How Diversity and Inclusion Programs Drive Pay Equity

Diversity and inclusion programs are not novel ideas. Companies have incorporated D&I programs into their culture for many years.  However, according to McKinsey,[1] although these programs are widespread, progress in these areas has been slow, primarily because many organizations lack of relevant policies and procedures.[2] 

Although diversity and inclusion overlap in purpose and process, they are not the same. Diversity is understood to represent “human demographic differences,”[3] such as race, gender, religion, age, sexual orientation, educational background, family composition, and perspectives, to name a few. 

Inclusion, on the other hand, refers “to a cultural and environmental feeling of belonging,”[4] which is much more nuanced than diversity. When framing policies and procedures for D&I programs, leaders must not only determine their organization’s current diversity but also assess whether employees feel respected, heard, valued, and encouraged.

The Pain Points

In a recent Boston Consulting Group study, as cited in the Harvard Business Review, 96-98% of 1,000+ employee companies across 14 countries have D&I programs; however, 75% of employees in underrepresented groups—such as minorities, women, and LGBTQ employees—do not feel that “they’ve personally benefitted from their companies’ diversity and inclusion programs.”[5]

Additionally, 50% of all underrepresented employees stated that they experienced bias on a day-to-day basis, where 50% said that they don’t believe that their employers have the appropriate mechanisms in place making sure that major company or HR decisions, such as who receives promotions, are free from bias.[6]

Let’s dig deeper.  Inclusive leaders set the stage for—well—inclusivity. According to Harvard Business Review,[7] when leaders encourage employees to speak up, empowering them to make decisions; ensuring that the environment is safe to propose new ideas; receiving advice and giving actionable feedback; and sharing in the success with their employees instead of taking sole credit for achievements, employees feel included and respected.  However, when leaders don’t have these attributes, 46% of employees don’t feel like they can express their thoughts or views where 37% don’t feel like they are heard or recognized.[8]

Understanding the Issue

Creating a D&I program won’t yield the desired results unless leadership understands diversity and inclusion as separate yet equal parts of the goal. Where most leaders understand that diversity equals representation, without inclusion, “the crucial connections that attract diverse talent, encourage their participation, foster innovation, and lead to business growth won’t happen,” according to Harvard Business Journal.[9]

Understanding diversity is a bit easier.  It’s a headcount.  However, with inclusion being more subtle, leaders will have to engage with employees to quantify inclusion further, as inclusion includes both quantitative and qualitative information.[10] Get feedback on inclusion from employees through focus groups or one-on-one interviews. Ask about sponsorship, career paths, and the ability to express their authentic selves at work.[11] Leadership must understand employees’ narratives along with the numbers of diversity to get the full picture.

Additionally, leadership should be involved from the start.  According to Harvard Business Journal, “[i]nvolving managers in the [D&I program] design process can increase buy-in and smooth implementation, making interventions more sustainable and long-lasting.”[12] Simply, diversity and inclusion policies and procedures must “reflect the tone and values set at the top level,” according to Gallup.[13]

Diverse and Inclusive Organizations Perform Better Than Those That Aren’t

Recent studies continue to prove that diverse and inclusive organizations perform better than those that don’t. For example, according to a recent study by McKinsey, “companies in the top quartile of gender diversity on executive teams were 25 percent more likely to experience above-average profitability than peer companies in the fourth quartile.”[14] Further, companies in the top quartile of in racial and cultural diversity outperformed those in the fourth quartile by 36% in profitability than those in the bottom quartile.[15]

However, “promoting diversity does not ensure a culture of inclusion.”[16] An inclusive culture is one that may be more challenging to achieve because it is part of the experience, is less tangible and more difficult to measure than diversity.

To create a program with both diversity and inclusion goals, employers need to take bold steps.

Next Steps to Implement and Document

So, how can companies take the above solutions and convert them into next steps for implementation? Here are some suggestions for creating sound and effective D&I policies and procedures:

  • Be sure to “enable equality of opportunity through fairness and transparency,”[18] by documenting clear career paths, sponsorship of employees, practical training and education, removal of bias from employment decisions, and robust anti-discrimination policies.[19]
  • Further, incorporate into your policies and procedures what matters most to your employees.  Is it giving your employees the necessary tools to balance work and family life, such as health coverage, childcare assistance, or flexibility?  Or Is it understanding career advancement? Perhaps it is being involved in hiring choices or serving on leadership committees? By understanding what is most important to your employees, you can provide the tools for them to feel included on a day-to-day basis.[20]
  • Continually test your technology for bias and discrimination, confirming that your systems are “built on data that is fair to socioeconomic groups—such as different racial groups—in the aggregate and that [your technology] is relevant and predictive for success for the particular role being evaluated,”[21] for example.  By doing so, leadership can further understand what’s working and what’s not working within their technological applications. 
  • Finally, according to Harvard Business Review, employers must “set goals, collect data, and examine change over time and in comparison to other organizations.”[22] Through the collection of data as it applies to established D&I goals, sharing this information with key stakeholders will increase transparency and accountability overall. 

[1] “Diversity Wins,” McKinsey & Company, May 2020. https://www.mckinsey.com/featured-insights/diversity-and-inclusion/diversity-wins-how-inclusion-matters

[2] Sherbin, Laura, Ripa, Rashid. “Diversity Doesn’t Stick Without Inclusion.” Harvard Business Review, Feb. 1, 2017. https://hbr.org/2017/02/diversity-doesnt-stick-without-inclusion

[3] [4] Washington, Ella and Camille Patrick. “3 Requirements for a Diverse and Inclusive Culture.” Gallup, Sept. 17, 2018. https://www.gallup.com/workplace/242138/requirements-diverse-inclusive-culture.aspx

[5] [6] Krentz, Matt. “Survery:  What Diversity and Inclusion Policies Do Employees Actually Want?” Harvard Business Review, Feb. 5, 2019. https://hbr.org/2019/02/survey-what-diversity-and-inclusion-policies-do-employees-actually-want

[7] [8] [9] Sherbin, Laura, Ripa, Rashid. “Diversity Doesn’t Stick Without Inclusion.” Harvard Business Review, Feb. 1, 2017. https://hbr.org/2017/02/diversity-doesnt-stick-without-inclusion

[10] Washington, Ella and Camille Patrick. “3 Requirements for a Diverse and Inclusive Culture.” Gallup, Sept. 17, 2018. https://www.gallup.com/workplace/242138/requirements-diverse-inclusive-culture.aspx

[11] Sherbin, Laura, Ripa, Rashid. “Diversity Doesn’t Stick Without Inclusion.” Harvard Business Review, Feb. 1, 2017. https://hbr.org/2017/02/diversity-doesnt-stick-without-inclusion

[12] [13] Pedulla, David. “Diversity and Inclusion Efforts That Really Work.” Harvard Business Review, May 12, 2020. https://hbr.org/2019/02/survey-what-diversity-and-inclusion-policies-do-employees-actually-want

[14] [15] [16] [17] [18]“Diversity Wins,” McKinsey & Company, May 2020. https://www.mckinsey.com/featured-insights/diversity-and-inclusion/diversity-wins-how-inclusion-matters

[19] [20] Krentz, Matt. “Survery:  What Diversity and Inclusion Policies Do Employees Actually Want?” Harvard Business Review, Feb. 5, 2019. https://hbr.org/2019/02/survey-what-diversity-and-inclusion-policies-do-employees-actually-want

[21] [22] Pedulla, David. “Diversity and Inclusion Efforts That Really Work.” Harvard Business Review, May 12, 2020. https://hbr.org/2019/02/survey-what-diversity-and-inclusion-policies-do-employees-actually-want

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