inclusivity practices will be paid back in terms of loyalty or positive sentiment. Anecdotal evidence is promising, but whether that holds in the long-term will be vital to their success. If the labor force or the consumer market becomes more sensitive to wages and prices, large companies will pay more than small companies for talent and customers. Using inclusivity as a differentiator will remain an important distinguishing characteristic for small businesses moving forward.
Conclusion
Moving Forward
The eight themes described here all point to the integral role that small businesses play in local communities. Even in cases when they are not the primary economic drivers in a community, small business owners are locally-based exemplars of the best parts of the American Dream.
Despite all the negativity around the COVID-19 pandemic, and the state of race in America, nearly all of the small business owners we spoke to were optimistic about their community’s future, both for small businesses generally and inclusionary efforts specifically. But they all understood that work remained for the small business community.
So, how do we help small businesses thrive through their inclusivity? Through its Incorporating Inclusion campaign, the U.S. Chamber of Commerce Foundation is preparing two new tools to help small businesses and local chambers continue their LGBT inclusionary efforts.
First, we are taking the lessons from our research and creating the LGBT Inclusion Hub for Small Businesses – an online platform for small business owners to find the resources and inspiration they need to build inclusive workplaces.
Second, we are providing one-on-one expert assistance on how to foster LGBT-inclusive programs and policies. Small businesses can fill out this form to get in touch with our DE&I expert.
Incorporating Inclusion will continue its efforts to showcase the importance of LGBT – and all – inclusionary efforts in the workplace.
