Lack of Business-Focused Diversity Measurement Can Spell Doom

Recently, I received another one of those calls where a key diversity officer stated their department and all of its employees were eliminated from the organization. The whole function was shifted to one person in human resources who must now handle diversity issues along with his or her current duties. After probing a little deeper, it was revealed that C-suite executives had asked for return on investment evidence from the diversity and inclusion initiatives they had conducted and the D&I organization could not produce them. They reviewed their representation metrics and highlighted the progress made in changing the demographics of the organization; however, that was not what these executives were looking for. They wanted evidence to show how their investment in diversity and inclusion was solving real business problems and driving actual business performance results and profitability!

Adding talent representation by race, rank and gender is a “cost” to the organization. It only becomes value-added if you can isolate and show how their addition to the leadership ranks has generated additional business results that are measurable in financial terms. This kind of translation requires a thorough understanding of diversity ROI sciences that show how to demonstrate this impact, both financially and non-financially, using a series of credible processes. There are other challenges that help fuel this situation:

Inability to relate the ROI or business impact of the diversity function: The difficulty many diversity professionals experience in talking the business language of ROI prevents them from gaining buy-in for diversity’s effectiveness and sustainability, no matter how much it is needed. This inability results in:

• A paucity of data-driven analysis or, if it does exist, analysis that is not tied to financial measures or communicated well.

• Too little of the data-based forecasting needed to create “burning platforms” for issues related to diversity and driving business performance outcomes.

The diversity function needs many things, but most of all it needs ROI skill development and a willingness to expand its reach; diversity professionals must suspend their own disbelief that what is accomplished in the field (of diversity and inclusion) is measurable in ROI and financial contribution terms. In essence, we must get out of our own way to make and demonstrate progress. A diversity practitioner’s buy-in to master diversity ROI measurement skills is no longer optional. It hasn’t been for a long time. It is required!

A support function mindset: Some diversity practitioners continue to have a support-function mindset, a low tolerance for risk and a limited sense of strategic authorship. These attributes often result in relatively low status among executive peers and no budget for initiatives. Some diversity professionals operate with a “keep a low diversity ROI measurement profile” mentality since they haven’t been asked for proof yet. That means they rarely take chances or create robust analytics beyond counting representation or reporting the number of activities conducted each year. Some of the excuses I have heard for not developing an evidence-based diversity measurement strategy often include:

• “That would take too much time” (Reality: It requires approximately 5-10 percent more effort).

• “That would cost too much money” (Reality: It requires approximately 3-5 percent more).

• “It wouldn’t be accurate since it’s just an estimate” (Reality: What is a credible marketing forecast? A detailed process-driven estimate which organizations have learned to trust due to a scientific approach and integration into the way they get their business done).

• “I don’t know how” (Reality: This may be closest to the truth since formal preparation for going into the diversity and inclusion field does not include diversity ROI metrics training and analytics as well as business acumen training. Many come into this field from staff functions, not line functions that require business ROI analysis and analytic skills.

• “I might find out that what I’ve been doing doesn’t provide value … I think we do a good job. We have good people in our department.” (Reality: Wouldn’t you want to find out the real impact and better align your work before your stakeholders and sponsors do?)

Many of the excuses listed are myths that get in the way of delivering business-focused diversity solutions. As a result, these actions or inactions create excellent conditions for a diversity elimination and allow this sentiment to firmly take root in the organizational climate and culture at the first sign of ways to trim the budget. Quite a few diversity practitioners come to their position with little or no knowledge of diversity, let alone the knowledge or skills to measure its impact. These limitations should not stop you from developing the ability to put a measurement strategy in place.

It is critical to adopt a diversity ROI management mindset and resolve to start building your diversity ROI and business acumen today. Stop waiting for the new human resources information system or for a bigger budget or for a dedicated staff person, or a completely automated system (even though these do exist for diversity ROI at affordable rates). Start with what you have and where you can get the training and information you need to fortify your D&I efforts with credible diversity ROI measurement practices. Ask: What are my key programs and initiatives that operate in support of key goals of the organization? Start there even if it is only one program. Having this kind of business alignment is essential. Once aligned, you can use a sample of the initiative’s results to gather the required data to estimate impact, or you can use a survey, etc. This does not have to be expensive or a major undertaking. However, it must be rooted in the science of diversity ROI to demonstrate a “chain-of-impact” relationship to the business outcomes it will drive.

Demonstrating a Diversity ROI Causal Chain of Impact

A successful demonstration of your initiative’s ROI impact offers direction. Once they hear your message, executives will want to know how you can prove the results were delivered and what you plan to do next. The diversity ROI methodology you use to produce the results must give them a step-by-step roadmap so they buy into the claims you make about the results. The Hubbard Diversity ROI methodology, for example, provides seven levels of analysis using evidence-based outcome approaches that demonstrate a causal chain of impact to the results generated.

This allows C-suite and board-level executives to follow the step-by-step actions taken that are linked to the results produced from the business needs/performance analysis phase through to their development, implementation and ROI impact. You will know the conversation was successful and had “impact” if it ends with the executives taking action in concert with your intended objectives and what is in the best interest of the organization.

Adopting a diversity ROI management mindset with regard to measurement of impact also entails working with the sponsor upfront to agree on the expected impact of the initiatives and on the roles and responsibilities of each party (D&I and the sponsor) to achieve the desired impact. Once you have an agreed-upon plan with the sponsor, then you will need to manage execution on a monthly basis. Reaching agreement with the sponsor on expected impact requires NO additional resources, just a little time. And monitoring progress against plan on a monthly basis can be done on an Excel spreadsheet or using an automated diversity ROI tool or service.

It is much easier to achieve this success if your diversity initiatives contain specific ROI-based measures, key performance indicators and other analytics that are measurable as well as linked and aligned with issues and challenges important to the business. These numbers can be validated by showing current and actual historical data that reflect the impact of the results and their reported value by others who apply and have success using the diversity-based solutions you develop. They can also be compared to internal and external benchmarks that give a C-suite executive comparative data to judge the outcome’s relative performance and contribution value.

Shifting to Evidence-Based, “Science-based” and Outcome-based Diversity Management Approaches

It is critical for our profession to begin immediately moving to fact-based or evidence-based diversity management and measurement. This means applying diversity and inclusion measurement sciences as a performance improvement technology, not merely a cobbling of diversity programs and interventions focused solely or primarily on talent management and pipeline challenges. Evidence-based diversity management proceeds from the premise that using better, deeper logic, facts and prescriptive and predictive analytic methods to the extent organizations and their employees are able to drive business outcomes and objectives is a much more effective and efficient approach. This allows the organization to strategically utilize scarce resources.

It is based on the belief that organizations must face the hard facts about what works and what does not work, and reject poorly designed and non-evidence based diversity and inclusion initiatives that often pass for sound advice and solutions. This will help organizations perform better in the long run. This move to factual and diversity ROI sciences-based approaches supports the expansion to a comprehensive set of success analytics and measures, including financial ROI, and leads to better organizational decisions regarding methods to drive business performance outcomes.

When diversity and inclusion organizations incorporate these diversity ROI processes and strategies as a standard part of their practice and performance outcome delivery, they are viewed as truly credible strategic business partners. As a result, diversity intervention outcomes are valued as core to the organization’s business and its success. Start measuring your diversity initiatives today to whatever extent you can, and work to improve your diversity ROI skills and processes for the future. Continuing practices that might lead to elimination should not be an option!