Gartner Reimagine HR 2018, Orlando.
In the past two years, issues related to diversity and inclusion in the workplace have appeared with increasing frequency in headlines, legislation, and shareholder earnings calls, underscoring the growing importance of D&I as a strategic priority for businesses. While it’s encouraging that CEOs and investors are paying more attention to D&I, this trend also puts more pressure on D&I leaders to create effective, sustainable strategies with direct impact on the organization’s priority concerns.
In a panel discussion at Gartner’s ReimagineHR event in Orlando last week, Gartner’s Vice President of Inclusion and Engagement, Rajiv Desai, moderated a discussion with a panel of D&I leaders at major companies on the practical lessons they have learned in adapting their D&I strategies to business needs. Our panelists included Lori McAdoo, Global Lead–Inclusion and Diversity at Alcoa Corporation, and Vanessa Abrahams-John, Executive Director, Global Diversity, Inclusion and Talent Acquisition at Praxair, Inc. While Alcoa and Praxair have taken different approaches to evolving their D&I strategy, both our panelists emphasized the need for D&I leaders to build networked teams in order to create sustainable strategies, and shared two specific ways they are integrating teamwork into their D&I strategies.
Embedding D&I Strategy into Business Processes
A key theme in both panelists’ success stories was that D&I strategy is not only about programming, but also about embedding D&I into the heart of business processes. This requires intentionally engaging senior leaders to increase their buy-in and help them take action on D&I efforts.
Alcoa’s effort to integrate D&I principles into the business started in a familiar place: building the business case for why diversity matters to everyone, not just the D&I team or diverse employees. McAdoo explained that to gain buy-in, Alcoa led with respect because, “In a practical sense, it is hard to disagree with the general principle of respecting others.” By evolving the company culture into one where all individuals matter, their D&I principles organically shifted to a D&I functional strategy that supported key business goals. However, integrating D&I into the business sometimes does come with changes to policies and procedures to support its integration. For example, Alcoa changed an operating policy to support this new inclusive culture, adjusting shift lengths from twelve hours to eight hours to better support parents and caregivers. By having policies and procedures that align with cultural values of inclusion, Alcoa was able to treat D&I as a business necessity, not just a “nice-to-have.”
Hourly employees make up over 50 percent of the total US employee population and a critical segment of the workforce at many organizations. While employee engagement efforts typically focus primarily on salaried employees who are perceived as having more of a long-term commitment to the organization, hourly employee engagement and loyalty are growing concerns for HR leaders in today’s tight labor markets. According to recent Gartner research, hourly workers are more engaged in their jobs when they are satisfied with their employer’s diversity and inclusion efforts.
In the past year, we’ve seen many large companies launch new initiatives to better engage and retain their hourly employees, whether through education benefits or opportunities to work with local nonprofit organizations. HR leaders have also seen improvement of hourly employee engagement when these employees have positive perceptions of their organization’s D&I activities, our research finds. In fact, when hourly employees are satisfied with D&I, they exhibit almost twice the discretionary effort and almost three times the intent to stay compared to those who are not satisfied. However, only about half of hourly employees are currently involved with D&I efforts and HR leaders are uncertain how to use D&I to engage this population.
Our D&I research team has uncovered three ways HR leaders can leverage hourly employee engagement in D&I to make a positive impact on the organization:
Integrate D&I in Current Processes
HR leaders should integrate D&I efforts into pre-existing engagement initiatives, such as team meetings, to ensure that cultural values and behaviors are articulated and implemented consistently throughout the organization. This approach addresses a key challenge hourly employees face when connecting to D&I at their organizations: They do not feel included on their teams. By building hourly employee inclusion into existing processes, organizations can improve team performance without creating additional structures for HR to manage.
In a recent Harvard Business Review article, Sujin Jang presented the concept of “cultural brokerage” as a way of facilitating interactions across employees from different cultural backgrounds to supporting team creativity. Her research shows that “cultural brokers” (team members with multicultural experience) can act as a link between team members whose experience is mainly limited to only one culture. This research has significant implications for an increasingly global workforce and for HR leaders working to support diversity and inclusion goals.
One key message for HR leaders is that while having diverse teams can foster innovative thinking, all of the members of those teams must also feel included in order to achieve maximum benefit to innovation and productivity. Our research at Gartner on D&I leadership also finds that an inclusive culture can have a major impact on team performance, particularly for diverse teams. (Gartner Diversity & Inclusion Leadership Council clients can read our Creating Inclusive Leaders study here to learn more.)
But facilitating an inclusive environment where employees from different cultural backgrounds feel equally valued and included is not an easy task; even with cultural brokers on their team, leaders must be proactive about inclusion and should not depend on these brokers to foster constructive collaboration alone. We recommend four approaches to building inclusive team environments:
- Ensure leader behaviors match inclusive values: Our research shows that interpersonal integrity and productive conflict management are two leadership behaviors that effectively drive inclusive environments for employees.
A recent study by the Boston Consulting Group and MassChallenge, a global network of startup accelerators, takes a close look at how startups founded by woman compare to those founded by men, both in terms of how much venture capital financing they receive and how well those investments pay off. Looking at five years of investment and revenue data from the startups MassChallenge has worked with, the study found that those founded by women consistently attracted less investment, even though they actually tend to generate more revenue:
Investments in companies founded or cofounded by women averaged $935,000, which is less than half the average $2.1 million invested in companies founded by male entrepreneurs. Despite this disparity, startups founded and cofounded by women actually performed better over time, generating 10% more in cumulative revenue over a five-year period: $730,000 compared with $662,000. In terms of how effectively companies turn a dollar of investment into a dollar of revenue, startups founded and cofounded by women are significantly better financial investments. For every dollar of funding, these startups generated 78 cents, while male-founded startups generated less than half that—just 31 cents.
The findings are statistically significant, and we ruled out factors that could have affected investment amounts, such as education levels of the entrepreneurs and the quality of their pitches. … The results, although disappointing, are not surprising. According to PitchBook Data, since the beginning of 2016, companies with women founders have received only 4.4% of venture capital (VC) deals, and those companies have garnered only about 2% of all capital invested.
This gender bias may be costly to venture capitalists as well as entrepreneurs: The study calculated that VCs could have made $85 million more over five years had they invested equally in the startups founded by women and by men.
The researchers went one step further and spoke to founders, mentors, and investors to understand the origins of the gender gap in VC funding. Consistent with various other research showing that women are more likely to be challenged, questioned, and criticized in the workplace than men, they found that women founders and their presentations receive more pushback from investors than their male peers. Men are also more likely to talk back to investors when their claims are scrutinized, and to make bold, blue-sky projections in their pitches:
Michelle Kim, co-founder and CEO of the diversity and inclusion consultancy Awaken, is tired of making the business case for D&I. That’s not because the business case isn’t strong enough, Kim writes in a recent post at Medium, but because she has found that the executives who demand a bottom-line argument for diversity are usually looking for a reason not to invest in it. In other words, “We’re wasting too much time trying to convince those who don’t have the desire to be convinced.”
The problem with making the case for D&I on the basis of the return the organization can expect to make on that investment, she argues, is that D&I is hard to do: It’s uncomfortable, it requires organizations to question their norms and processes, and it’s a long-term game with no quick fixes, in which progress is often hard to quantify. With a focus on ROI, it’s too easy to look at the short-term outcomes of a D&I program and conclude that it isn’t working, when really it’s just getting started:
Creating a diverse and inclusive workplace requires a multi-pronged, iterative, and long-term strategy. It takes real commitment to continue what sometimes could feel like an endless journey. Sometimes you’ll take one step forward and three steps back. You’ll need to constantly reevaluate your approach because the world of D&I is constantly changing (and it always will).
If you’re only focused on the quantifiable ROI of D&I, it’s not going to be enough to fuel this long term battle. You’ll end up looking for that “checklist” that merely gets you to comply with what’s minimally required. You’ll treat D&I as a crisis prevention strategy.
IBM made headlines last month when it filed a lawsuit against its former Chief Diversity Officer and Vice President of HR, Lindsay-Rae McIntyre, claiming that her decision to accept a new position as Chief Diversity Officer of Microsoft violated a year-long non-compete agreement she had signed with IBM. McIntyre, the suit claimed, was privy to data and methods pertaining to IBM’s diversity and inclusion program that constituted trade secrets and would inevitably influence the work she did for their competitor.
In a court filing Monday, IBM revealed that it had settled the suit on February 25 and that McIntyre would delay the start of her new position at Microsoft until July, GeekWire reports:
Terms of the settlement weren’t disclosed, but Microsoft said in a statement this afternoon that McIntyre will be officially starting in her new position this summer. … A judge in the case had issued a temporary restraining order preventing McIntyre from working at Microsoft pending a preliminary injunction hearing that was slated to take place next week.
“We’re pleased the court granted IBM’s motion for a temporary restraining order, protecting IBM’s confidential information and diversity strategies,” an IBM spokesperson said. “We’re glad the action has been resolved to the satisfaction of all parties and that Ms. McIntyre will not begin her new responsibilities until July.”
At the Harvard Law School Forum on Corporate Governance and Financial Regulation, Institutional Shareholder Services Executive Director Subodh Mishra recently published a summary of an ISS analysis of 450 proposals filed at Russell 3000 companies, which shows how investors’ priorities are shifting toward social, political, and environmental concerns. More than two thirds of these proposals are related to social or environmental issues, chief among them political activity and spending, board and workplace diversity, and climate change and sustainability, Mishra writes. Furthermore, nine of the ten most common types of proposals related to one of these issues, whereas only one (demanding the right to call a special shareholder meeting) is focused on governance. Mishra sees two main factors driving this trend:
First, social and environmental issues themselves are gaining significant traction with investors and the public. Important issues, such as concerns about the transparency of the political process, harassment and equity in the workplace, and climate change risks make headlines and dominate the public discussion daily. At the same time, investors and asset owners are bolstering their efforts towards greater ESG integration, which helps proponents gain further momentum. Second, governance topics may be lower on the agenda for the target universe. Shareholder proposals are typically filed at large-capitalization companies, where many formerly-contested governance issues have now become the standard. Annual director elections, majority vote standard, simple majority vote requirements and even proxy access—to a large extent—are now the norm for the vast majority of large companies.
ISS’s analysis counts proposals related to diversity and inclusion toward its total of “social issue” resolutions; while that’s fair, investors are paying more attention to diversity not only out of a sense of social responsibility but also as part of the investor community’s growing concern with talent as a key driver of business value.