Unleashing the Strategic Power of Diversity ROI Measurement

Effective organizational management is based on a foundation of effective measurement practices, and almost everything else is based upon that. Organizations can be viewed as a conglomeration of many systems combined to achieve a strategic purpose.

Measurement is actually the most fundamental system of all. The measurement system, for better or worse, triggers virtually everything that happens in an organization. This includes both its strategic and tactical actions. This is because all of the other organizational systems are ultimately based on what the measurement system is telling the other systems to do.

No organization can be any better than its measurement system. If the measurement system works well, management practices will tend to drive the right things and the desired result will be achieved. Similarly, if the measurement system is designed or works poorly, management practices will tend to encourage dysfunctional behavior and drive failed execution.

Importance of Strategic Diversity ROI Measurement

The ultimate success of an organizational change management strategy greatly depends on how the change is introduced and implemented, rather than on the merit of the strategy itself. Successful development and utilization of key diversity return on investment, or DROI, measures is determined often by how well selected measures support the following:

1. Partnerships with all demographic groups such as staff, unions, key suppliers, customers, etc.

2. Transfer of power to front-line employees who drive critical organizational processes.

3. Integration of measurement, reporting and improvement of performance that results in “evidence-based” outcomes and action.

4. Linkage of performance measures to the organization’s strategy and objectives.

Well-crafted strategic DROI measurements can help accomplish the following:

Cut through the insignificant minutia and get right to the point. People can (and often do) advance their points of view about diversity and other things with incredible vagueness until they are challenged to measure it. If the challenge is accepted, suddenly the focus shifts to generating clarity of purpose that has a basis in evidence and fact.

It makes performance visible. Even if you can’t see performance directly, you can see it indirectly using diversity ROI-based measurement practices. This involves the concept of building operational definitions. They are a critical part of any effective measurement process and will help provide a conceptual framework for understanding contributions such as intangible diversity outcomes that cannot be quantified into a financial or numeric equivalent.

It tells you what you need to manage to get the results you want. Using diversity ROI measurement linkage maps, you will be able to identify, understand and discuss the high-leverage relationships that drive results, and apply them toward your organization’s benefit.

Diversity ROI measurement makes accountability possible. It is difficult to hold yourself or anyone else accountable for something that is not being measured because there is no way to determine that whatever you were supposed to do has actually been accomplished. Measurement tells you whether you (your employees or the organization) are doing the right things at the right times, which is the essence of accountability.

Diversity ROI measurement lets people know whether they are off track so that they can do something to correct their performance. Without measurement, feedback is often too vague and too late, and feedback that is too vague and too late is useless.

Diversity ROI measurement tells employees in the organization what is important. If you don’t measure it, people won’t pay attention to it. A person I met while working with a Navy client stated it this way: “People tend to do what you ‘inspect,’ not always what you ‘expect.’” Diversity ROI measurement sets the foundation for what’s important. This also highlights a critical reason why diversity metrics and analytics must go well beyond representation-based measurements. Diversity ROI measurements and analytics must focus on full business and operational processes such that the diversity initiatives help drive your organization’s mission.

Using diversity ROI metrics makes things happen; they are the antidote to inertia. I am sure you have witnessed at some point in your career how milestones in a project plan get people on the project team energized toward a goal, while open-ended time frames ultimately lead to complacency and low energy. If you give people measurable diversity ROI goals and help them track and monitor their efforts, they will make substantial progress.

Diversity ROI measurement results in consequences (rewards and punishment) that further reinforce the inherent power of measurement. Any effective system of rewards and recognition, and any system of performance management must be based upon a solid foundation of measurement.

In general, diversity ROI measurement helps you understand what is happening in the organization regarding the execution and impact of your organization’s diversity strategy. Utilizing strategic diversity ROI measurement enables you to make comparisons, study trends and identify important correlations and causal relationships that will help establish a road map for success.

Current observations of those using strategic diversity ROI measurement reflects good news and bad news. The good news is that some organizations are finally discovering the importance of diversity measurement. The bad news is that most organizations are still using them very poorly or not at all beyond mere representation-based analytics. In some cases, I have witnessed organizations investing millions of dollars in diversity and inclusion programs with no concrete ROI-based tracking, evaluation and measurement system to gauge its effectiveness and impact. When this happens, diversity organizations have little to offer to demonstrate their value and often suffer devastating consequences to their departments.

Creating the Proper Measurement Environment for Success

Unfortunately, when used poorly, not only does diversity performance measurement not live up to its promise, but it can be an extremely negative force in the organization. Almost everyone has experienced negative measurement used to expose negative things – errors, defects, accidents, cost overruns, exceptions of all kinds to trigger negative emotions like fear, threat, fault-finding, blame, and punishment. They also know how dangerous measurement can be in the hands of those who don’t use it well or benevolently.

Although negative measurement can get results, it is mostly short-term compliance, and leaves a bad taste in people’s mouths. For many employees, measurement is viewed, at best, as a necessary evil. At worst, it is seen as a menacing force that is greeted with about the same enthusiasm as a root canal! When people think of performance measurement in this way, they think of being watched, timed and treated unfairly.

The environment of diversity measurement has a major influence on how measurement is perceived by employees and, therefore, how they respond emotionally to it. Since measurement in general is such an emotionally laden topic, preparing the environment in which the measurement is conducted is an important requirement. Even if people aren’t directly involved in the measurement, almost everyone feels strongly about it and its implication on them in the future.

Measurement is powerful. One of its primary purposes is to act as an effective communications tool. When implemented and managed properly, measurement can strategically drive results. Most employees seem to intuitively understand that most effective decisions will be made on the basis of having good, clear data provided by a well-designed measurement strategy and system. Although seldom explicitly acknowledged as such, measurement is important to people because they know that their success, rewards, budgets, punishments and a host of other things ultimately are directly or indirectly based on measurement.

To create a transformative measurement environment, it is critical to address the following four key elements during your implementation process:

Context: The context is everything that surrounds the diversity ROI measurement task, including the social and psychological climate needed to drive employee behavior to use the measurement system. The context of measurement tends to reflect how diversity measurement is perceived by employees and therefore how well they will be used.

Focus: Focus is what gets measured in the organization, that is, the diversity measures themselves. Selecting the right diversity measures can create leverage and focus the organization on what is most important.

Integration: Integration is how the measures are related to each other; the relationship among the measures. Measurement frameworks make sure that the diversity measures relate to each other and are not just isolated metrics.

Interactivity: Interactivity is the social interaction process around the diversity measurement data. Interactivity is the key to transforming diversity measurement data and information into knowledge and wisdom.

It is essential that all four keys work in tandem with one another. For example, without the right focus, other keys will be meaningless, because if you don’t measure the right things, you won’t be able to manage the right things and you won’t get the right results, no matter how well you measure them technically. On the other hand, even with the right focus, without a positive context, people won’t be motivated to measure the right things, will tend to focus on what will bring them the largest personal rewards and will tend to have an adversarial position toward whatever it is that is measured. When measurement has the wrong focus and a negative context, a multitude of things can go wrong.

Without the right integration, diversity measures will stand alone, functional silos will be perpetuated, individuals and functions will not be properly aligned and there will be a natural tendency to maximize individual measures, often at the expense of other parts of the organization or the organization as a whole. In more advanced cases, individual measures may actually work against each other, and even cancel each other out.

Without frequent interaction relative to measurement, none of the other keys can really work. Without frequent and effective interactivity, you will have a technical engine without a social engine. In addition, you might develop a diversity scorecard or a diversity measurement framework, but who is going to maintain it and keep it updated? Without adequate interactivity, it is impossible to sustain any gains from the other three keys.

When all four keys are working together synergistically in an organization’s diversity measurement system, amazing things can happen. Together, the four keys to powerful performance measurement will work together to enable the power of strategic diversity ROI measurement to make a real, transformational difference in your organization’s success.