Track meaningful metrics to ensure productivity and profitability.
An organisation’s diversity and inclusion performance (or its brand attractiveness) can be thought of in terms of a balance sheet. Just as a financial balance sheet provides a snapshot of a company’s assets and liabilities at a defined time, so the D&I balance sheet describes an organisation’s less concrete standing. The relationship between a D&I balance sheet and its financial sibling isn’t just metaphorical.
Diversity and inclusion have a direct bearing on non-tangible assets such as reputation, social capital and brand. Furthermore, diversity and inclusion impact on the efficiency and effectiveness of non-tangible assets such as business processes and structures. And diversity and inclusion have a massive influence on the performance of an organisation’s most important soft asset: its people.
I encourage organisations to build a diversity and inclusion balance sheet – for real. You may want to dumb it down into a dashboard or a scorecard. Whatever form you choose, it needs to track metrics that aren’t traditionally measured – items such as: employees’ perceptions of fairness, customers’ assessment of the organisation’s ability to understand and respond to their needs, and a segmented rate of advocacy. Organisations are taking avoidable hits to their reputations, reach and returns on investment because they lack data about their diversity and inclusion performance. Too many are painting a picture of their supposed accomplishments based on aspiration rather than reality.
If organisations were simply kidding themselves about their D&I performance, then there wouldn’t be too much cause for alarm. But the mismatch between corporate rhetoric and reality is causing a dangerous trust gap to emerge. As the gap widens, customers, would-be employees and other stakeholders become further alienated from the organisation, stoking its problems.
We’ve seen trust gaps swallow organisations when a CEO is identified as a racist and sexist bully. Sales suffer or share prices drop when social media users urge a boycott of a business because of its bad treatment of minorities. The damage is almost instantaneous because of social media and its never-ending hunger for villains.
A D&I balance sheet provides a way to track meaningful metrics and to identify risk mitigation. A company that has earned a solid reputation for treating people fairly may be forgiven for an isolated incident of bias against a customer or employee, as long as the company admits to the error and credibly explains how it is going to remediate the situation and ensure it doesn’t recur. Companies without a tracked and sustainable source of appropriate goodwill are more likely to suffer a reaction. All organisations make mistakes; those that take care to keep trust with their stakeholders and project their authenticity enjoy greater protection than those which don’t.
Customers and employees are choosing organisations for the trust they have in their diversity and inclusion performance, which is cognitively linked to ideas about sustainability and ethics as forces for good. They want to affiliate with organisations that reflect their values. Many organisations have responded by declaring their D&I credentials through accreditation schemes, involvement in Pride or the creation of employee affinity groups. These are the kinds of activities that might have been seen as innovative and as a sign of real commitment three or so years ago, but that now reflect corporate aspiration rather than impact – and can be regarded as window dressing. Such actions might help the balance sheet but are no longer as valuable as their sponsors hope or believe. Stakeholders know that it’s easy to sign up to a scheme or to write a cheque. It’s much harder for an organisation to live and breathe the principles of diversity and inclusion. Activity by itself means nothing unless it is linked to evidence of progress.
The actions of organisations and the reactions of stakeholders are highly variable and unpredictable. However, trust is a constant and, without it, markets evaporate. The close relationship between diversity and inclusion performance on the one hand and trust on the other is extraordinary. Business leaders are only beginning to recognise trust as both a massive threat and a huge opportunity.
The way people think about organisations has changed for ever.
This change hasn’t come out of the blue. In many ways, organisations created the conditions under which they are increasingly being judged. The era of the rockstar CEO began in earnest in the 1990s when organisations focused on humanising their images, on positioning themselves as allies in their customers’ lives and – especially in the new technology sector – making the workplace more informal and supportive. A more human business culture is inevitably held to higher standards of transparency and fidelity than the faceless, distant culture it replaced. When business leaders are positioned as heroes, they are vulnerable to falling from grace in newly public and potentially devastating ways.
The reality of the customer experience and the employee experience have become hugely influential. Organisations that sell aspiration as opposed to communicating reality are taking enormous, existential risks in our post-Twitter reality. Their failure to invest in diversity and inclusion will cost them their lives.
A diversity and inclusion balance sheet isn’t built in the same way as a financial balance sheet. Crucially, you can’t buy or sell your way out of a problem with D&I. If an area of your business is found to have had problems with disability, you can’t just dispose of the business unit and its leaders and declare the problem fixed. Approaches that aim to transform individuals without addressing the structures and processes which make up their environment are ineffective. Efforts to improve diversity and inclusion in an organisation need to be holistic and to provide evidence of recognised impact.
By contrast, negative impacts on your D&I balance sheet tend to be cumulative and, like radioactivity, take years to clear. If an employee is subject to a stream of micro-aggressions then, sooner or later, they will reach a point where they decide to leave. If a gender or ethnicity pay gap persists within an organisation, then employees will draw their own conclusions about the reality of the organisation’s inclusion goals and diversity promises. If minorities don’t see people like themselves reaching positions of power then they, too, often mark the organisation down accordingly – and move out or find a more comfortable lane.
Organisations that see D&I as a functional add-on rather than as a systemic feature will miss out on the benefits. Diversity and inclusion must be embedded in their cultural practices so that it becomes an additional lever for achieving the organisation’s core goals, through both customer experience and staff engagement. I’ll go further and propose that an organisation which increases inclusion by 6 percentage points will gain an extra 3 percentage points in engagement. In turn, if carefully curated in an inclusive ecosystem to drive impact, this increased engagement will generate a 1 percentage point increase in productivity within two to three years.
We know that diversity should be good for productivity – and we know that the UK has lots of diversity. We also know that productivity increases with engagement. Organisations are not seeing productivity benefits from diversity because they have not sufficiently addressed inclusion or preconceptions. Diversity in itself is inert and just having diversity isn’t enough. It’s what you are understood to have done with your diversity that matters. And that’s inclusion. Understanding the importance of inclusion and taking action to strengthen it lets organisations hook up their diversity to their business performance. In this way, diversity and inclusion form a powerful economic engine.
Organisations that don’t recognise the motive power of diversity and inclusion are risking their futures. Business leaders who don’t get the connecting line between inclusion, engagement and productivity are vulnerable to internal or external competitors who do. Organisations that talk up a storm about diversity and inclusion but then alienate employees and customers are manoeuvring themselves into a glass-walled dead end.
That’s scary stuff. But the under-seasoned takeaway is all positive. Diversity and inclusion are the keys to tremendous business opportunities. This is a bottom-line issue. There’s money to be made, and saved, through excellence in diversity and inclusion. Public sector organisations can do more with less when they get D&I right.
Every part of society stands to gain.
Raj Tulsiani is leader of Green Park ,an award-winning consultancy that offers Executive Search, Interim Management, Board Advisory, Diversity & Inclusion and Managed Service People Solutions across the private, public and third sectors and author of Diversity and Inclusion for Leaders: Making a Difference with the Diversity Headhunter.