Diversity's business case doesn't add up

Workforce, April, 2003 by Fay Hansen

"There are estimates that companies spend $8 billion on diversity training annually," he adds. "Much of this is wasted because it is spent on programs for awareness and valuing diversity that do not give people the skills they need." Kochan's study, forthcoming in the Human Resource Management Journal, presents findings that have dramatic implications for the kind of diversity training that must be provided to achieve performance improvements. Training programs aimed at "valuing diversity" and addressing subtle forms of discrimination and exclusion do not lead to long-term changes in behaviors, the study notes. Instead, group members and leaders must be trained to deal with group process issues, with a focus on communicating and problem-solving in diverse teams.

Hyter says the diversity industry includes "all types of people who profess to be experts in this area and who have a stake in companies' programs," but that no recognized set of credentials or professional certification exists for practitioners. Diversity consultants are chasing what he estimates to be $400 to $600 million annually in consulting fees alone. Human resources executives often don't demand documented results from outside consultants or in-house diversity staff because "it's easier to create activities and get credit for doing something than it is to create metrics and measures and hold people accountable," he says.

Missing metrics

Some companies measure diversity results with recruitment, promotion, or turnover rates, but few look beyond simple head counts to measure the full financial or performance impact of their programs. The difficulty of creating valid measures is part of the problem. "There is a connection between diversity and financial success, but typical profit-and-loss systems don't capture the benefits that diversity creates," says Laura Liswood, senior adviser to Goldman Sachs on diversity issues and a senior scholar at the University of Maryland's Academy of Leadership. "A lot of the benefits are not quantifiable, but it's also true that we have not devoted the same level of resources to attempts to quantify diversity results."

The business community has not pursued the implications of the academic studies, in part, Kochan says, "because of the traditional breach between the corporate and academic realms." Liswood retorts that "the academics might do a better job of marketing their work."

Kochan acknowledges that quantifying performance results is problematic. "The needed data cannot, in most cases, be culled from existing human resources data," he says. "To create the needed data and analysis, human resources executives must run experiments within their organizations. They must invest in efforts to train departments in group processes, and then follow their performance over time, comparing the performance of groups that have been trained with that of groups that have not, using hard performance measurements based on the goals of the unit." These measurements might be time-to-market, error rates, sales growth, or any number of other productivity measures.