Diversity metrics used by many organizations today are characterized by a lack of focus on organizational performance improvement and primarily concentrate on representation by race, rank and gender. However, there are guidelines to enhance your diversity scorecard metrics and provide ways to tell leaders as much as possible about how diversity and inclusion have helped drive organizational performance and success.
Don’t blindly follow a template; create a scorecard that is aligned with business strategy: In my book, “The Diversity Scorecard: Evaluating the Impact of Diversity on Organizational Performance,” I provided a sample “six-perspective” diversity scorecard (financial impact, diverse customer/community partnership, workforce profile, workplace climate/culture, diversity leadership commitment, learning and growth) that could be used to assess an organization’s diversity efforts. However, I emphasize that this arrangement is merely a guide and not written in stone. Some organizations choose to deploy a “three-perspective” scorecard: workforce, workplace and marketplace. Others may follow a refined version of the four-category balanced scorecard pioneered by Kaplan and Norton (financial, customer, internal, innovation/growth). I mentioned throughout the book that it is critical to carefully examine the selection and alignment of your metrics to gauge their ability to drive organizational performance.
Some of the best diversity scorecards I have seen do not blindly follow a standard template. Instead, the diversity organization that does it well takes the time to strategically align its metrics with the organization’s mission and strategy first, then utilizes analytic frameworks or templates like the diversity scorecard that link their results to outcome-based diversity ROI metrics. They avoid tying their measurement strategy to representation-focused headcounts of race, rank and gender alone with no strategic intelligence value. Kaplan and Norton were the pioneers of the concept of a balanced scorecard many years ago (published in 1996). Obviously, the field of performance management has evolved over the last several years. Thus, our diversity and inclusion metrics must change as well.
Utilizing a Performance Excellence Framework
An alternative diversity scorecard option I suggest to organizations, where appropriate, is to align their diversity scorecard with the organization’s strategy, and periodically examine their performance success through the lens of each strategy category and categories framed by the criteria for performance excellence of the Malcolm Baldrige National Quality Award model. The criteria areas include:
• Strategic planning.
• Customer focus.
• Measurement, analysis and knowledge management.
• Workforce focus.
• Operations focus.
These assessment categories will provide a solid foundation for analyzing your performance impact and help guide your action planning implementation efforts.
In today’s organizations, people are a major expense, but effectively acquiring, managing and optimizing diverse talent can be a major competitive performance advantage as evidenced by the success of companies such as Google, Microsoft and others. Although there is probably no such thing as an ideal scorecard architecture that fits all types of organizations, a contemporary scorecard must reflect the current state of human resources and other realities. When considering a starting point for the development of your scorecard, start with the organization’s mission and strategy and begin arranging your analytical “straw-man” using the following categories:
1. External metrics.
2. Customer-focused metrics.
3. People metrics.
4. Internal metrics.
5. Financial and strategic metrics.
Too often diversity measurement strategies as well as diversity strategic plans limit themselves to program-based activities and do not provide strategic intelligence regarding diversity’s impact on areas such as increasing market share, improving productivity, fostering innovation, making manufacturing and operational processes more efficient, enhancing educational curriculum design, addressing community-based problems, and the like. This requires unhooking from a “counting heads” practice of race, rank and gender, and moving to the application of diversity ROI performance sciences to resolve key business, government, educational and societal challenges. This brand of diversity business intelligence is often welcomed by C-suite leaders and managers alike. Our diversity and inclusion value proposition must be much broader than representational diversity and simply checking to see what everyone else is doing.
Creating Better Business Intelligence by Measuring the Right Things
All types of organizations need to consider the first four categories of metrics because all organizations, even government and nonprofit organizations, have external factors they need to monitor. They also need metrics that examine their success with customers and employees as well as measures of their impact on quality, productivity, process consistency and the like. Measurement is easy. What is difficult is measuring the right things and learning to ignore a focus on what other organizations are measuring or other interesting data that does not help you become more successful in driving your own organizational performance objectives. The link to the organization’s strategy and mission is a key ingredient to determine what the right measures are.
There are four basic facts that managers and employees need to know about each of your diversity measures of performance. They include answering the following questions:
• What is the current level of performance? Level is defined as how current performance compares to a target or objective and is usually displayed as red, yellow or green. Performance levels may also be compared to historical data (such as what occurred last year or last quarter) or other units in the organization.
• What is the trend? Trend is defined as performance over time. Trend is an important dimension of performance and is just as important as the current performance or level, which is just a single data point. Trends show improving, declining or flat levels of performance over time.
• Analysis: Why is this level and trend in performance occurring? This is qualitative information that explains the quantitative level and trend. The explanation of the root cause of problems or declines should be included. It may also be important to document the reasons or causes for good (green) performance for an improving trend.
• Action plan: What is being done to improve performance or maintain it at current levels? The action plan usually consists of a series of tasks, responsibilities and deadlines. It is also important that action plans are derived from the analysis information. The owner of the metric is usually responsible for developing the action plan.
Metrics That Matter
The categories of measures in your diversity scorecard are not nearly as important as the metrics themselves and the integrity of the data collected. The categories are merely sorting mechanisms. Time is better spent debating and thinking about which metrics belong in which category and how accurate data will be collected, not what the categories are. Metrics are critical because they are used to obtain important information to drive your strategic performance value. If they are not well defined, information will not be forthcoming to intelligently guide your actions and decision-making toward value-added results. A sample of the metrics that matter might include calculating:
• Human Capital Value Added — This measure captures profitability per full-time employee and is used instead of the old measure of revenue per employee measure since it takes into account other expenses to generate the improved output.
• Human Capital ROI — This measure captures ROI in terms of money spent on pay and benefits.
• Return on Workforce — This measure is used to monitor the true operating bottom-line influence of your utilization of human capital by examining the relationship between operating income and total labor costs.
• Income Factor — This measure is used to monitor income generated per full-time employee.
• #/% IDPs Achieved by Group by Level — This measure captures individual development plans actually implemented versus those written that do not result in the employee gaining a new level of competency and expertise.
• #/% Competency Coverage Ratio Objectives Met by Group by Level — This measure captures the degree to which the organization’s succession planning pipeline has critical strategic competencies to execute its strategic plan objectives for the future.
• #/% Employees With Global Competencies Who Are Promotion-Ready by Group
• ROI Dollar Value Impact Generated from ERG/BRG Strategically Aligned Initiatives
• Targeted ROI From Niche Opportunities Identified and Implemented by Diverse Employees by Group
• Dollar ROI of Operational Improvements/Savings Generated Through Diverse Work Team Utilization
In my book, I defined the term “diversity scorecard” as “a tool containing a carefully derived set of measures from an organization’s strategy used to communicate the outcomes and performance drivers the organization will use to achieve its mission and strategic objectives.” Its design and objectives are deliberate attempts to generate performance and results that are communicated as value-added evidence that diversity and inclusion practices have affected bottom-line outcomes. Measures such as those described above help target your diversity efforts toward performance-based outcomes.
Any diversity metrics that are used to meet strategic challenges must enhance results and decision-making in the organization. This better business intelligence intent goes well beyond a “staff-focused role” to the role of “strategic business partner.” That is, one who is aligned and linked to operating requirements and applies diversity ROI sciences and practices as a means to drive strategic business performance.
Deploying Your Intelligence Strategy
Business fundamentals tend to be issues that all organizations need to concentrate on, such as impacting profitability, growth, operations excellence, etc. The diversity and inclusion organization is no different. Selecting and linking critical key success factor metrics for your organization’s diversity measurement strategy is a major part of a business partner’s role. By doing so you are selecting areas of evidence-based performance on which you will concentrate. Next, specific goals or objectives need to be set for each metric. Goals are based upon research and should help the organization achieve its overall vision. Care must be taken to make certain all goals link up well with each other so that improved performance in one measure does not cause deterioration of performance on another measure. Once goals and objectives have been identified, strategies and/or action plans are put in place to achieve them.
When diversity scorecard metrics are designed with better business intelligence in mind, the organization as well as your department will reap tremendous benefits and motivate organizational behavior toward a cycle of continuous improvement and success. To do otherwise sets diversity and inclusion apart from other results-focused, value-added areas of the business.