How Do You Value Diversity?

Just as financial capital and physical capital need to provide a positive return on investment, so too does human capital. We can often measure the financial value of a person by their productivity and the costs associated with hiring, developing and retaining them, but many of our human capital policies don't face such scrutiny.

One such set of policies is centered around diversity. Diversity policies of all shapes and sizes are common; everybody in North America and Europe has 'em, for instance, and they're on the rise in Asia. But how much do they help?

Edward Hubbard offers a calculation in his blog at Diversity Executive. The calculation is a fairly simplistic one, estimating the amount of time spent on problems caused by internal barriers and figuring that as a percentage of annual payroll. The numbers themselves aren't the most important part (Hubbard acknowledges they aren't necessarily the most accurate measurements in the world); what's important is the discussion that results. If the Hubbard Calculation provides a low-end estimate, does that number in itself give us reason to look closer at the potential impact of different policies? Probably, yeah. Ultimately, the desired effect of a simple calculation is to start creating an ROI mindset when it comes to diversity, and other, policies.

How do you measure the impact of diversity in YOUR company?

Moving On Up

One of the most important tools for recruiting and retention is a good program for career development. We find this to be true throughout both developed and developing markets. The problem many Creatives face, though, is that there isn't always a lot of upward mobility in their field. In small companies there may simply not be many positions, and even in larger ones we run into the problem of people topping out in a senior creative position where they'll stay for a long time, creating a traffic jam for the people coming up behind them.

Take, for example, interior designers at a kitchen store. Customers come in, work with a designer to create the idea for their kitchen and select the right elements, and the designer then works with the contractors who turn this into reality. Sounds fun, but there's a problem that's likely to emerge at this shop: there will be one senior designer and a few junior designers, and until the senior designer moves on, there won't be any opportunity for the juniors to move up.

So, how do you develop your Creatives and help them with their career progression when there doesn't seem to be anyplace to go?

Well, the first thing to remember is that development doesn't have to be vertical. Your Creatives can develop horizontally as well, by learning new skills and expanding their talents. They can become instructors, which builds not only their subject matter expertise but their communication skills as well. There are ways to develop an individual without necessarily promoting them.

Another option is creating additional job descriptions in your organization, allowing people to change job titles over time without bumping up against the senior people. This doesn't necessarily have to be tied to higher salary or increased responsibility; it might instead be a title based on demonstrated performance, attainment of certifications, etc. (for example, going from "hairstylist" to "master hairstylist"). This provides a demonstrable way of showing progress, which for many Creatives is what matters far more than higher pay.

Don't ignore pay, of course. Consider some sort of graduated pay scale that rewards tenure as well as performance. The US military does something like this, with standardized pay tables that are based on rank (which could be a proxy for performance) and years of service. Consider how you can reward people for continuing in the industry, and specifically, with you.

People need to feel like they're moving forward (and, more than that, they need to actually be moving forward!). While its difficult in many creative fields to move people up a typical career path, they are other ways to build a career besides traditional promotions. If you want to keep your Creatives you need to give them a reason to stay, and you may need to get pretty creative yourself to make that happen.

Arigato, Mr Abe

Japanese Prime Minister Shinzo Abe has taken a small step forward by Western standards, but a big leap in the context of Asian countries. He recently called on business leaders to expand the number of female executives at their firms, a change that would have implications all the way down the line. If you're setting people up for leadership positions, that means you've got to expand the pool at lower levels, which means bringing more women into the workforce and trying harder to keep them there.

Why does this matter? Well, beyond the equity associated with giving everyone who wants to work the opportunity to prove themselves, Japanese businesses would benefit because they, like most Asian countries, face a tight labor market combined with aggressive growth targets, which basically means there are too few workers. As you grow you want the best possible employees in place, and if you essentially remove half your population from serious consideration, you just might end up with your second or third choice...or fourth or fifth choice.

Diversity is good for the broader japanese economy, not just for individual businesses. One analyst calculated in 2010 that

Japan could increase its labor force by 8.2 million and expand its gross domestic product by as much as 15 percent by raising the rate of female employment, then about 60 percent, to match that of men, which is more than 20 points higher.

More employees enables greater growth; more options from which to choose your employees leads to better employees in place and higher performance, which leads to higher revenues; and, more people working means more consumers, which can drive up the Japanese economy (and it can certainly use some help).

PM Abe suggests some specific targets, and that's something you need to be careful about as you look at diversity concepts in your company. A recent article in the Economist urged governments to avoid affirmative action programs, except in extreme cases, because the side effects often prove economically and socially harmful. That being said, you can focus on creating an environment that encourages women to come into and stay with your company, rather than setting specific targets. Are there aspects of your employment value proposition that could be particularly attractive to women, and that you should emphasize during recruiting? Do you know why women may leave in larger numbers than men and certain points in their career, and is there anything you can do to retain them at that point? Women face more pressure around certain life challenges than men do; do you account for that in the way your structure work styles in your firm?

Japan may take some small steps forward; it's as hard for a country to change paths quickly as it is for a supertanker to make a sudden course change. But for your firm, such a change would be easier. Look at your firm's demographics and ask yourself if you are artificially shrinking your pool of creative talent by ignoring the concepts that would draw women into your company and encourage them to stay. If you are, then ask yourself why, and what damage you may be doing to your company. You may not like the answers, but they can put you on track toward finding some good solutions.