DEI Scrutiny Is High, How Can Big Data Support HR Decisions?
Environmental, Social, and Governance (ESG) non-financial factors are increasingly being viewed as growth and risk management opportunities by asset management firms, shareholders, and new young investors (not to mention future recruits). Organizations are under pressure to react to diversity, equity and inclusion (DEI) expectations. While there’s no universal consensus on what number of underrepresented minorities constitute diversity, scrutiny is intensifying, nonetheless. And for good reason.
Research summarized in a Harvard Business Review article indicates that companies ranked in the top quartile for diversity in management had a higher probability of generating financial returns above their industry mean, and diverse teams enhanced objectivity, decision making, and innovation. Board diversity was also the second-highest engagement priority in 2020 and a top-four proxy voting theme according to Harvard’s Law School Forum on Corporate Governance. – Rockefeller Capital Management article: “Diversity, Equity & Inclusion (DEI) Shareholder Engagement Campaign”
Lots of research parrots the business case that DEI environments lead to higher profitability and performance. Moreover, it’s the right thing to do. It’s a moral responsibility. And an ethical position that reflects the communities where we work and the populations we serve. So, the pressure for DEI accountability should come as no surprise.
Big Brother Is Watching
To say that the composition of an organization’s workforce, executive team, and board of directors is falling under the watchful eye of many is the understatement of 2021.
Nasdaq is threatening to delist companies that won’t move toward having at least one woman and at least one underrepresented minority or LGBTQ person on their corporate boards.
Goldman Sachs Group Inc. has said the firm will no longer take a company public in the U.S. and Europe if it lacks a director who is either female or diverse.
Institutional investors, such as BlackRock and Vanguard, are encouraging companies to disclose the racial diversity of their boards and are using their proxy votes to push this initiative.
State Street Global Advisors, which manages about $3 trillion for clients, has said it will ask companies about their metrics and goals to boost racial diversity within their ranks.
Legislatures are flexing their muscle too. California, a case in point, signed into law the requirement that all publicly traded companies headquartered in the state include on their board at least one woman and a minimum of one director from an underrepresented community.
European countries echo a similar sentiment. In Germany, for instance, at least one woman on any board that has three members is now a legal requirement. Norway introduced gender quotas in 2003, while Iceland, Spain, and France require that women fill 40% of supervisory board seats.
The U.S. Equal Employment Opportunity Commission (EEOC) has begun collecting EEO-1 data sorted by job, race, ethnicity, and gender. Under federal law, businesses with at least 100 employees and federal contractors with at least 50 employees and a contract of $50,000 or more with the federal government must file the EEO-1 form each year.
And then, of course, there’s media. A recent Newsweek article named (and shamed) the 20 largest public U.S. companies without a Black director. Far from thorough, this list is a red flag warning for the reputational risk associated with corporate DEI complacency.
The Application of Big Data Help Companies Walk the Talk
JDSupra a daily news source for the law industry reports how activists are launching lawsuits and holding boards of directors accountable when they allegedly breached their fiduciary duties by failing to include diverse directors on their boards—despite published claims of commitment to diversity, equity, and inclusion.
As Doug Melville, the head of diversity and inclusion at Richemont points out “the sniff test is high for authenticity. Everyone’s watching, and there’s a battle between optics and intent.“
How can Big Data Support HR Decisions?
With stakeholders of different hues expecting companies to react to DEI, whether publicly traded or not, boards are under pressure and pressuring CEOs and executive leaders in turn.
The application of big data in HR functions as the bridge between DEI talk and action.
Employees are, after all, a combination of intersecting characteristics. People young and old, people of different cultures, people of colour, people who speak different languages, people who identify as LGBTQ+, or who observe different beliefs, people who live with neurological or physical disabilities, or come from a spectrum of socio-economic backgrounds—and any intersectionality or combination therein—each have their own lived employee experiences. To understand and address those experiences DEI requires a proactive approach driven by commitment and deliberate action.
Scientifically vetted DEI surveys and research techniques ensure you ask the most critically revealing questions relevant to your organization. By collecting and analyzing this data you can track progress against goals. And establish greater accountability across chains of command.
You can look at progress in aggregate, by operational divisions, by leaders, activities and teams, and get ahead of issues should comparisons suggest something’s amiss. A potential recruiting and hiring bias, for instance, may become apparent across or in pockets of your organization. Data trends might flag concerning promotion and retention numbers in one or more marginalized groups.
DEI survey data supports HR decisions by letting you see parts of the organization where employee sentiment is very low or noticeably high—and dig deeper. It’s this collection, analysis and reporting that removes barriers and creates a culture of diversity where everyone belongs.
As British Workforce Disclosure Initiative (WDI) research manager Charlotte Lush observes, “without this data, companies are effectively taking a shot in the dark, implementing practices without knowing who is in their workforce, and what it is that they need.”
Check out our guides on workplace culture, employee engagement, and employee surveys. Learn about every aspect of a successful employee voice initiative!
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