“Defining Inclusion has bottom Line Impact”

By Eric Davies 1/23/12, This article is re-blogged from Diversity Executive

Inclusion is the invisible thread that ties the elements of an organization’s culture together. It helps to promote open communication, knowledge sharing and innovation by creating a collegial, mutually respectful environment. It allows workers to bring their full faculties to bear in the workplace by fostering a unified culture of acceptance.

Therefore, it makes sense that programs promoting inclusion have a measurable impact on an organization’s bottom line and on workforce productivity. That may explain why the Institute for Corporate Productivity’s (i4cp) 2010 Inclusion Measurement study, released in March as part of its “Inclusion Measurement: Policies and Practices of High-Performance Organizations” report, found a 14 percent gap between high- and low-performing organizations — 22 percent compared to 8 percent — when it comes to the use of productivity data in determining inclusion success.

The goal of the study was to determine how high-performance organizations are approaching the inclusion challenge and how they are measuring success. A high-performance designation was based on i4cp’s Market Performance Index (MPI), which is identified through a series of questions that determine a company’s current performance in revenue growth, market share, profitability and customer satisfaction vs. those same items five years ago.

Make Measurement Follow Initiatives
The aforementioned finding on productivity as a metric for inclusion success demonstrates increased interest among higher-performing organizations in evidence-based human resources (EBHR). EBHR is driven by the need for more stringent HR metrics that are relevant to business goals and the bottom line.

The study showed that, though 62 percent of organizations overall reported that one driver of inclusion initiatives is to increase productivity and engagement, only 15 percent of respondents reported using productivity data to assess the success of those efforts. This begs the question: How are the others going to know if they have addressed the driving forces behind their inclusion program’s inception? Based on supplemental interviews and focus groups done for the i4cp study, the answer is either the business case for inclusion has yet to be made in those organizations or the case was made based on inspirational definitions and drivers for the inclusion initiative that don’t lend themselves to measurement.

Results show high-performing companies are more likely to use metrics that support business drivers for their inclusion programs. For example, the aforementioned gap between high- and low-performing organizations on the use of productivity measures relates back to data showing high performers are more likely to say increased productivity and engagement are drivers for their inclusion strategy — 72 percent compared to 56 percent among their lower-performing peers.

Evidence of the relationship between market performance scores and the drivers, definitions and metrics used to measure success came primarily from the study data, while further insight on weighing multiple metrics to build a more comprehensive inclusion picture was derived from interviews and focus groups. Most practitioners interviewed also confirmed that inclusion definitions and drivers that are more business critical and less inspirational make for more concrete success metrics.

If the driver for inclusion programs is to support ongoing diversity initiatives, diversity metrics will weigh more heavily on determinations of success. Metrics such as employee resource group participation and retention of diverse employees may become more prominent in this measure of inclusion. If inclusion is defined as a separate talent management initiative, like engagement, then engagement survey measures or retention rates will produce a more accurate measure of success.

Building a Bigger Inclusion Picture 
The i4cp study showed higher performers are three times more likely to devote the necessary resources to conducting linkage analyses between inclusion and overall enterprise productivity.

This added rigor in connecting metrics to business drivers and having those metrics demonstrate business impact is an EBHR focal point.

EBHR has surged in importance as workforces strive to create leaner functions that demonstrate the efficiencies gauged by standard metrics, and display effectiveness demonstrated in strategically aligned, qualitative metrics tied to organization goals.

This evidence-based approach is a measurement philosophy and approach that is increasingly being applied to all talent management processes, such as recruitment — quality of hire; retention — quality of attrition; and on-boarding, development and succession — quality of movement.

However, the concept and definition of inclusion can make finding effectiveness metrics tricky. The inclusiveness of an organization’s culture is difficult to pin down. How can a diversity executive report to the CEO or board of directors that the organization is now 5 percent more inclusive than the year before and quantify what effect that statement has on the bottom line? In the absence of direct measures, it’s often necessary to rely on indirect observations to determine if goals are being achieved. Metrics such as engagement scores, retention rates, productivity measures and diversity representation at various tiers often must be combined to create a broader picture of an inclusion strategy’s impact on the overall organizational culture.

While the majority of organizations combine inclusion and diversity under the same umbrella — 47 percent — it’s not unusual for inclusion to be considered a talent management initiative — 19 percent. Several of the organizations contacted for this study likened inclusion more to engagement, reinforcing the finding of engagement surveys as the most commonly used measure of inclusion success, used by 41 percent of all companies surveyed.

But it was productivity data and participation in third-party employer of choice lists in which the largest gap between high- and low-performers can be seen — the latter showed a 25 percent usage rate among higher performers compared with only 11 percent adoption among lower performers.

Study practitioners were opinionated about participation in third-party rankings. While participation speaks to organizational adoption of inclusion to bolster talent acquisition and the employment brand — both of which rank as top drivers for inclusion initiatives — not all practitioners were convinced of this practice’s ROI.

Almost half of the supplemental interview and focus group subjects said there were negative aspects connected to participation in third-party rankings. Though most saw the benefits in public exposure and external benchmarks, they acknowledged that a lot of time and resources were required in the application and data collection processes. So, although higher performers are more likely to use these lists as an inclusion metric — and are more likely to have something to publicly crow about — the resources required make it a choice that deserves careful consideration to ensure it aligns with larger organizational goals and strategies.

Surveys Determine Success 
Although analysis of productivity data and participation in third-party employer of choice lists are differentiators, survey results indicate a majority of respondents use other measures to demonstrate inclusion success as well. Roughly 63 percent of high performers report using the measurement techniques queried in Figure 3 at least to some extent, while more than 29 percent report using them to a high or very high extent.

This shows these organizations are looking for a way to demonstrate that inclusion makes a difference, and it speaks to the difficulty in trying to quantify inclusion. It also backs up data that shows higher performers are trying harder than others to quantify the inclusion advantage. Almost a third of high performers reported their organizations attempt to quantify the effects of their inclusion strategies and initiatives to a high or very high extent, while no low-performing organizations reported attempting to quantify the effects of inclusion to a very high extent and only 16 percent reported doing so to a high extent.

Most organizations recognize a diverse workforce alone cannot improve organizational performance. Inclusion is the key to fully leverage the advantages of diversity. The Inclusion Measurement study found 69 percent of high-performing organizations used inclusion as a diversity or talent management strategy, as well as 58.5 percent of low-performing organizations. But it’s the higher performers’ predilection for measurement that allows them to gauge the effects of their efforts in a way that supports the drive to become and remain high performers.

To measure inclusion, diversity executives should:

• Review the current definition and drivers behind the organization’s inclusion initiative and make sure they describe the desired cultural effect as well as the employee behaviors expected to achieve the desired results. Establishing a definition for inclusion that spells out some measurable elements and is understood across the entire organization can maintain focus and help develop metrics.

• Align the organization’s inclusion definition and drivers with strategic organizational goals. If the organization needs to improve its talent pipeline, weave inclusion initiatives into existing talent management functions. If increasing innovation is critical, promote inclusion programs that will facilitate knowledge sharing. Both of these goals may require raising awareness of the employment brand by competing to become an employer of choice.

• As organizational goals help to develop drivers, and drivers help to develop programs to support those goals, make sure to measure to ensure programs are having an effect. Select or develop metrics that circle back to align with the original drivers. By carefully articulating outcomes, organizations can define measures that assess the impact of their inclusion strategy. For a concept as ephemeral as inclusion, multiple qualitative, quantitative, effectiveness and efficiency metrics may be required to imply success or indicate the need for a course change.

Eric Davis is senior editor for Institute for Corporate Productivity. He can be reached at editor@diversity-executive.com.


http://diversity-executive.com/articles/view/define-the-intangible/print:1

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