Corporate reporting generally has a steady tone. The type of information each company releases has a reliable consistency, keeping their structure the same but filling it in with the year’s details. This consistency has lots of benefits. Consistency also can create inertia, not just in reporting but also in behavior. I have been thinking about what it would be like if some S in ESG metrics were flipped on their head. This post is one example of doing a flip.
Current DEI reporting centers on demographic transparency.
Current diversity disclosures focus on recruitment and employee demographic breakdowns as indicators of progress. Although efforts to increase employee diversity can have an impact, evidence shows companies should not expect to recruit their way to positive outcomes.
As Robin J. Ely and David A. Thomas wrote for Harvard Business Review: “Taking an ‘add diversity and stir’ approach, while business continues as usual, will not spur leaps in your firm’s effectiveness or financial performance.... what matters is how an organization harnesses diversity, and whether it’s willing to reshape its power structure.”
DEI metrics which primarily represent demographics may show progress on the "stir in" method. For instance, financial institutions that actively recruit more women into the organization can point to progress in junior ranks. However, those workforce numbers can disguise larger gaps in senior leadership roles and fail to address pervasive cultural issues.
As the Financial Times outlined in a recent piece reporting female employees’ concerns about Goldman Sachs’ male-dominant culture: “It’s not as though any individual is saying, ‘hey, let’s keep women back’ — that’s not how it works,” said Martin Davidson, professor of business administration and global chief diversity officer at the University of Virginia Darden School of Business. “It’s just in the water . . . masculinity is the bread and butter of the investment banking industry.”
The choice of what data to disclose affects more than just reporting.
The role of metrics on behavior, culture, and incentives is real. In this case, demographic metrics may negatively affect all three. Talent acquisition leaders change their behavior, but hiring managers may not. An employee survey for people to self-identify, if not written carefully, may cause harm to individuals and the culture.
Hitting a particular target - whether race, gender, or other self-identification dimensions - creates incentives for those responsible to meet it. Promoting progress on diversity metrics can create a backlash that undermines individuals’ recently hired success by casting a ‘diversity hire’ shadow. To create real change, we can’t simply count the new fish in the water. Hitting the target has benefits, but it can’t be done without also addressing other sources of toxicity.
One way to flip that norm is to draw attention to who’s leaving (or not leaving) instead of who’s joining.
In addition to recruitment and retention, we could pay more attention to the currently silent “r” in the continuum: Retirement. The truth is, power shifts are often generational. Evolving policies and practices often takes the people holding power getting out of the way. That might sound harsh, but if we aren’t creating ever more space for these new employees to grow within our organization, the odds of keeping them long-term are low. And, the odds of true power shifts in how decisions are made are also low.
Illuminating the Exit
Even organizations that espouse values of diversity, inclusion and belonging are finding it more challenging than ever to build the kind of team trust that’s needed for everyone to thrive. Today’s five-generation workforce isn’t just navigating a post-pandemic change in how and where work gets done. The current workforce is also an active part of tilting investor-focused capitalism to stakeholder capitalism by demanding employee opinions rise on the priority list. While they can feel practicality-wise out of reach, it’s important to consider how different metrics could be one tool leaders can use for change management.
What if organizations measured and managed employee exits more intentionally? Picture introducing a retirement target alongside recruitment metrics in S in ESG data tables. How might that speed up the adoption of people-centered policies?
To hit recruitment goals, organizations strategize around building a diverse talent pipeline. Human resources departments commonly set up recruiting partnerships with HBCUs and student chapters of BIPOC professional organizations to get candidates in the door.
If retirement targets were more commonly measured, would business practices to encourage leadership change would emerge? Those responsible for retirement package design would factor in new incentives. Senior leaders may start having quarterly check-ins with their senior-most team members to more rapidly uncover those considering their transition. Currently, these exit supports are most common as part of an overall restructuring strategy—so tend to elicit fear from prospective participants. That could change.
By developing and providing encouraging pre-retirement resources, companies could help promote better planning around career-end and prevent leadership bottlenecks.
Retirement is only one example of the opportunity to consider familiar topics metrics through the lens of a different metric. Better Next works with organizations to assess the impacts of their current metrics and offer consulting on how to redesign dashboards to promote positive outcomes. Are there other missing measurements that could strengthen your strategy? Let’s start a conversation.