“Diversity, Equity, and Inclusion” (DEI) is an increasingly top focus of human resource departments for medium to large organizations.
Vendium Global set out to discover some key findings –
Why is DEI important?
How do organizations use DEI?
What are organizations currently doing to solve DEI challenges?
What is the impact of those solutions?
How do the current solutions compare to the Vendium DEI solution model?
Since DEI is such an emotionally charged topic, this study brings forward the data to support decision making for business leaders.
For the purposes of this study, certain assumptions are used for consistency -
Assumptions in Analysis
Organization Size: 10,000 employees
Average Salary: $70,000 USD
Average Hourly Rate: $33.65 USD
Diversity: diversity of thought and demographics within a workforce
Equity: fairness of opportunity and organizational leadership ability to drive that fairness
Inclusion: a sense of belonging that employees have while working for the organization
Goal of DEI
Enable and improve the attitudes and behaviors of employees when interacting with diverse others to create a workplace of innovation, profitability, longevity, and cost controls within an environment of fairness and belonging for all.
IMPORTANCE OF DEI
The key focus of any business is to achieve the maximum amount of profit while extending or maintaining business longevity. Diversity, Equity, and Inclusion (DEI) initiatives are designed to reduce costs and increase revenue.
Cost reduction is achieved by reducing attrition, reducing compliance exposure, and reducing customer loss. Revenue increase is achieved by increasing innovation, increasing employee longevity, and increasing productivity.
Entrepreneur Magazine cited the three key reasons why an employee stays with an organization are engagement, respect, and personal treatment. Engagement is the combination of professional enablement, strong leadership, and personal well-being. Respect references the importance that the employee feels within the organization.
Personal treatment is the feeling that the company cares for the unique circumstances of the employee’s life such as children, family life, personal goals, etc.
Understanding these three factors, we can determine -
Business leaders need to provide the tools, technology, and development for employees to be impactful.
Leadership development should include the interpersonal skills needed to put people first, keep people engaged, and an understanding of the foundational needs of the team.
Mental and physical health are priorities recognizing top performance is achieved when humans are at the higher tiers of the hierarchy of human needs.
Talent Management insights should include metrics on individual skills and goals on all levels to implement them when helpful, achieving the respect attribute for why employees stay.
Human Resources (HR) programs and policies should include a structured amount of flexibility for managerial discretion to address the unique personal situations of employees.
Attrition is the highest and most identifiable negative consequence of an organization with a culture that poorly addresses key DEI factors. Organizations should use their exiting employees as an opportunity to collect data, finding both trends and rates for why they leave.
Most Common Reasons Employees Voluntarily Leave An Organization
These reasons are what employees feel comfortable sharing and do not account for the involuntary exits that may have a root in the three factors of why employees stay with an organization.
Attrition rates vary by industry and economic climate but average at approximately 2% per month as a baseline. Organizations should benchmark within their industry to know their specific baseline.
Organizations of 10,000 employees have an average of 200 employees lost and therefore, 200 new employees needed each month.
Direct Hiring Costs: $5,833.33 (one-month base salary)
Relocation: $20,000 (average level of support with tax gross-up)
Training: $26,600 (38% of salary)
Time to Hire: 42 Days
TOTAL COSTS: $52,433.33 (~75% of salary)
Doesn’t include costs associated with business unit interviewers, downtime for the role, onboarding costs, leakage costs, nesting expenses, etc.
Cost may be reduced with local hires.
SHRM reported that entry-level hires cost 2.5x the annual base salary to replace.
The average time to bring an employee to full productivity is 18 months and the time to reach current employee cost parity is 30 months (nearly 2.5 years).
As an illustration of impact, at 200 new hires per month, the expense to the organization can be as high as ~$126 million dollars per year.
Developing and retaining top talent has an immediate return on investment (ROI). Organizations would have the budget to expand their workforce 15-25% just on wasted funds used for losing talent and failure to develop internally.
COST OF INACTION
With the complexities of a well-executed DEI program, it can be easy to choose inaction and focus solely on the business objectives. This decision can have much higher costs than choosing a well-formulated solution.
Inaction increases the risk of loss of productivity, loss of top talent, and lawsuits caused by related compliance issues.
A Gallup poll found that 34% of employees are actively disengaged in the workplace. This means that $23,800 dollars of a $70k base salary are wasted. Loss of engagement is the loss of productivity and loss of productivity is a direct loss of profit. Disengagement due to a lack of belonging can go much higher and even result in protest in the form of poor quality of work. Poor quality of work can lose customers, credibility, and be more damaging than a lack of work. Every interaction with an employee or message from an organization is a direct reflection of the company as a whole.
Infighting is another consequence. John Hopkins University reported that an estimated one in four people in the United States over 18 have a diagnosable mental disorder and one in ten have a depressive illness. In a 10,000-person workforce that equates to 2,500 with a mental disorder and 1,000 with a depressive mental illness. Combine this with intercultural communication barriers, misunderstandings, and the conflict brought from the very same diversity meant to drive innovation and the result is concerning. These are most often the causes for infighting and can be addressed proactively with a well-formulated DEI solution.
Loss of opportunity should not be overlooked. Salaried and hourly employees all have a certain cost to the organization per hour. There is an expectation that each hour comes with a certain amount of utility or value generated. Opportunity cost comes from the loss of utility with disengagement. Opportunity cost is a loss of what could have been accomplished with that time and that loss is decreased at a statistically significant level with poor DEI mitigation.
All organizational initiatives are perishable. Needs, impact, and environment all have a profound changing ability in how organizations act. The current model is antiquated and short-sighted. Meaningful impact needs to have a measurable understanding of the current state, a clear path of improvement, and measured outcomes.
Current Model Inclusions
Employee Resource Groups (ERG)
DEI Internal Team
ERGs are designed for employees to have a community, share their stories, and leverage the collective to work towards common goals. Organizations often have an ERG for each specific group of employees who have traditionally felt excluded to discuss their challenges, act as a support group, and focus on initiatives related to their respective groups.
While these groups are helpful to the participants, businesses are designed to be good at business but are not licensed therapists. The role of organizational leadership is to provide people the right tools, processes, and guidance for employees to be impactful in their roles. The community should be the organization and the sense of belonging should be driven at the team level.
ERGs can quickly become a box and echo chamber for people of similar backgrounds. This box limits the organizational impact and can have a detrimental effect on individuals by amplifying the perception of their challenges. There is a direct compliance risk of individuals sharing so openly. Common challenges of ERGs are lack of participation, time away from the role, and costs associated with operation.
The chat sessions conducted in this space have employees of diverse backgrounds come together and share their stories for the organization's members to see, hear, and learn from the participants. Understanding is important in diversity but a challenge manifests when individuals share personal trauma or negative experiences, unintentionally becoming where other employees go for guidance. The employee elected to be vulnerable for the time of the chat, but the employee can become inundated with messages from others, amplifying their trauma and distracting the employee from their role.
Consultants are very impactful in sprints and building structure, but organizations hire internal talent for lasting interaction. The consultant is compensated with an hourly rate, associated expenses (travel, materials, etc.), and have a limited scope of impact. The scope of impact is directly related to how many employees can physically attend the sessions provided by the consultant causing inconsistency of messaging.
Diversity teams currently operate with limited impact potential. They facilitate chat sessions, send communications, operate ERGs, and act as the internal consulting function to talent acquisition, talent management, learning and development, and others. The limited impact potential is due to limited budgeting only allowing the experts in the space to impact what they can contingent upon little to no cost to the company. The average cost of a 10-person diversity team is $1.65 million dollars with compensation and benefits making the utility of each additional dollar spent profoundly important.
Consultant: Quarterly visits with three 1.5-hour sessions per visit
Direct Cost: $22,600
Reach: 2,400 employees annually (estimated 200 per session)
Time Away Cost: $242,280 (estimated 3 hours annually per participating employee)
ERG: 12 ERGs taking 12 full-time employees to operate
Direct Cost: $840,000
Note: Does not account for external ERG management or infrastructure costs
Reach: 1,200 employees annually (estimated 100 active users per group)
Time Away Cost: $6,299,280 (estimated 3 hours per week per participating employee)
TOTAL COSTS: $7,404,160
WORKFORCE PERCENTAGE IMPACTED: 36%
There are many tools and options to create an impact. The goal is to have a measurable understanding of the current state, a clear path of improvement, and then measured outcomes. There should be accountability metrics and long-term initiatives to ensure the changes remain in place.
Vendium recommends three initiatives to clients to solve short, medium, and long- term needs in the most cost-effective and impactful ways –
Technology Solution: Go Culture International
Business Solution: Business Resource Groups
Personal Solution: Chat Sessions
Internal Solution: DEI Team
To date, the best technology solution for DEI initiatives is Go Culture International (www.goculture.org). Go Culture is an organization founded by two leading university professors who conducted a 20-year research initiative into how to bring people together across cultures. Go Culture’s solution takes the employee through a 15- minute behavioral assessment measuring their attitudes and behaviors in 15 factors related to DEI. The employee is guided to training for each factor with the training for factors that the employee scored lowest on coming in first. Each training has a reading section, video, bulleted action points, and writing section for the employee to provide qualitative responses. After completing the training, the employee completes a post-assessment to see how they have improved.
Vendium found an average of 9% organizational improvement within 12-weeks of use of Go Culture’s solution. In being a technology solution, the entire organization has the same experience and training. The analytics function of the solution provides actionable quantitative and qualitative insights to the Talent Management and People Analytics teams at a 93% data reliability (Cronbach Alpha) rate.
Business Resource Groups (BRG) are very similar to ERGs but take a business-focused approach. The Vendium Model has the BRG take a mentorship circle format where a senior leader champions and structures the initiatives. The topic of each group is business-focused so it can relate to topics such as –
How do we better market to customers in X demographic?
How do we better serve customers in X demographic?
What products are most important to customers in X demographic?
What benefit packages should we offer our diverse workforce?
How do we better attract top talent in X demographic?
What projects should the organization be working on to be future-proofed?
In contrast to traditional ERGs, BRGs provide a community for diverse talent to come together and use their diverse backgrounds to improve key business initiatives. The participating employees have direct exposure to senior leadership supporting their growth within the organization, gain business-related metrics to improve their performance evaluations and receive the opportunity to leverage the power from what makes the employee unique. Since BRGs are hosted and managed internally, the cost is only time away from the normal work functions which are mitigated by the value from the initiative results. The time away is further justified as a function of the employees’ role.
Chat sessions are a space for employees to share their stories in a structured capacity. The chat session should have a defined topic and be given in two formats:
1. Conversation between senior leaders on a topic and answering related employee queries in a chat function
Purpose: Employee visibility to the human side of senior leaders with the value generated from the thought-leadership of executives and direct access to them through questions in the chat function
Format: Webinar to be recorded and posted on the company intranet for future use
Reach: 200+ employees per session
2. Conversation on a defined topic open to up to 20 participants with a senior leader moderating
Purpose: Employee open dialogue on the defined topic with the ability to volunteer by signing up through the organization’s intranet
Format: Zoom or another video conference
Reach: 20 employees per session
With structured chat sessions, the employees can share valuable thoughts and perspectives toward a topic that is business-related. The format and business-related structure support the development of the employees, provide visibility of the participants, and support the organization on key initiatives through the selected topic.
Diversity teams should be allocated the budget and authority to implement and manage the technology solution, given their expertise. The analytics capabilities of Go Culture enhance the Diversity team’s ability to consult with stakeholders in areas such as talent planning, talent management, leadership development, and more.
Go Culture: Access for every employee
Direct Cost: $480,000
Reach: 10,000 (every employee)
Time Away Cost: $1,682,500 (5 hours annually per participating employee)
BRG: 36 BRGs taking 36 part-time employees to operate
Direct Cost: $0 (BRG fits into anticipated role function and cost)
Reach: 3,600 employees annually (estimated 100 active users per group)
Time Away Cost: $0 (BRG fits into anticipated role function and cost)
TOTAL COSTS: $2,162,500
WORKFORCE PERCENTAGE IMPACTED: 100%
The future of work requires innovation, cost control, data-driven initiatives, and efficiency. The organizations that remain dedicated to the sunk costs of unmeasured impact will be level set by the competition.
The financial analyses in this study focus on having employees staying in their dedicated channel of work to not take away resources from the organization on tasks that don’t directly impact business initiatives and while still solving for the emotional needs of the workforce. As such, chat sessions and time associated with business-related functions were not calculated.
Analysis A: Do Nothing
Cost: Variable (a portion of up to $126 million in attrition costs and unquantifiable negative external business impact)
Positive Workforce Impact: 0%
Analysis B: 2020 Model
Positive Workforce Impact: 36%
Analysis C: Vendium Model
Positive Workforce Impact: 100%
The ability to enhance the attitudes and behaviors when interacting with diverse others directly benefit organizational profitability by improving workforce cohesion, productivity, and interactions with customers and stakeholders in a global environment. Time and resources are limited so the productive allocation of such is essential to building an organization able to survive the worst of times and thrive in the best of times.
Without the accurate measurements in place and business alignment with DEI initiatives, organizations will be citing DEI improvement as an unquantifiable endeavor, leaving it vulnerable to cuts when times are tough. It is too important to leave to chance or solely emotionally driven initiatives.