The workforce is among the largest investments many companies will make. And it goes a long way in determining the ultimate success or failure of a business.

Those companies that build a truly inclusive workforce—one where all employees feel valued and respected—create a win-win for the business and its employees. The company cultivates an engaged, productive, innovative, and collaborative workforce, with lower rates of attrition; meanwhile, employees benefit through better emotional support, increased job security, and enhanced economic stability.

Yet many companies today still struggle to create such a workplace. This is not due to a lack of effort or good intentions; indeed, many companies have created robust programs that include goal setting for recruitment, retention, and mentorship of people in underrepresented demographic groups. And such initiatives will continue to be important elements in DEI efforts.

But these established approaches typically fail to reflect the multitude of employee needs, both functional (including compensation, benefits, and work schedules) and emotional (such as feeling valued and doing work that is enjoyable). Consequently, the programs often do not sufficiently address the issues that determine whether employees will thrive both professionally and personally.

To build a truly inclusive work environment, companies need to take a page out of the playbook of leading consumer businesses. Much as consumer companies do extensive research to explore the disparate needs that shape the behaviors of various customer segments, companies need to understand the different segments within their employee base.

If they gain a clearer understanding of the specific needs of different employee segments, companies can then design work models, benefits, and environments that address the needs and motivations of those distinct groups—and in the process, they can create a workplace where more people can succeed.

Pulling Back the Curtain on What Matters to Employees

Companies continue to face challenges in retaining talent. A 2023 BCG global survey of 11,000 workers found that 28% were at risk of leaving their current employer in the next year. The figure was even higher for employees in the restaurants, food, and beverage services (42%) and retail (36%) sectors.

Research based on BCG’s BLISS (Bias-Free, Leadership, Inclusion, Safety, and Support) Index reveals that creating an inclusive workplace can reduce this attrition risk. The index, a measure of perceived inclusion in the workplace that drew on a 2022 survey of more than 22,000 employees, found that companies that move from the lowest quartile of the index to the median can cut attrition risk in half—and can increase the number of employees who feel they have the ability to fulfill their potential by 30 percentage points.

Such findings underscore the importance of understanding and addressing core employee needs—both functional and emotional.

Functional needs are table stakes, in many ways, particularly when it comes to decisions around taking a new job. The 2023 survey found that, when workers were asked whether they would take a new job, the factors that matter most to them are overwhelmingly functional: pay is the most important factor, followed by benefits and perks, then hours and work/life balance.

If we look at what makes employees stay with a job, the equation is a bit different. We analyzed employee responses to correlate their stated intention to stay or leave their job with the various factors in the survey, and we found that emotional factors rose to the top of the list. The top five were job security, being treated fairly and respected, having enjoyable work, feeling valued and appreciated, and feeling supported.

The bottom line: addressing functional needs may help bring employees in the door, but emotional needs are a critical and often overlooked factor in keeping them happy, engaged, and motivated.

Embedding Inclusive Design into People Strategy

Addressing the most important needs for employees does not lend itself to a one-size fits all approach, of course. A broad set of drivers—demographic identities, life context, work context, and attitudes—can all shape an individual employee’s needs and motivations. Notably, an employee’s demographic identities may not be the most important or even a significant driver of needs. And needs will almost certainly change over time.

So how do companies begin to build a workplace that works for their people? They can start by working to understand the functional and emotional needs of current and potential employees. This analysis should be based on a rigorous assessment of the factors that actually correlate with greater workplace engagement, motivation, and retention.

From there, companies should evaluate those needs from two angles:

• Needs that are common across groups but which are addressed in very different ways among employee segments. For example, the functional needs of receiving adequate compensation and building financial security, as well as the emotional need of feeling respected, may be core across all employee segments. However, what it looks like to have those needs met will be different for a frontline retail employee versus a middle manager.
• Needs that are unique across different segments. Employees with young children, for example, may have needs that are quite distinct from employees without children, including access to good childcare (a functional need). At the same time there may be a segment of employees who have distinct emotional needs, for example to know that their work is contributing to society as a whole.

Armed with such insights, companies can then identify where their workplace has the most significant gaps in meeting employee needs. In some cases, these gaps may be causing attrition, or they may represent a missed opportunity to attract and develop overlooked talent. Forward-looking retailers, for example, have zeroed in on the latter challenge by creating programs that offer high-potential frontline employees new pathways for advancement.

To get the most out of the significant investment they make in their workforce, companies must bring analytical rigor to understanding the segments of employees (both current and potential) within their business and then build a workplace that meets the needs of those groups. Under such an approach, employees thrive—and companies build a powerful business advantage.