A Business Case For Diversity – Chalk It Up Pt. 1

Chalk It Up talks about sustainability metrics (CC Nobert Lov, 2010)

I love numbers, which is why I believe that hard data is critical to sustainability strategy. In my approach to marketing, my mantra is “what you can measure, you can communicate”. To explore the “numbers”, I am starting a new series on metrics and measurement tools called Chalk It Up. Hope you will enjoy these posts as much I will! (PS: A thank you to the organizer and participants of a great Tweetchat #sustyXX, where this  idea was born!)

The first Chalk It Up post looks at the issue of diversity, an indicator of social justice and an important measure on the social side of sustainability.

Creating an inclusive and heterogeneous workforce is a priority for businesses today, a large part of which can be attributed to the need to comply with numerous anti-discrimination laws. Most companies have broad policies in place that state that they are “equal opportunity employers”, protecting them from lawsuits and bad publicity. However, policies alone do not make an inclusive workplace. In a report discussing the cost-effectiveness of inclusion programs, the Center for Strategy and Evaluation notes that a “diverse workplace” is an outcome of major changes in the internal culture of a company. Although companies can, and do, set targets for changes in the representation of selected groups in the workforce, long term changes in workforce mix and in the effectiveness of all employees will only emerge if a new employment culture is created. This distinction makes “workforce diversity” a complex subject, one that is difficult to pin down and therefore, fraught with controversy.

The controversy stems from two issues – measurement criteria and quantifying the benefits. Let’s examine these in detail.

Measuring diversity – Aside from simplistic representation quotas, a “diverse workplace” is difficult to define in practice. There is, as yet, no widely accepted way of distinguishing between workplaces that are ‘diverse’, and those that are not. This, as we shall see later on, poses considerable problems for the development of a credible “business case” for investment in workforce diversity policies by companies.

Let us assume that a business sees workforce diversity as a opportunity to expand their sustainability goals and decides to set up a tracking program. First step would be to define the socio-economic segments to monitor. The problem with measuring diversity is, once you go beyond basic compliance, there is no limit to how you set the boundaries and what groups you want to track. You can expand your program to include your local community and your suppliers, in addition to employees. You can group people based on any number of things,  including their backgrounds, talents, martial status or even their personalities. Introverts Unite, anyone? In this rush to create new clusters, businesses run the danger of trivializing serious and deep-rooted inequalities in our society. Instead of trying to provide opportunities to historically marginalized sections of society, whether that is based on race, gender or ability, diversity becomes another name for special interest clubs. Selecting the clusters that genuinely contribute to sustainability goals requires an understanding of imbalances in your industry and dialogue within the company and community.

Once the segments have been identified, what should the company track over time? Monitoring diversity indicators requires a multifaceted approach. A few common metrics are given below. For a more detailed list, refer to this report.

  • Hire, retain, promote and train: This group of indicators is aimed at giving a basic overview, taking into account number of new hires in different management segments, number and frequency of promotions, equality in pay, turnover and access to training programs.
  • Policies, support, complaints, resolution: This set of metrics looks at whether clear policies exist, how employees are made aware of policies, what support networks exist, how complaints are received and the ways they are handled.
  • Attitudes, culture, impressions: This set is subjective and attempts to assess how employees (community/suppliers) perceive diversity within the company. This group can also include tracking media mentions, external benchmarking indices and awards.

With all the time, money and effort that goes into diversity tracking, it is little wonder that companies are demanding to know how it affects their bottom line, or in the case of sustainable companies, their triple bottom line. That is where the case for diversity gets murky.

Quantifying benefits – In attempting to build a “traditional” business case, researchers find it hard to justify the large amounts of resources spent on diversity and inclusion programs. In a 5 year study of the business impact of diversity in large firms, Prof. Thomas Kochan from MIT’s Sloan School, concludes,  “The business case rhetoric for diversity is simply naïve and overdone. There are no strong positive or negative effects of gender or racial diversity on business performance.” A body blow indeed.

What about sustainability-driven businesses? Promoting workforce diversity can be powerful force to push for greater social justice in both industry and local communities. The key to a successful program is to identify the groups that matter and help them overcome obstacles in a way that is culture-driven and resource-effective. It is upto responsible businesses to look beyond the short-term costs of diversity and create tomorrow’s workplaces, companies that everyone would love to be a part of.

Want to know more before you jump right in? For a one-stop shop on creating, implementing and evaluating workforce diversity initiatives, start here.

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