Although interest in measuring diversity and inclusion’s impact has been growing, the topic still challenges even the most sophisticated and progressive diversity departments. Yet diversity professionals should know they must begin to show how diversity is linked to the bottom line, or they will have difficulty maintaining funding, gaining support and assessing progress.
Calculating diversity and inclusion return on investment is an essential skill that separates practitioners as novice from those who can truly operate as strategic business partners to drive business performance objectives, goals and value to the bottom line. But where do you start?
The creation of an effective diversity measurement system and best practices cannot be a mechanical modeling exercise. It must be preceded by an inspection and utilization of basic business principles. It must focus on organizational and departmental strategic thinking as well as an assessment of the desired quality of work-life. Developing the actual measures is easy compared with the amount of time that should be spent thinking about what is important to the organization’s strategic business objectives and the expectations of the diversity measurement process.
Some practitioners seem to believe that quantifiable and quality-based measures cannot be applied to the diversity implementation process or a diverse work culture. Others believe that diversity is not a business-focused activity, simply another form of affirmative action regulatory compliance. This turns diversity and inclusion into a “head and activity counting” exercise because it is the easiest thing to do, or diversity and inclusion is seen only as the “differences in the physical characteristics of people.”
It is regrettable that many diversity and inclusion practitioners do not have even the basics in diversity measurement beyond head counting and representation statistics by race, rank and gender and no diversity return on investment skills. Their lack of analytics skills place them in jeopardy of being cut out of the budget, marginalized, and seen as not credible or a soft area without much substance. Workforce and market place demographic changes as well as business performance needs make diversity and inclusion return on investment a business and global competitiveness imperative.
Regardless of the events that led to the conclusion that diversity and inclusion is not critical for business or whether this subjective position is valid, the fact that this conclusion exists and that some diversity professionals and others support it creates major problems. In particular, it sets managing and leveraging diversity apart from the rest of the organization. While peers in other organizational areas are focusing on metrics that reflect their contribution such as profits or reduced costs, those implementing the diversity process often limit their discussion of diversity’s contribution to increased awareness, improved feelings and increased satisfaction among work groups. Only a select few really show demonstrated, evidenced-based results of diversity’s affect on organizational performance.
As a result, diversity is not taken seriously. Fewer managers support it in actual practice, and even fewer managers structure their workforce to leverage its richness through teaming or implementing strategic partnerships to penetrate key ethnic customer markets. We know from current organizational practice that diversity initiatives often experience less management support than other business initiatives due to the lack of skill in presenting diversity and inclusion’s impact in key financial terms and “evidence-based” outcomes.
Creating an effective diversity measurement system and process that embodies these concepts involves at least five critical steps:
1. Review the strategic business plan. It is critical to examine the mission of the organization, key goals and objectives, core business strategies and tactics, marketing and sales targets, production or operational issues, recruitment and retention issues, succession plan challenges, productivity issues, legal compliance concerns, customer service challenges, globalization plans, and the like. Each of these areas should be examined to determine where diversity could have a direct or indirect effect on the business issue.
2. Formulate research questions. Know what you want to know. This involves formulating research questions that help give you answers for establishing baseline diversity measures or calculating change and impact. Some example questions are:
- “What is the distribution and retention impact of females and minorities in management positions above the first level?”
- “What is the diversity makeup of our customer base by product line and market share?”
- “What factors make the difference for high productivity among diverse work teams and their impact on customer service ratings?”
3. Design the study methodology. This step in the process involves creating a formalized plan of action, which spells out how you will address each research question and the potential tools used. A complete plan should address questions such as:
- “What existing measures can be adopted to measure these areas?”
- “What benchmark or compatible measures are available?”
- “What is the priority or order of measures by criticality level?”
4. Collect and analyze data. The data collection and analysis process requires the use of specific formulas and techniques designed to assess the research questions. These formulas and techniques might include calculations such as cost per diversity hire, percent change in local and global customer diversity demographics, the family of measures index, diversity hit rate, and diversity training evaluation using the Hubbard-Levels 0-7 Assessment Methodology, which includes a business needs analysis and diversity training return on investment calculations.
5. Communicate and monitor the results. Reporting your diversity results is almost as important as producing the results. Regardless of the message, at least three general rules are important to remember:
- The communication must be targeted to specific audiences. The communication will be more efficient when it is designed for a specific group.
- The communication should be unbiased and always modest. Facts must be separated from fiction, and accurate statements must replace opinion.
- The communication must be consistent. The timing and content of the communication should be consistent with past practices.
You can use diversity return on investment measurements to identify winning approaches and processes that work to transform the organization's culture to a more inclusive environment. They can help you increase the value of your workforce diversity and inclusion efforts by providing focus and demonstrating organizational impact, value and performance.
