best practices Measuring the business benefits of diversity: 15 key metrics 21st CENTURY WORKFORCE STRATEGIES FOR SUCCESS

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1 best practices Measuring the business benefits of diversity: 15 key metrics 21st CENTURY WORKFORCE STRATEGIES FOR SUCCESS

2 Tracking and assessing workforce-diversity programs shouldn t be hard work, but it should be a top priority. Because businesses benefit when they employ highly engaged workers with different backgrounds, HR leaders and hiring professionals contribute directly to a company s success when diversity programs meet their goals. The opposite also is true: Workforce-development professionals who do not effectively measure the outcomes of their diversity programs are in danger of having the programs and perhaps their jobs deemed expendable. Ongoing competitive pressures are driving business leaders to demand that all investments return bottom- or top-line improvement, including workforcediversity programs. As diversity has been redefined as a strategic business advantage, measurements have become more sophisticated with quantitative and qualitative measurements tied to business goals, wrote Marc Brenman in his 2012 article, Diversity Metrics, Measurement, and Evaluation. Metrics today can measure revenue growth, improved productivity, leadership accountability, and a financial return-on-investment. Diversity should be measured with the same kind of scrutiny that business operations have commonly received. 1 Demonstrating a program s success based on business results requires metrics that convey competitive value. Social and compliance goals remain important, but even these goals can be expressed in terms of business benefits, such as clearer visibility into the day-to-day program effectiveness and how the program can be improved proactively instead of reactively. Tracking metrics related to diversity. Recently commercialized technologies make this level of measurement possible. Cloud computing, mobility, apps development, business analytics, and social media/social business tools empower workforce managers to see program performance in real time and interact more frequently with the workforce. A resounding 96 percent of executives believe having a diverse and inclusive workforce can improve employee engagement and business performance. Source: Korn/Ferry Institute, August 2013, com How can you create or transition to an effective tracking-and-assessment method? Fifteen metrics, grouped according to the following three broadly universal business goals, are a great place to start. Efficiency Innovation Sustainable profitability You ll see some familiar metrics and some that may be new to your organization. You ll find all of them helpful in measuring and improving your programs. 2

3 Efficiency Efficiency is a moving target because no process ever reaches perfection, so there s always room for setting even higher goals. However, the following metrics will help you track how your programs contribute to improvements over time. To measure efficiency, consider the following metrics: Pay disparity/equality Grievances and complaints Discrimination Performance-based firings and overall turnover Perception of equality of opportunity and/or promotion Employee engagement/job satisfaction Improving in these areas makes businesses more efficient in two ways: Highly satisfied employees are more productive and, therefore, more efficient. In addition, grievances and complaints, discrimination findings, performance-based firings, and turnover consume vast resources and produce nothing valuable for customers. They drag down a company s efficiency and, hence, profitability. When you monitor the entire enterprise for pay disparities and measure job satisfaction in real time, it s easier to spot potential problems before they lead to grievances, firings, and resignations. But what about the bottom-line value? To convey this, document enough hard data to be able to establish a trend, such as a 20 percent year-on-year increase in unsatisfied employees vs. satisfied employees. Then, multiply that number of employees by a turnover-related cost metric so that you can express the increase in terms of costs avoided. For example, if your organization has documented that it spends $10,000 on every replacement hire, and the 20 percent number equates to 100 people, that s a potential $1 million in cost avoidance in one year. Innovation Innovation is essential to any modern business even if its product or service is a commodity because innovation can drive growth and profitability when applied to related functions, such as product development, sales, or marketing. At the same time, diversity is essential to innovation, according to the survey-based Forbes Insight Report Global Diversity and Inclusion: Fostering Innovation Through a Diverse Workforce: Multiple voices lead to new ideas, new services, and new products, and encourage outof-the box thinking. 2 To measure innovation, evaluate how your company performs on the following metrics: Management/leadership diversity Process-improvement participation Flex-time and part-time opportunities Index tracking diversity-and-innovation correlation Traditional ratios of overall representation in the workforce and in leadership and management are still important, but it s crucial to look deeper into daily activities to proactively manage diversity participation. 3

4 You can measure such activities with social business tools (such as SAP Jam) to review employee participation in the improvement of existing processes and products, as well as the creation of new knowledge (ideation). Social business tools mimic social media in usability, but are team- and/or role-based and leave a record of participation through group alerts, conversations, decisions, and so on. Tapping into these records can provide a common measure for participation, as well as a direct connection between diversity and the benefits of innovation. Sustainable profitability Sustainable profitability requires organizations to constantly self-evaluate and keep tabs on what s happening outside the organization as well. Use the following metrics to determine how diversity is affecting your performance: Cross-training participation Leadership-track participation Market perception Compliance Work/life balance Related to workforce diversity, tracking participation in activities that promote leadership and skills development is crucial because these factors contribute directly to job satisfaction and retention, and indirectly to efficiency and innovation. The longer any highlytalented employee remains with an employer, the more that employer benefits from having that employee on board all the while avoiding the costs of losing and replacing that employee as he or she moves up in the organization. 3 By using such external measures as standard metrics, organizations can address diversity inequities that are both quantitative (as determined by benchmarking) and qualitative (as shown by market perception and customer feedback). Summary For companies of any size and in any industry, technologies such as business analytics are making the tracking and assessing workforce-diversity programs easy and affordable. Minding your diversity metrics does not require extensive capital investments or massive process disruption just defining and tracking the metrics that reflect the reality of today s competitive global economy and increasingly diverse workforce. 1 Brenman, Marc, Diversity Metrics, Measurement, and Evaluation, Nov. 24, 2012, Workforce Diversity Network, 2 Global Diversity and Inclusion: Fostering Innovation Through a Diverse Workforce, Forbes Insights, July 2011, 3 The Top 10 Economic Facts of Diversity in the Workplace, Center for American Progress, July 2012, 4

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