Throughout human history, people have formed tight-knit communities as a way to achieve safety and security among peers. When placed in an office setting, this instinct manifests in the formation of clubs, organizations, and as of the past few decades, Employee Resource Groups, also known as ERGs.

ERGs are self-organized groups of employees started with the objective of creating an inclusive environment within a larger corporation for a specific identity or shared experience. The first known ERG was created in 1960 and have flourished at nearly every Fortune 500 company since then. Common examples of ERGs include those focused on Women, LGBTQ+, Black Indigenous People of Color (BIPOC), and Asians and Pacific Islanders (API), though this is by no means an exhaustive list.

Most formal ERGs are supported by company funding, with over 25% of all budget for Diversity & Inclusion programs being directed to these groups. Over the past year, most companies have increased these budgets, which begs the question, what is the benefit of launching ERGs in an organization?

Faster Recruitment for Underrepresented Candidates

ERGs were originally developed in order to help organizations foster an equitable workplace climate and meet their D&I goals. Therefore, one would expect that ERG presence would have a positive impact on meeting D&I goals, which include recruiting and retaining a diverse team.

To see this in practice, we can look to the well-studied effects of the launch of a Women’s Network ERG at Colgate-Palmolive. According to a study in 2010, this group led to the to “recruit and retain female leaders around the globe” (1).

The addition of an ERG signals to prospective employees that the firm values diversity. As such, this signal will likely attract employees who value diversity or those who are generally underrepresented in the workforce. Effective ERGs can act as a competitive advantage that makes a company stand ahead of the competition for its most sought after candidates. (2)

Increased Retention for ERG Members

Retention is a north star metric for virtually every business, as it can cost between 50–100% of an employee’s salary in recruiting costs to find a replacement, and churn can cost a 1,500-person company north of $1.5 million in lost productivity.

According to a study done by Friedman and Holton called ““The effects of network groups on minority employee turnover intentions”, they conclusively found that the feeling of “embeddedness and satisfaction” within ERGs leads to a substantial increase in retention, particularly for high-level employees. This is particularly important given that underrepresented employees are generally at a higher risk of churn and more expensive to recruit. (3)

Looking at the root cause of this retention increase, Deaux and Martin published “Interpersonal networks and social categories: specifying levels of context in identity processes” in 2003 that provided the answer. According to them, “organizations increase employee identification with the organization by supporting the formation of ERGs. Support of an ERG signals commitment to the ERG’s purpose; therefore, ERG membership increases individual’s identification with the organization.” (4)

A Sense of Well-being and Mental Health

With the benefits to a company’s bottom line becoming clear, it’s equally important to answer the question of how ERGs impact an employee’s sense of well-being and mental health. Fortunately, the results are equally conclusive in favor of ERGs as a way to reduce feelings of anxiety and isolation, and promote a sense of belonging in an individual.

In addition to increasing an individual’s identification with the organization, which as discussed above leads to higher retention, participation in an ERG results in higher levels of job satisfaction. According to a study by Daskalaki in his book Organizational Studies, ERGs provide employees a “validation (of ) their identity claims”. Such validation can strengthen social identification with the group, which can increase self-esteem, mental health and satisfaction. (5)

A study by Theresa Welbourn et al summarizes it clearly and succinctly. They conclude that “ERG members will have higher levels of individual job satisfaction than similar individuals in the organization who are non-ERG members.” (6)

Summary

The science on Employee Resource Groups and their effects on bottom line and mental health couldn’t be more clear. When looking at whether they are the right fit for your organization, you no longer need to think about why, but rather should think about how. At Everyspace, we’re dedicated to supporting ERG development with our platform for community-building, events, and discussions that empowers ERG leaders to achieve the results that we know they are capable of.

Sources:

1. Jennifer Brown Consulting (2010), “Employee resource groups that drive business”, available at: www. cisco.com/web/about/ac49/ac55/docs/ERGreportEXTERNAL.pdf (accessed January 7, 2015).

2. Dose, J.J. (1997), “Work values: an integrative framework and illustrative application to organizational socialization”, Journal of Occupational and Organizational Psychology, Vol. 70 No. 3, pp. 219-240.

3. Friedman, R.A. and Holtom, B. (2002), “The effects of network groups on minority employee turnover intentions”, Human Resource Management, Vol. 41 No. 4, pp. 405-421.

4. Deaux, K. and Martin, D. (2003), “Interpersonal networks and social categories: specifying levels of context in identity processes”, Social Psychology Quarterly, Vol. 66 No. 2, pp. 101-117.

5. Daskalaki, M. (2010), “Building ‘bonds’ and ‘bridges’: linking tie evolution and network identity in the creative industries”, Organization Studies, Vol. 31 No. 12, pp. 1649-1666

6. Theresa M. Welbourne et al (2016) “The Case for Employee Resource Groups”, Personnel Review. 46(1):00-00

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