Diverse, equitable and inclusive cultures aren’t just good for employees — they’re good for business. Research shows that better DEI metrics are correlated with higher overall revenue, increased revenue from innovative products, better brand reputation and employee retention. The economic value that DEI initiatives can provide has even caught the attention of the U.S. Securities and Exchange Commission (SEC), which recommended reporting DEI metrics in their recent human capital reporting guidelines.
While they recommend reporting DEI metrics, the SEC does not define them. Instead, organizations must identify appropriate metrics independently from a complex slough of standards and benchmarks. This results in confusion and DEI metrics that may not accurately reflect the organization’s goals. It can also lead to a heavy focus on the desired outcomes and fail to address the behaviors that influence them, thus creating a “leaky bucket.”
The Leaky Bucket
The leaky bucket phenomenon describes how organizations fail to meet their DEI goals due to an attrition of people of color, people with disabilities, women and other minority groups. One key factor in this is diversity without inclusion. Without the necessary human capital investment, employees lack the support needed for proper retention. Organizations may create a leaky bucket by measuring DEI as an outcome and failing to create a diverse, equitable and inclusive environment.
In many instances, organizations measure DEI as a simple breakdown of various demographics and identities, such as race, gender, disabilities or age. Transparency regarding these measures is expected and crucial to understand, but they only tell part of the story.
These representation metrics fall short of providing any insight into how to change strategy. For example, an organization may see in their metrics that they have far fewer women on staff than men, but the data fails to show them why. Creating truly diverse, equitable and inclusive cultures requires an intense commitment to organizational culture change and human capital development. But where does the organization begin?
Enter the “social value ROI roadmap.”
The Road to Success
A roadmap can help an organization stick to their commitments and offer insight into the return on this investment. With this framework in place, organizations can move beyond diversity metrics and begin to address what drives them by capturing the right data, using analytics to identify potential risks and opportunities and identifying the human capital investment strategies with the biggest impact on attaining an organization’s DEI goals.
The first step is to identify the right metrics. These might include:
- Measures of diversity, such as:
- Overall diversity metrics by demographic categories, including overall organization, board, senior leadership, specific functions and geographies.
- Demographics of candidates applying for jobs.
- Measures of inclusivity and belonging, such as:
- Policies supporting diversity, including child care, flexible work hours, remote work, benefits for LGBTQ+ couples and accessibility policies.
- Cultural inclusivity and belonging assessments, including measures like equitable opportunities, psychological safety and metrics of belonging.
- Employee resource groups (ERGs), including the number of groups, active membership, senior team member engagement and sponsorship.
- Measures of equity, such as:
- Promotion metrics, including the advancement of people in various demographic categories within each level of promotion opportunity.
- Wealth metrics, such as average hourly earnings, annual salary, stock ownership/options and patents.
- People development investments, including career development paths, access to skills and management training.
- Measures of retention, such as:
- Employee retention, satisfaction, voluntary attrition and turnover
- Well-being, which includes metrics related to stress, burnout, hospitalizations and sick days.
- Benchmarks, such as:
- External benchmarks from organizations like the Human Rights Campaign, the Disability Equality Index or Refinitiv.
- Internal benchmarks that compare business units and functions or groups on specific internal DEI metrics.
- Metrics developed by the United Nations in their sustainable development (SDG) goals.
- The U.N. outlines some helpful metrics in their goals for quality education, gender equality and decent work and economic growth. Organizations can inspire employees by linking their DEI goals to greater societal goods.
While these metrics may not be as simple to measure as representation metrics, they are vital to getting the full picture of an organization’s diversity, equity and inclusion. This data will show where organizations can patch the holes in the leaky bucket and improve company culture to meet DEI goals.
Organizations should strive to balance social and economic value and a commitment to DEI goals is crucial to this. Not only do these initiatives improve employee well-being and retention, but they also improve revenue and brand reputation. Clear DEI goals accompanied by a roadmap for attaining them will help organizations move beyond the numbers game of representation so that they can focus on developing more equitable and inclusive cultures.