Diversity is largely seen by executives as a ‘warm and fuzzy’ HR issue, and as such, has traditionally been hard to build a business case for. However, Craig Donaldson has found that a number of recent developments are shedding new light on the business benefits of diversity
Diversity is largely seen by executives as a ‘warm and fuzzy’ HR issue, and as such, has traditionally been hard to build a business case for. However, Craig Donaldson has found that a number of recent developments are shedding new light on the business benefits of diversity
With growing skills shortages across a number of sectors, an ageing population and generational changes, diversity is an increasingly important issue for organisations. It is moving from one of the most ‘warm and fuzzy’ HR issues to a more serious business issue, as organisations seek to mitigate future workforce risks.
The war for talent is the top people and diversity issue for Australian organisations and HR professionals, according to Kylie Nicolson, diversity manager for IBM Australia & New Zealand. “Australian population demographics have changed in such a way that organisations need to consider these shifts when looking at the attraction and retention of top talent, particularly in the shrinking labour force market,” she says.
Demographic shifts that HR professionals need to take into account include the ageing of the population, women having children later with more experience when going on parental leave, increases in dual income earner households and shared parenting, employees with child and elder care responsibilities, and the shift in Generation Y’s approach to work and careers, Nicolson says.
Fiona Krautil, head of advancement of women and diversity for ANZ Bank, also says that attracting, retaining and developing diverse talent is an increasingly important issue for business. Increasing the number of women in leadership roles should be a top priority, she says, in order to enable organisations to access this highly educated but under-utilised talent pool. Other issues include developing leaders who are consciously competent in managing and leveraging diversity, and creating a workplace culture that supports difference and enables each staff member to fully contribute to the best of their ability, according to Krautil.
Implications for business
Carolyn Gallaway, director of HR and diversity consultancy Diversity Dimensions, says there are obvious implications for business in terms of retention and attraction of people. But there are also work-life and OHS implications resulting from increased personal stress levels and from employees working longer and less traditional business hours to compete in the global market place.
“The often overlooked implications will be on market share and organisational reputation. While these issues are not new, work-life and diversity will affect a company’s bottom line and ability to attract new employees and retain key talent,” Gallaway says.
Krautil says organisations require a mind-set shift from one that currently tolerates people who are different, to one where diversity is valued, harnessed and leveraged to achieve greater business success. “This means managers need to become consciously competent in managing diversity, teams need to support the diversity within teams and people systems, policies and processes need to be realigned to deliver a workplace culture that enables diverse people to thrive.” To achieve this, Krautil says companies need managers who can think outside the box, are intellectually curious about diversity and are committed to action.
Employers also need to shift from a one-size-fits-all approach to retention, according to Nicolson, in order to reach a diverse population. “For example, to retain mature workers for longer, employers need to consider greater workplace flexibility and continued career development.”
Similarly to ensure women are retained after parental leave, she says they need to be supported to care for family given that with greater experience they are costlier and harder to retain than ever before. “The same applies to supporting all employees to manage their work and life with greater emphasis on both parents caring for children, and possibly elders.”
Securing managerial/executive support
It can be easier said than done when it comes to securing managerial and executive support for diversity. However, Nicolson says diversity has a strong impact on the bottom line, and as such, HR can build a business case for diversity. For example, business imperatives might include:
• Organisations engender loyalty through best practice diversity policies and programs, resulting in greater retention of top talent;
• Organisations attract the broadest talent through being an employer of choice;
• Organisations better serve existing client bases and attract new clients, enabling them to compete more effectively in the marketplace; and
• Diversity of thought enables organisation’s to create diverse solutions for clients.
Gallaway says that managers like proof, so facts and statistics are a good starting point. Furthermore, it’s a good idea to ask them for ideas and suggestions, as managers are human too and probably have similar work-life issues themselves.
“If you want to engage and encourage managers to take ownership for work-life issues, then you’ll need to show them how to be a champion and set them up for success. Managers are busy just doing their job, so if they’re going to stick their neck out, they need to reduce their risks, so they are going to need more guidance, structured support and tools to assist them,” according to Gallaway.
In the 21st century, the quality of people is the only differentiator between competitors, according to Krautil. “Share the Australian demographic forecasts that show staff and skills shortages are here to stay; while we have major groups of untapped talent,” she says.
Other steps include linking diversity to the business strategy, gathering and presenting quantitative and qualitative data that provides a snapshot of where the organisation is compared to where the organisation wants to be (based on the business strategy), recommending priorities for action that align with business priority needs, identifying business champions who will support these recommendations and lead the way and developing measures of success and holding managers accountable to deliver these, she adds.
Proving diversity’s worth
The business case for managing diversity and work-life may be common sense, but the risks associated with not managing these issues in the current and future employment market is far greater, according to Gallaway.
“Diversity and work-life is about business sustainability. From a management perspective, for any work-life or diversity initiative to be successful you’ll need to show managers how to make it work for them and reinforce that it doesn’t mean that they have to do all the work. How you do this is by providing tools and resources to help employees to enable them to drive the process, and managers to handle the discussions and think outside of the box.”
Krautil says the diversity business case is the strongest it’s ever been, based on a number of demographic forecasts. “In my experience, most executives/managers intellectually get the business case, but the challenge is to expand mind-sets to enable executives and managers to understand the role they personally need to play and the personal action they need to take to effectively leverage diversity in their business,” she says.
Furthermore, it is possible in an organisation to establish ROI on individual diversity interventions (such as cost-benefit of investing in child care), and interventions that have been put in place to address staff turnover and absenteeism of key groups of diverse staff.
At a strategic, organisational level, Krautil says the best example of ROI on effective diversity was a 2004 Catalyst research report, The Bottom Line: Connecting Corporate Performance and Gender Diversity, which found a link between gender diversity in top management teams and US corporate financial performance.
Catalyst examined 353 Fortune 500 companies and used two measures in the report: return on equity (ROE) and total return to shareholders (TRS). It found that the group of companies with the highest representation of women in their top team experienced better financial performance (ROE 35 per cent higher and TRS 34 per cent higher) than the group of companies with the lowest female representation.
The stats on diversity
A recent survey, conducted by HR and diversity consultancy Diversity Dimensions, found that staff turnover is a critical human capital indicator for 73 per cent of companies, but only 29 per cent have a staff retention policy.
The survey, which took in 70 organisations that employ more than 23,000 employees between them, also found 88 per cent of companies believe that mature age workers have a positive impact on their business, however, 60 per cent of these companies do not have a strategy to maintain or attract mature age workers.
Furthermore, most Australians prefer career progression and work-life balance over money, but companies are losing staff in the 26 to 45-year-old age bracket due to dissatisfaction with their career progression and work-life issues.
As such, HR professionals need to assist their organisations by providing them with practical how-to tools and resources that will enable employees and managers to talk with each other about diversity and work-life issues, according to Carolyn Gallaway, director of Diversity Dimensions.
"Open communication is the most effective way for employees and managers to understand accept and work towards mutually beneficial work-life solutions. If employees feel that they have a voice and that someone will listen to them they are more likely to engage with the organisation and their manager," she says.
"From our experience, the how-to is the missing link, because people, both managers and employees, often don't have the skills to have the hard discussions, or know where to start or have an idea of what to talk about. By providing managers and employees with tools and resources they can work together to manage work-life issues in a way that meet the needs of the business and individual."
Putting diversity into practice
There are a number of steps HR professionals can take in improving diversity in the workplace. The first step is to accept that most workplaces are not a level playing field for women, older workers, people with disabilities, indigenous workers, and workers from culturally or linguistically diverse backgrounds, according to Fiona Krautil, head of advancement of women and diversity for ANZ Bank. Many managers are well intentioned, she also notes, but are unconsciously incompetent in managing diversity.
"HR has a governance role and a strategic intervention role to play to enable diverse talent to thrive so that we can build diverse talent pipelines," she says. The governance role involves ensuring there is no bias in the organisational outcomes from the recruitment, career development, training and development, remuneration or promotion processes, while the strategic intervention role is identifying what is getting in the way of diversity success and taking action to address the issues.
This includes developing processes to track how well diverse people are doing in the organisation through data analysis and surveys, ensuring recruitment processes deliver diverse talent and ensuring career development processes deliver diverse talent, according to Krautil. For example, "in the talent development process, who gets recognised as high potential? Do they get the necessary experience to compete effectively for the next role? Are managers held accountable for growing diverse talent? How well are transitions such as parental leave managed?" she asks.
Kylie Nicolson, diversity manager for IBM Australia & New Zealand, says the key to attracting and retaining a diverse and broad talented workforce is the provision of work-life flexibility. "This is the greatest motivator any individual is likely to have when considering either staying in an organisation, or beginning a new employment relationship. It is more important than ever before to truly be an employer of choice."
At IBM, for example, Nicolson says 6 per cent of the workforce works at home full-time, 17 per cent of female employees and 6 per cent of employees overall work part-time. Most employees also put in more than five hours' work at home during regular business hours each week. IBM provides additional leave programs and flexibility in leave types to support individual employees to balance their work and personal life, she adds.
