Traditional measures of D&I effectiveness tend to rely on static pictures of workforce demographics, employee attraction and retention. What if we could measure effectiveness dynamically through the collective intellectual capital generated by a diverse organisation?
The last 15 years have seen a transformation in the business landscape with increasing investment in Diversity & Inclusion (D&I) efforts within organisations. The rising importance of D&I in leaders’ agendas has stemmed from increasing awareness of the social and commercial benefits that can be achieved by adopting a more inclusive approach to organisation management. Past research by Cox (1991) and later Krell (2004) linked diverse workforces to competitive business advantages through increased innovation, market access, staff retention, and business brand.
As investment in D&I has increased over time, organisations have incrementally increased the number of initiatives aimed at improving D&I practices. Despite the increasing number and complexity of initiatives, EK (2005, 2008) found that organisations tend to rely on single measures of D&I effectiveness per initiative. Success of these initiatives would often be examined separately without an overarching strategy. A holistic diversity strategy is needed to tie all initiatives to core business processes and objectives. This would also enable them to be evaluated for their combined business impact.
The development of a holistic diversity strategy is often limited by the lack of tangible economic benefits that can be measured as outcomes for D&I initiatives. The difficulty of linking economic benefits to D&I initiatives mainly stem from the tendency of initiatives to influence the intellectual capital of an organisation rather than fiscal bottom-line directly. Intellectual capital can be defined as the collective knowledge pool of an organisation and its ability to tap that knowledge into core business processes thereby allowing the organisation to achieve strategic objectives (Edvinsson and Malone, 1997).
Acknowledging that the efficacy of D&I initiatives can be measured by evaluating its impact on intellectual capital, Hubbard (2004) designed the Diversity Scorecard derived from the Balanced Scorecard from traditional management theory. The Diversity Scorecard assesses an organisation across six business indicators (including both financial and intangible indicators) found to lead and lag increasing intellectual capital through better D&I outcomes. Hubbard’s approach, however, has not gained much traction in industry potentially due to demanding and academic-levels of measurement required.
With that in mind, a recent study by Mr Manfred Wondrak and Dr Astrid Segert (2015) explored another approach to measuring the efficacy of D&I initiatives that would be readily implemented into organisations.