Diversity and Inclusion: Strategy Scorecard with KPIs

Diverse teams with engaged talents are more innovative, understand customer needs better, and drive financial results. Let’s discuss how to combine various ideas about diversity and inclusion into a coherent strategy.

How diversity is driving inclusion

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Key topics of the article:

What Are Diversity and Inclusion?

Let’s start with a general introduction to the idea of Diversity and Inclusion (D&I).

Diversity = Representation

What is diversity? A short answer:

Diversity is representation

When we are talking about a diversity of talents (internal diversity), we are talking about the representation of different groups of population in the workforce of an organization.

When we are talking about a diversity of partners (external diversity), we want to have different types of companies among our partners.

For example, for the procurement scorecard, we agreed that the success of the procurement department depends on the diversity of skills (internal diversity) and on the diversity of suppliers (external diversity).

Diversity is representation

How to Define the Dimensions of Diversity

For example, we can focus the measurement of diversity on one of the following dimensions:

  • Gender
  • Education
  • Nationality
  • Culture
  • Language

How to select these dimensions? Some will be dictated by the local regulations (see the part about quotas), some will be part of a reporting framework commonly used in the company’s business domain.

Align Perspectives of Diversity with Strategy

If an organization wants to leverage the benefits of diversity and inclusion, it needs to align diversity dimensions with their strategy.

For example:

  • A company that targets the Brazilian market will benefit from hiring employees who know local cultural traditions and language
  • A company that wants to be prepared for future social trends might want to focus on the diversity of job models (remote employment, part time, etc.)

Inclusion: To Feel Like Part of the Team

What is inclusion then? First of all, it is a feeling. It is subjective and less tangible than diversity.

Diversion does not work without inclusion

Inclusion is a feeling of:

  • Being part of the team
  • Being heard
  • Being respected and valued
  • Having equal political power

Inclusion eventually leads to more tangible employee engagement.

Diversity Doesn’t Work Without Inclusion

Diversity doesn’t make a lot of sense without inclusion:

The best talents that don’t feel included will not contribute and won’t’ stay in the organization for a long time.

An organization that has only diversity metrics on their dashboard follows one of the bad practices in performance measurement. A pool of talents seems like a diverse one, but in reality, the organization simply makes the numbers look good without making any tangible impact.

Why Are Diversity and Inclusion Important?

The diversity of talents results in a diversity of ideas. If those ideas are taken seriously (=inclusion), an organization will enjoy some performance improvements.

1. Retaining Best Talents

Being an inclusive organization is no longer a proactive initiative. The labour market is becoming more diverse[1]. Organizations that have mastered diversity and inclusion have a better chance of attracting and retaining the best talents. In their turn, diverse talents can become an inimitable competitive advantage for a company.

Diversity and inclusion leads to performance improvements

2. Diving Innovations

As we discussed before:

Diversity in ideas is a leading factor for innovations.

An intuitive hypothesis is that a more diverse talent pool will approach the challenges of the organization from different, sometimes unexpected perspectives.

Will those ideas be heard? Inclusion ensures that those ideas will find their way in the innovation process (will be heard -> will be valued -> will be tested and prototyped).

Empirical studies support this hypothesis. See, for example, a study by Catalyst[2] or the report summarized in this HBR article[3].

3. Better Understanding Customers

Having a more diverse workforce is a leading factor for better understanding the needs of different groups of customers.

4. Better Financial Performance

The correlation between the financial bottom line and D&I was demonstrated empirically. Check out these two reports by McKinsey’s:

  • “Why diversity matters”[4]

and

  • “Delivering through diversity”[5]

While there is a correlation, be careful setting the targets for the D&I KPIs – as the 2018 report underlines, the correlation doesn’t yet mean causality. What is obvious is that the economic sustainability of an organization can be predicted on their D&I achievements.

A Strategy Template with KPIs for Diversity and Inclusion

Let’s discuss a strategy to improve Diversity and Inclusion in an organization. When defining any strategy, we need to understand the causality, find success factors, and understand better expected outcomes. I’ll use the Balanced Scorecard as a framework to articulate the D&I strategy.

Strategy map for diversity and inclusion

Diversity and Inclusion Strategy Scorecard
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We will follow this plan:

    • Strategy attributes. Getting mission and core values ready.
    • Finance perspective of the Balanced Scorecard Stakeholders perspective. Improvement of the financial bottom line or satisfying the needs of the stakeholders is the ultimate goal.
    • Customer perspective of the Balanced Scorecard Customer perspective. To improve the financial performance, we will need to better satisfy the needs of internal and external customers
    • Internal processes perspective of the Balanced Scorecard Internal perspective. To better satisfy the needs of the customers, we will need to implement the culture of diversity and inclusion in all processes of the organization.
    • Learning and growth perspective of the Balanced Scorecard Learning and growth perspective. To achieve internal changes, we will need to focus on the right skills and create an appropriate infrastructure.

Revise Core Values and Mission

A classical strategic planning process starts with a definition of strategy attributes. It’s a good idea to revise a company’s most important strategic statements, such as mission, vision, and core values.

Make sure the diversity and inclusion are actually among your values!

For example, one of our diversity-related values is “hire talents globally.”

An example of mission, vision, values - BSC Designer

Diversity and Inclusion Strategy Scorecard
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As for the mission statement, on the D&I strategy scorecard, you can reuse the company’s global mission statement or formulate something more specific and more inspiring for your team, for example:

  • Drive innovations by providing a diverse and inclusive workplace

Stakeholders (Financial) Perspective

As we discussed above, studies confirm that there is a correlation between the D&I and the financial results. To reflect this idea on the strategy map, let’s use a generic financial goal, for example:

  • Improve financial bottom line

An alternative approach is to quantify the expectations of the stakeholders (like we did on the non-profit scorecard for community interests) and focus on the value created.

Many organizations prefer to report their achievements according to the Sustainable Development Goals 2030 by the UN. There are at least three goals that resonate with the D&I initiatives:

  • Goal 5 – Gender equality
  • Goal 8 – Decent work and economic growth
  • Goal 10 – Reduced inequalities

Before, we were talking about the way to align an organization’s strategy with the SDGS goals.

Customer Perspective

In the customer perspective, we traditionally map the needs of the customers. In this case, we can map:

  • Expectations of external customers. Satisfying the needs of diverse groups of end users.
  • Expectations of internal customers. Satisfying the need of diverse partners and suppliers.

How to quantify these needs? It depends on the type of business you are managing.

For example, for the external customers, we can take some marketing metrics:

  • Qualified leads from targeted demographic groups
  • Leads to sales conversion for targeted demographic groups, %

For internal customers, we can align the D&I scorecard with, for example, a procurement scorecard by linking to these indicators:

  • Supplier satisfaction, %
  • Supplied compliance index, %

Internal Perspective

Looking at the expected benefits of diverse and inclusive business environments, we can formulate these goals:

  • Diversity and inclusion
  • Transparency of hiring
  • Effective innovations

Let’s start with the indicators for inclusion.

Internal perspective of diversity and inclusion strategy

Diversity and Inclusion Strategy Scorecard
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Metrics for Diversity

We discussed how to define the dimensions for diversity. Follow those ideas to have a long list of metrics for diversity.

For this example, we can focus on:

  • Gender diversity, %
  • Education diversity, %
  • Cultural diversity, %
Track Diversity of End-Users

As a part of tracking external diversity, track the diversity of your customers. The findings of such study can reveal that some important customer groups don’t have an internal “advocate” in your organization.

For the organization, it means an opportunity to adjust internal diversity and serve those customers better.

I’ll add this as an initiative for the “Diversity and Inclusion” goal:

  • Analyze diversity among end-user
Targets for Diversity Metrics

How to set the target values for the diversity metrics? It depends on the existing strategy of the organization. For example, if you are targeting the Brazilian market, then the diversity targets will be focused on the talents with a background in Brazilian culture and those who are fluent in the Portuguese language.

If there is no specific strategic goal behind diversity, then use demographic and other statistical data to make sure that the diversity targets reflect equal representation.

Investing in Social Development to Achieve Diversity

Another important idea is that the diversity targets should be realistic. The natural limitation, in this case, is the number of diverse talents with needed skills. That’s the reason why companies like Google are not limiting their diversity target to the existing pool of talents but are investing in social and educational initiatives, like STEM accessibility for underserved communities.

Using Employee Surveys to Measure Inclusion

While there are a lot of diversity (representation) metrics, the inclusion part is hard to measure. The reason is that inclusion is a feeling, and as any feeling, it is hard to quantify it objectively.

One way to measure inclusion is to use surveys. A metric in this case can be formulated as:

  • Employee inclusion index, %. As measured according to the anonymous employee surveys.

While this approach gives some numbers, it is far from being perfect. Even properly organized surveys will not show an objective picture because of survivorship bias.

Using Career Path to Measure Inclusion

Another measurement strategy is based on the hypothesis that inclusive companies are able to retain diverse talents for a longer time.

This assumption makes sense:

A company can ensure diversity (for example, by the quotas), but what actually matters is if people stay and get promoted in the organization.

With these ideas in mind, we can define another proxy metric of inclusion:

  • Average length of employment (tenure) for diverse talent. The number of years a diverse talent stays in the company compared to the company’s average tenure.

With this metric, we could quickly find some extreme сases. Still, its application range is limited, as talents stay in an organization for different reasons, and the time lag between hiring and leaving an organization might be several years.

An example of a dashboard for Diversity and Inclusion

Here is another proxy metric for inclusion:

  • Promotion rate for diverse talents, % The percent of talents promoted with a cut by diversity dimensions.

To understand the effectiveness of the D&I strategy, we are interested in seeing how this metric will progress over time. To automate this, we can set the “Update interval” to quarters so that the software reminds us about upcoming update time.

Another idea in the context of automation is to visualize such indicators on the performance dashboards.

Similar to average length of employment, we can measure (all analyzed by diversity dimensions):

  • Job function
  • Seniority
  • Salary and bonuses

Improve Transparency of Hiring Process

What about measuring the effectiveness of HR in the context of diversity and inclusion?

Some HR experts suggest that the job posts need to be adjusted to be more diversity-friendly:

  • A typical suggestion is to minimize the list of the qualification requirements as presumably, men apply for a job when they meet 60% of the requirements, while women apply only if they meet all of the requirements.

Another point of view[6] is that this bias doesn’t actually exist, and what employers should really do is to inform better about the hiring process.

What is clear is that the hiring process needs to be adjusted according to the D&I strategy. Making the hiring process less bureaucratized and more transparent will certainly lead to a better diversity of the candidates. Also, making the decision boards more diverse, like we discuss below, will help to create and maintain a more inclusive workspace.

Measuring Innovations

Diversity and Inclusion are often named as a driver factor of innovations. To measure this goal, we can use metrics from the innovations scorecard:

  • Innovation engagement and sponsorship index, %
  • Diversity of ideas sources, %

If you are looking for some more light-weight innovation framework, check out my recommendations in the “Agile Scorecard” article. Instead of complex metrics, focus on just one:

  • The number of experiments

Instead of a formal innovation pipeline, create an innovation sandbox where members of your team can try new ideas without the need to rationalize their potential value.

Leverage diversity and inclusion by enabling innovations sandbox

Diversity and Inclusion Strategy Scorecard
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Let’s add to the strategy map:

  • Initiative: Leverage diverse talent pool in the context of innovations.
  • Action plan: Create a sandbox for testing new ideas without bureaucracy and rationalization.

Learning and Infrastructure

In this perspective, we’ll talk about the skills and the infrastructure needed to make the diversity and inclusion strategy possible.

Adjust Governance and Leadership with D&I in Mind

Over the last decade, many governments introduced[7] mandatory or voluntary diversity quotas for the members of the board.

One of the strategies behind quotas is about solving D&I problems from the top:

  • A more diverse board is expected to have a better power balance
  • and will eventually lead to better diversity and inclusion on all levels of the organization.

The acceptance of quotas varies across the countries with actual inclusion being one of the main challenges. We need to wait another decade to see how these ideas will be implemented in practice.

What is obvious now is that organizations that aim for diversity and inclusion should revise their processes of board recruitment/succession planning.

On our strategy map, we can formulate this hypothesis as:

  • Adjust governance to support D&I

Diversity of corporate governance

Diversity and Inclusion Strategy Scorecard
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With this idea in mind, we can define some leadership-related keystones and focus on these indicators:

  • Representation in the board of directors, %. Diversity of board members.
  • Representation in the hiring roles, %. Diverse talents within the hiring role (doing interviews) as a percentage of total hiring roles.
  • Representation in the leadership positions, %. Diverse talents within leadership positions as a percentage of total leadership positions.

Training on Diversity and Inclusion

There are a lot of training and workshop products offered on the market. Training on:

  • Inclusive leadership
  • Inclusive culture
  • Unconscious bias

The training goal for the strategy map can be formulated as:

  • Diversity and Inclusion Training

In terms of performance measurement, the efforts part can be quantified and measured by:

  • Training efforts (budget, time)
  • Training participation level, %

Diversity and Inclusion training goal in the Learning and growth perspective

Diversity and Inclusion Strategy Scorecard
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As for the results, it’s interesting to look beyond the basic test scores and analyze if the actual behaviour patterns have changed. The metrics can be:

  • The number of complaints reported
  • D&I compliance rate, %

What’s Next?

Use D&I Template

The strategy scorecard that we discussed above is just a starting point for your own strategy.

Use diversity and inclusion strategy template as a starting point for your own strategy

Diversity and Inclusion Strategy Scorecard
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Copy it to your free account at BSC Designer and use it as a template:

  • Add more goals specific for your organization
  • Add relevant initiatives with budgets, timelines, and persons responsible (you can find many interesting ideas here[8])
  • Create dashboards and customize performance reports
  • Link D&I scorecard with other scorecards, like scorecards for corporate governance or innovations.

D&I is a Marathon

Diversity and Inclusion is not a one-time initiative. In the best case, it becomes a part of the company’s culture. In the context of a strategy scorecard, it means that all indicators should be updated and analyzed periodically.

Users of BSC Designer will find the “Update interval” feature in the “Initiatives” dialog for this purpose.

Cascading of D&I Strategy

D&I is not just the job of the CEO or Chief Diversity Officer – anyone in the organization should be accountable for building and supporting proper inclusive culture.

Above, we discussed some ideas applicable for the Talent Management department. It makes a lot of sense as the diversity part of the equation is what the HR department can influence directly.

Strategy cascading

As for the inclusion, HR contributes in the form of training and better representation of minorities on the management roles, but the final results depend on people from other departments that will or will not create a feeling of inclusion for their colleagues.

In this sense, it’s not enough to define the high-level D&I strategy; the company’s management needs to understand how defined goals can be cascaded throughout the organization.

Conclusion

We’ve discussed some KPIs for diversity and inclusion, we also talked about certain strategies that an organization can follow to achieve better diversity and make sure that it is converted into actual inclusion.

While we are now equipped with KPIs and a strategy map, it always makes sense to put those business tools aside and ask a simple question:

Do the indicators and the initiatives that we introduced actually create a positive change that we expected?

The answer to this question can be a good starting point to improve things.

What's next?

  • Access templates. Sign-up with a free plan at BSC Designer for immediate access to 28 scorecard templates, including Diversity and Inclusion Strategy Scorecard discussed in this article.
  • Master skills. Check out free video tutorial for the Balanced Scorecard. Master your strategy planning and execution skills with Strategy Execution training.
  • Automate. Learn what Balanced Scorecard software is and how it can make your life easier by automating strategy execution, KPIs, and strategy maps.

More Examples of the Balanced Scorecard

Customer service strategy map with KPIs
8 STEPS To Create a Strategy Map By BSC Designer
Corporate Governance Dashboard with KPIs

References

  1. ^ The 2016 Global Talent Trends, Mercer, 2016
  2. ^ Inclusive Leadership: The View From Six Countries. Jeanine Prime and Elizabeth R. Salib, Catalyst, 2014.
  3. ^ How Diversity Can Drive Innovation, Sylvia Ann Hewlett , Melinda Marshall and Laura Sherbin, From the December 2013 Issue
  4. ^ Why diversity matters, Vivian Hunt, Dennis Layton, and Sara Prince, McKinsey & Company, 2015
  5. ^ Delivering through diversity, Vivian Hunt, Lareina Yee, Sara Prince, and Sundiatu Dixon-Fyle, McKinsey & Company, 2018
  6. ^ Why Women Don’t Apply for Jobs Unless They’re 100% Qualified, Tara Sophia Mohr, Harvard Business Review, 2014
  7. ^ What Board Directors Really Think of Gender Quotas, Margarethe Wiersema, Marie Louise Mors, Harvard Business Review, 2016
  8. ^ 6 Steps for Building an Inclusive Workplace, Kathy Gurchiek, SHRM, 2018

Expert in Strategy Scorecards | Trainer | Author

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