Yet precise measurements of diversity’s worth as an organizational performance driver are still largely neglected, said Edward Hubbard, president and CEO of Hubbard & Hubbard Inc., a human performance consultancy.
Hubbard, who has written more than 40 books on organizational performance, the last 12 or so focused on diversity ROI, said a big reason organizations haven’t totally embraced the ROI approach is because of the legwork it requires. But he also said, with diligence, organizations can uncover the true financial benefits to embracing diversity and inclusion efforts, thus equipping diversity leaders with vital dollar metrics that help prove its worth on business initiatives.
For instance, Hubbard framed diversity’s potential financial impact on employee engagement by asking a straightforward question: What percentage of a typical eight-hour workday is not spent on mission-critical work due to real or perceived barriers in the workplace?
“When you have diverse resources walking through the door as employees or associates, they have discretionary efforts at their fingertips,” Hubbard said. “They can either be fully engaged, partially engaged or actively disengaged.”
He said an organization’s diversity efforts can have a profound influence on the level of employee engagement, which carries extensive financial weight in the form of productivity and employees’ salaries. Having a culture of inclusion promotes engagement, while one that isn’t inclusive is more likely to be disengaged because of “diversity-related barriers.”
In his consultancy Hubbard has surveyed a large sample of business leaders to gauge the financial ramifications of having an engaged workforce. The results showed roughly 25 percent, or two hours per day, is the average amount of time employees of the leaders surveyed were disengaged.
What if the average wage at a firm is $12 an hour, and there are 5,000 employees? That would amount to $120,000 a day in lost productivity due to employee disengagement. “If we look at the average of 260 days a year in terms of the number of days worked,” Hubbard said, “that’s $31.2 million a year lost in productivity.”
Not all engagement barriers are diversity related. Hubbard estimates about 45 percent are. Forty-five percent of $31.2 million per year in lost productivity equals roughly $14 million lost due to diversity-related barriers to employee engagement in his example.
Hubbard said he also would take off a certain percentage to account for any margin of error — in this case roughly 15 percent of $14 million. Based on that estimate, about $11.9 million will be lost due to diversity-related barriers to engagement in terms of wages paid to employees for time they are not totally engaged.
“When we’re looking at engagement scores … and looking at the ROI value around these kinds of things, we can look at [diversity] initiatives that move people up higher on the engagement level of being able to be fully engaged in their work,” Hubbard said.
Frank Kalman is associate editor of Diversity Executive magazine. He can be reached at fkalman@Diversity-Executive.com.