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Part Two - The Diversity Data Imperative:
How to Drive Organizational Value.
Diverse businesses outperform their peers on every major financial metric, and diverse teams make better decisions while being more innovative and productive.
Part Two - The Diversity Data Imperative:
How to Drive Organizational Value.
Diverse businesses outperform their peers on every major financial metric, and diverse teams make better decisions while being more innovative and productive.
Key Highlights:
- Doing diversity well is foundational to business success and the imperative related to it from outside stakeholders is here to stay due to ESG and DEI related disclosures and reporting guidelines.
- Historically, businesses have struggled to understand what “good” looks like for their organization from a diversity perspective due to the lack of an objective, relevant, and quantitative framework.
- Rich diversity data from multiple sources and advanced AI-powered analytics make it possible for companies to now measure and manage diversity across all major stakeholders portfolios–employees, suppliers, customers, and the surrounding community.
- Boards, C-suites, and their cross-functional teams all play a role in the diversity imperative and have an opportunity to capitalize on it by making it more core to their strategy and operational business processes.
- Companies that embrace the diversity imperative and align around a set of goals and initiatives to achieve them stand to benefit on every major external and internal performance KPI (market value, cost of capital, revenue growth, profitability, employee productivity, and more).
Table of Contents:
Measuring Diversity
Diversity’s Impact
Diversity Data
The Diversity Imperative
Section ONe
Measuring Diversity
Equity Quotient helps companies measure and manage the S in ESG to drive stakeholder value and outperform their peers.
Measuring Diversity
What is diversity and how can it be measured?
Diversity refers to the individual characteristics people have that make us unique. Though diversity has traditionally been boiled down to race and ethnicity, it comprises many factors including but not limited to race, ethnicity, gender, gender identity, sexual orientation, age, socioeconomic status, physical ability or attributes, religious or ethical values system, national origin, and political beliefs.
One of the most significant challenges facing those trying to devise policies and investments focused on closing the racial wealth gap is the lack of relevant data and actionable insights.
One of the most significant challenges facing those trying to devise policies and investments focused on closing the racial wealth gap is the lack of relevant data and actionable insights. Furthermore, the ecosystem focused on addressing the imperative is viewing it as a compliance requirement rather than a growth opportunity. The exciting news is that diverse businesses are the most successful ones, outperforming peers on every major internal and external financial metric. Moreover, profit and impact are not inextricably separate, but instead should be viewed together to understand how to align resources to drive sustainable and quantifiable results.
Stock Price Impact
- 5.79% higher1
LT Market Performance
-
3.5% 4-factor alpha
(2.1% higher vs. average)2
Retention
3x stronger3
Equity Quotient is focused on helping companies gain access to diversity data to help leaders measure and manage their imperatives and understand how investing can help drive stakeholder value. Beyond data that demonstrates the compelling new ROI–Return on Inclusion–for businesses that make diversity core to their strategy and operations, understanding demographic data across the full continuum of stakeholders–employees, suppliers, customers, and the surrounding communities–is an important component of growth. Rich data and analytics can help all of us evolve diversity beyond a 21st century workplace buzzword to a concrete competitive advantage driven by actionable insights.
Section Two
Diversity's Impact
Diversity drives productivity, innovation, and financial success, making it essential for companies to embrace and promote it in the workplace.
Diversity’s Impact
How does diversity impact an organization’s success?
Now that we know strong organizational diversity has a compelling impact on productivity, innovation, and financial performance, let’s dive into specific examples in leading organizations around the world.
Diversity = Productivity
According to a UK-based Cloverpop study that examined 600 business decisions made by 200 teams across a range of industries, diverse teams outperform individuals 87% of the time in business decision-making processes. Additionally, the study showed that diverse teams make decisions faster than individuals too. Another evaluation from Forbes showed teams that follow an inclusive process make decisions 2x faster with half the number of meetings.
Diversity has a plethora of internal benefits for teams, including lower turnover, higher productivity, and better employee engagement.
Diversity has a plethora of internal benefits for teams, including lower turnover, higher productivity, and better employee engagement. An HBR study found that teams solve complex, unfamiliar problems faster when they are more cognitively diverse. Diverse teams also pull from a wider range of sources and experiences. That can help them make more educated decisions, leading to better results for your business. Diverse teams make better decisions than non-diverse teams up to 87% of the time, according to another study.
Diversity = Innovation
When employees feel appreciated at work, productivity and innovation tend to increase. Businesses may also see their candidate pool expand and company culture improve. Research by Fundera shows that racially and ethnically diverse companies are 35% more likely to perform better, and diverse teams are 70% more likely to capture and enter new markets. “A paradigm shift and the ability to see through diversity as an opportunity to expand the horizon of growth, productivity and resourcefulness of your brand is one that business owners should adopt. It has many advantages and benefits to your brand’s objectives both in the short- and long-term,” according to Thomas Helfrich in Forbes.
Furthermore, a study by Josh Bersin and Deloitte found that inclusive companies are almost twice as likely to be considered innovation leaders in their market. Teams that demonstrate diversity are proven to be smarter, more innovative and more socially aware. They also process facts more carefully — a significant factor in making smarter, data-driven decisions.
Another significant advantage of diversity for organizations is that employees often feel more comfortable, confident and satisfied in inclusive environments.
Another significant advantage of diversity for organizations is that employees often feel more comfortable, confident and satisfied in inclusive environments. CEB/Gartner found that highly diverse and inclusive organizations show 26% more team collaboration and 18% more team commitment. They also tend to be more loyal and are more inclined to stay longer at companies where their unique contributions are recognized and respected, lowering attrition. A Deloitte study found that inclusive companies are three times more likely to retain millennial workers for more than five years. Workplace diversity can increase confidence and encourage employees to achieve their full potential. Diverse teams have higher morale and are more productive, innovative and loyal to the organization.
Employees who feel included and represented at work may report higher job satisfaction—and when employees are happier at work, they tend to engage and connect more to their jobs. This often results in improved morale and productivity, which can lead to stronger performance and higher business revenue. For example, a BCG study found innovation revenue to be 19 percentage points higher than that of companies with below-average leadership diversity, showing a close correlation between diversity and innovation.
Diversity = Financial Success
Eventual outcomes of more diversity in business can include economic and market growth, and higher revenues and profits. McKinsey and BCG studies have found that financial performance improves as organizations become more inclusive, thanks to improved productivity levels. Another contributing factor is the low turnover rate—bad hires can be very costly for organizations.
The numbers are concrete, clear, and compelling: Diverse businesses do better business.
The numbers are concrete, clear, and compelling: Diverse businesses do better business. An IMF study of European corporations found that those with a larger share of women in senior positions have significantly higher financial performance, especially in high-tech and other sectors where critical thinking, creativity, and knowledge work matter. In addition, the cash flows of diverse companies are 2.3 times higher than those of companies with more heterogeneous staff, and companies with diverse teams are 70% more likely to capture new markets than organizations that do not actively recruit and support talent with diversity in mind.
Beyond these three key benefits–stronger productivity, innovation, and financial success–strong diversity and transparency related to a company’s metrics create a virtuous circle. Companies that lead by example with diversity — sharing diversity insights and company diversity data publicly — tend to positively impact their racial equity outcomes. A majority of survey respondents said it is important for large companies to promote racial diversity and equity in their workplace—79% overall and 95% among Black and African American respondents. There is broad demand from the public for this data to be shared publicly: a survey from JUST Capital and The Harris Poll found that 73% of Americans want companies to publicly report diversity data. As a result of this call for transparency, firms are increasingly disclosing racial and ethnic workforce data, according to recent analysis by JUST Capital. From January to September 2021, the share of Russell 1000 companies disclosing racial and ethnic data increased by 23 percentage points—from less than one-third (32%) to more than half (55%).
Section Three
Diversity Data
Achieving DEI requires a data-driven, dynamic approach, with concrete metrics and benchmarks that enable companies to put diversity at the center of business and achieve the full financial returns and social impact that are possible.
Diversity Data
What is diversity data and how should it be used?
Beyond the compelling business case for diversity, company external stakeholders are demanding transparency related to corporate diversity, equity and inclusion, or DEI, more than ever. Concrete metrics not only from internal systems (HR, procurement, and marketing) but also detailed demographic and socioeconomic data profiling surrounding communities, can help boards and executive teams ensure they have a clear picture of their current state and opportunities for improvement and growth.
Meanwhile, it is important to keep data dynamically at the center of the discussion versus pursuing it as a periodic exploration or annual consulting project that gets presented to boards and executives and then sits on the shelf. Operationalizing this internal and external data into a unified system makes it possible to achieve transparency around how teams are making progress with creating a diverse and inclusive workplace and enabling cross-functional teams to evolve as they learn. Clear and actionable benchmarks enable alignment across executives and their teams, enabling companies to put diversity at the center of business to maximize the return on diversity through a more comprehensive, coordinated approach.
Without data and a dynamic system of measurement over time, leaders may risk treating DEI as strictly an HR problem versus a company-wide strategy that involves the entire C-suite and their functional teams.
Without data and a dynamic system of measurement over time, leaders may risk treating DEI as strictly an HR problem versus a company-wide strategy that involves the entire C-suite and their functional teams. For DEI to have a material impact on financial performance and long-term growth, it must go beyond the approach most companies currently take–ask the CHRO to pursue a few superficial initiatives (e.g., name a DEI leader, establish employee resource groups (ERGs), and allow employees to take paid volunteer days) that can’t really be measured objectively over time. These cursory approaches fail to achieve the full financial returns and social impact that is possible.
What is required to achieve meaningful impact and financial results is a data-driven, objective, and dynamic approach to measuring and managing diversity across all stakeholder groups (employees, suppliers, customers, and community) and functions (Finance, Legal, Marketing/Sales, Product, and HR) in a more holistic way. External data sources can enable an outside-in view of an organization’s diversity posture in the context of the communities where it operates and its peers. Combining that rich external data from public sources (e.g., Data.gov) and private sector data providers (e.g., Zillow, Equifax, AWS Data Marketplace) with information from internal enterprise systems (HR, FIN, CRM+) creates a rich platform ripe for analytics and insights. Meanwhile, applying advanced, AI-powered technologies to the public-private data platform can enable unprecedented insights into current state, risks and opportunities, and an actionable path to growth.
Section Four
Meet Equity Quotient
By harnessing rich data and applying advanced AI-powered analytics, Equity Quotient enables companies to make more inclusive decisions that create a win-win for everyone.
Equity Quotient and the diversity imperative
Equity Quotient is the first SaaS technology platform that provides data and insights to help companies drive financial growth and stakeholder impact by measuring and managing diversity data. We increase access to data so companies can increase access to opportunity.
For businesses that make diversity core to their strategy and operations, measuring diversity data is an important component. Here at Equity Quotient, we evolve the power of diversity from subjective to substantive by harnessing the rich data that exists on company stakeholders and the surrounding communities in which they operate. Intersecting this data and applying advanced AI-powered analytics enables a more relevant, objective and quantitative approach for gleaning insights into the relationship between a company and its stakeholders.
Learn more about our dashboards and how you can measure such imperatives as:
- Pay Equity: Prioritize the diversity of your teams across various functional areas to better understand how pay equity across demographic groups can impact talent acquisition and retention
- Supplier Diversity: Determine how your current portfolio of available suppliers aligns with your local ecosystem of minority & women-owned businesses broken down by key micro-vertical
- Average Rental Rates by Demographic Group: Understand where bias exists in your portfolio and how to take action and understand how alignment for your tenants can contribute to key performance and growth objectives and more.
Our goal is to help any organization, regardless of size and industry, can get a clear snapshot of themselves, their community, and the opportunity they have to take positive action and manage risk with our data. More clarity for businesses, their stakeholders and operations in the context of the world in which they operate paves the way for more inclusive decisions that ultimately create a win-win for everyone.
Now What?
Here are some actions you can take today
Download Our Questionnaire
Download our .pdf questionnaire to guide discussions with your leadership and expanded cross-functional teams. We recommend having each function complete the questions and then convene for collaborative conversation about current state, future goals, and ideas to achieve them.
Explore Opportunity Index
Explore the EQ Opportunity Index Dashboards with your Question Guide in hand. These dashboards feature data about the world around you to help you start thinking about how your company’s data compares and begin considering your risks and opportunities.
Review the Industry Dashboards
Review the Industry Example dashboards to gain further understanding of how your company could achieve a dynamic, automated, and quantitative approach for measuring and managing your diversity imperatives and ESG Social Impact.
