Speech---The Business Case for Diversity

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					The Business Case: Why Diversity and Inclusion
                       are Good for Business

                                              December, 2009

             Dr. Shirley Davis, Ph.D.
      Director, Diversity and Inclusion Initiatives
      Society for Human Resource Management
                   Today’s Discussion

  What is the
“Business Case
 for Diversity”?
                          Why is it
                      important to build
                        the Business
                           Case?            How one can
                                            leverage the
                                           Business Case
                                              inside an


•   Never has the business case for Diversity & Inclusion been
    more important than now given this economic, global, and
    political climate.
•   Diversity & Inclusion initiatives are being re-examined,
    reprioritized, downsized, and in some instances dismantled
•   In order for D & I initiatives to be sustainable during turbulent
    times, they must show relevance, be fully integrated into the
    business strategy, and demonstrate measurable results.
•   What is required is a robust and comprehensive Strategic
    Diversity Management Plan that addresses all relevant areas
    of the business.

          Definition of Diversity

       Our “concept of diversity in the workplace has two fundamentals.
       The first is creating a workplace that reflects the diversity of the
       general population from which we draw our people and to whom we
       sell our products. The second is creating an environment that
       celebrates people's differences and, in doing so, inspires innovative
       ideas and solutions.”

       We see diversity as encompassing “not only obvious human
       differences such as age, gender, race and culture, but also more
       subtle dimensions like work style, life style, physical capacity and
       characteristics. In an organizational context, diversity is found in the
       mix of differences we collectively create, rather than in the
       uniqueness of any individual group.”

How is diversity defined at your organization?
        What is the role of inclusion?
                             SHRM’s Definition of Diversity

       Workplace Diversity is defined as the collective mixture of differences and
       similarities that includes for example, individual and organizational
       characteristics, values, beliefs, experiences, backgrounds, preferences, and
       behaviors. A few examples include:

Diversity                               Race                              Physical
 Traits                                                                  Attributes
                             Gender         Behaviors
             Physical Abilities/Qualities               Religion        Sexual Orientation
                                        Level in Organization           Personality
              Military Experience
                                     Work Background Culture          Values
                   Geographic Location
                                              Beliefs Thinking Styles Marital Status
 Invisible                Functional Specialty Smoker/Non smoker
                        Education                          Communication Style
  Traits                             Parental Status   Native born/non native
                         Socio-economic Status
         SHRM’s Definition of Inclusion

At SHRM, Inclusion is ……

…. the achievement of a work environment in
which all individuals are treated fairly and
respectfully; have equal access to
opportunities and resources; and can
contribute fully toward an organization’s
                      Why Focus on Diversity

• There are many reasons why an organization might/
  should focus on Diversity.
• Usually, these fall under two broad themes: the
  Values Case and the Business Case.

            Values Case                           Business Case
“It’s the right thing to do, and will   “It’s the smart thing to do, and will
make our people happier.”               improve our bottom line.”

• Both the Values Case and the Business Case are
  important and necessary; they do not contradict
  each other, but rather complement each other.

               The Business Case for Diversity and Inclusion

                       Employee                   Employee Retention
                      Satisfaction &              Productivity & Quality
                      Commitment                  Products / Services

Fair and Inclusive
  Environment                   Organizational
   Increased                Loyalty
   Revenue &                   1. Retention
   Profitability               2. Repeat Sales
                               3. Referrals
 The Business Case for Diversity (cont’d)

From Current     To Diversity Outcomes   To Business Outcomes
   Workforce     Workforce with Best     Quality Solutions

   Workplace     Inclusive Work          Increased Performance
                 Environment             & Innovation

   Community     Positive Reputation     New and Emerging
                 In all Communities      Markets, Services,

   Marketplace   Customer/Member         Customer/Member and
                 Satisfaction            Employee Attraction
                                         and Retention
   Suppliers     Mutually Beneficial     Potential gains in
                 Partnership             service, quality and
                                         cost savings

The Business Case: Workforce Demographics

    Who Are The New Entrants to the Workforce?

       The Business Case: Workforce Demographics

      75% of the new entrants to the workforce are women and people of

      Changing family patterns in the United States (single parents, dual
      income households, growth in elder care & child care) will bring new

      For the first time, the number of workers entering the workforce will
      not replace the skills that will be exiting, thus resulting in a skills

      By 2050 Asians, Hispanics, African Americans and American Indians
      to account for 47.2% of the population.

      By 2012, the Hispanic labor force is expected to reach 23.8 million.

      The number of women in the labor force will grow by 14.3 %
      compared to 10% for men.

      10% of the workforce is gay or lesbian.

      It is estimated that 1 in 3 people has a disability.

Source: Bureau of Labor Statistics and Census Data 2004; CamMasten Communications
The Business Case: Workforce Demographics

Challenges a More Diverse Workforce Brings

The Business Case: Workforce Demographics

Opportunities a More Diverse Workforce Brings

     The Business Case for Diversity (cont’d)

     Diversity & Inclusion helps the business’s bottom line in the following

     1.       Greater adaptability and flexibility in a rapidly changing
              marketplace (INNOVATION)
     2.       Attracting and retaining the best talent
     3.       Reducing costs associated with turnover, absenteeism
              and low productivity
     4.       Return on investment--Increased sales and profits;
              greater market share
     5.       Mitigate and minimize legal risks

Source: Lockwood, N., June 2005, “Workplace Diversity: Leveraging the Power of Difference for Competitive Advantage”, Research
Quarterly. Society for Human Resource Management: www.shrm.org/hrresources
1. Greater flexibility and adaptability

• The workforce continues to change demographically
  and globally.
• Organizations need to be able to flex and adapt in
  times of increasing complexity and change.
   > Technology

   > Policies/Processes          Innovation
   > Products/Services

• Customer Service: Diverse organizations are better
  able to serve a diverse customer/client base.

1. Greater flexibility and adaptability

What Chief Diversity Officers have to say about innovation:

    > Because we operate in a global economy, we need to find
        answers in different places than we did in the past.
    > Smart companies are still bringing in new talent, even in cost-
        cutting times. They need the innovation.
    > Diversity enables us to create content and ideas that
        differentiate us in the marketplace.
    > Sustainable change needs systems that imbed innovation in
        the process.

    Source: DiversityInc. May/June 2009
    2. Attracting and Retaining the Best Talent (cont’d)

    Finding GREAT talent is seen as the most important management
    challenge facing business executives in the next 5 years

       Increasing number
        of markets served

            Increasing size               19
                of company

      Greater competitive

              Finding talent                        31

Source: McKinsey & Company
2. Attracting and Retaining the Best Talent (cont’d)

• Building leadership capability starts with creating a
  culture that makes employees want to stay
• Ensuring that all employees have full and equal access
  to opportunities
• Implementing leading-edge talent management
  programs such as:
   > Mentoring
   > Cross-functional development assignments
   > Job rotations
   > Special assignments
   > Career pathing
   > Skills inventories
   > Succession planning
       • 55% of employers are already doing succession planning

 3. Turnover, Absenteeism, Low Productivity

  When an employee perceives that a company
  and its leadership are committed to a diverse and
  fair workplace, they are:

  • More likely to stay with that company
  • More likely to recommend their company to others
  • Less likely to have experienced discrimination
  • Less likely to have missed days at work
  • More engaged in their work

Source: Gallup Organization, “Civil Rights in the Workplace Survey,” 2005

  3. Turnover, Absenteeism, Low Productivity (cont’d)

  • Each year, more than 2 million people voluntarily leave
    organizations due to perceived unfairness (cumulative
    comments/jokes, unfair policies, perceived invisibility)
  • This trend costs U.S. corporation $64 billion each year
  • This figure is nearly equivalent to the combined revenues of
    Google, Goldman Sachs, Starbucks, and Amazon.com, and
    does not include costs associated with litigation or loss of

Source: Level Playing Field Institute, “The Corporate Leavers Survey,” 2007, LPFI.org

4. Return on Investment

                                 10 Things That Keep HR/Diversity Professionals Up at Night
We must speak in terms of business outcomes. For example:

•        Increased Revenues; Profitability
•        Increased Market Share; Market Expansion
•        Innovative/Quality Solutions/Product Development
•        Stock Price Performance
•        Return on Investment
•        Customer/Member Satisfaction & Retention Results
•        Competitive Index
•        Productivity
•        Process/Product Improvements

Note: We should not try to convince them to speak our language, we have to speak theirs. When
we continue to speak only in terms of HR outcomes we continue to have to sell/justify our value.
    4. Return on Investment—greater market share

    Customer acquisition and improved service may be the most
    compelling and least leveraged business case of them all. Consider
    the following:
•     Women
       > By 2010, women are expected to control ________ dollars, or ____% of the
         country’s wealth.
       > 60% of U.S. and European university graduates are women.
       > 80% of consumer goods purchasing decisions made by women in North America.

•     African-American market
       > Estimated _________ in buying power in 2007, growing by 127% between 1990
          and 2003

•     Hispanic/Latino market
       > Purchasing power in the U.S. is __________ and projected to reach ________ by

•     Asian American market
       > Buying power is estimated at _____________

•     Native American market
       > $48 billion in discretionary spending power

U.S. Census Bureau, Business Week, and Selig Center for Economic Growth, University of Georgia   22
    4. Return on Investment—greater market share

•      Native American market
        > $48 billion in discretionary spending power

•      People with Disabilities
        > $220 billion in discretionary spending power

•      GLBT market
        > Total buying power of the U.S. gay, lesbian, bisexual and
          transgender adult population is estimated to be $641 billion.

•      Traditionalist/Baby Boomer market
        > $1.7 Trillion in buying power

    U.S. Census Bureau, Business Week, and Selig Center for Economic Growth, University of Georgia

   4. Return on Investment--increased sales and profits

     1.     Over a 10-year period, the index of publicly traded companies
            in DiversityInc’s Top 50 Companies for Diversity list
            outperformed the:

              •     NASDAQ by 28%
              •     Standard & Poor’s 500 by 25%
              •     Dow Jones Industrial Average by 22%

   2.       Fortune 500 companies with the highest representation of
           women board directors attained significantly higher financial
           performance, on average, than those with the lowest
           representation of women board directors.

1. Source: – DeGroat, TJ, No Way to Measure Diversity's Value? Mainstream Article Ignores the Hard Facts, DiversityInc.com

2. Catalyst’s (2008). The Bottom Line: Corporate Performance and Women’s Representation on Boards.
     5. Mitigate and Minimize Legal Risk

    More than $335 million settled in discrimination lawsuits in 2008* alone

•     33,937 charges of race discrimination received; resolved 28,321 race
      charges; and recovered $79.3 million.

•     28,372 charges of sex-based discrimination received; resolved 24,018
      sex discrimination charges; and recovered $109.3 million.

•     24,582 charges of age discrimination received; resolved 21,415 age
      discrimination charges; and recovered $82.8 million.

•     19,453 charges of disability discrimination received; resolved 15,708
      disability discrimination charges; and recovered $57.2 million.

•     3,273 charges of religious discrimination received; resolved 2,727 religious
      discrimination charges; and recovered $7.5 million.

* Doesn’t include religion. Also doesn’t include penalties, legal fees, or costs associated with reputational damage
Source: U.S. Equal Employment Opportunity Commission; http://www.eeoc.gov/                                             25
5. Mitigate and Minimize Legal Risk (cont’d)

What can you do?

   Develop solid working relationships with the CEO, General
   Counsel and senior leaders in the organization
   Be proactive in establishing fair, consistent and inclusive
   policies, practices, and programs
   Ensure representation at all levels in the organization
   Respond to employee complaints/concerns in a timely manner
   Leverage tools that will provide insight into the heart of the
   culture of the organization

In closing …

•   Building a strong business case (and values case) is the first
    and most important step in gaining support and commitment
    for your initiative
•   The task of creating and implementing a Strategic Diversity
    Management Plan is complex (but necessary) work.
•   A Diversity Practitioner must also be a Strategic Business
     >   Enlist performers, owners, and champions throughout the
     >   Remember …you are the architect, not the owner of the work.

•   Diversity & Inclusion, when managed well, will contribute to
    your organization’s bottom line and competitive advantage.