Measuring the ROI: How to show diversity’s value

'It's not magical. There will be a cost. The more you invest, the more change you'll see'

Measuring the ROI: How to show diversity’s value

For Michael Bach, diversity is a way of being.

As the founder and CEO of the Canadian Centre for Diversity and Inclusion, Bach has dedicated his life to educating leaders on the importance of self-reflection.

Following a distinguished career at KPMG, Bach recently released his first book – Birds of all Feathers – a guide for HR managers on all things equality.

HRD sat down with Bach to learn more about inclusivity, ant-racism, and measuring the ROI on diversity.

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“After a lot of years working in D&I, I felt there was a lack of practical books on the topic,” he told HRD.

Bach explained how he’d only ever seen two definitive tropes;

  1. Books by academics which were valuable but not necessarily practical or accessible;
  2. Books by consultants that wanted to sell you something.

“I wanted a book that I could hand to a middle manager, senior leader, small business owners,” he added.

“One which would say ‘Here! Do this!’ and then let them figure it out themselves.”

Diversity can be branded around like a buzzword – one which beleaguered employers bring out to shift an uncomfortable lens.

The key is to invest authentically - or not at all. Stop being overwhelmed with ‘costings’ and start understanding the issues within your company.

“While you can really move the dial on D&I without spending much, you’re going to have to spend something even if that is just people’s time,” continued Bach.

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“It’s not magical. There will be a cost. The more you invest, in theory, the more change you will see.

“From here, figure out what’s wrong before you try to fix it. Too often, employers put the proverbial horse before the cart. Conduct an assessment, identify the issues, develop a strategy to address, and then execute. In that order.

“Finally, don’t reinvent the wheel. While every employer likes to think their workplace is super unique, they’re really not.

“Workplaces all function on the same principal. Just because you have a foosball tournament once a month doesn’t make you unique. The existing practices work just fine, if they’re done right.”

HR leaders understand that the only way to get the C-Suite onboard is through metrics. If you want to get their backing, you have to speak their language – i.e. numbers.

“The best approach is with a rock-solid business case that speaks to why D&I is an imperative for your organization,” advised Bach.

“However, that’s sometimes easier said than done. Another approach is very individualistic: with C-Suite members try to figure out what motivates them. Ask yourself, what’s keeping them up at night? Then leverage diversity and inclusion as a means to address the problems they have in their area of the organization.”

ROI is important in any budgeting – but it’s tricky to estimate an exact price for D&I.

This is the million-dollar question - how much should you spend?” added Bach.

“Based on 15 years’ experience, I have said that to start you need to spend $100 per person in your organization. That’s a minimum if you want to get anything done - and based on guess work - but you need to start somewhere.”

Don’t fret, financial officers!

There is a way to measure analytical returns on a diversity plan – it’s just much more complex than graphing it out.

“This is about measuring the return on investment, which can be done, it’s just not that easy,” Bach told HRD.

“It involves a myriad of calculations and data points.

“As an example, voluntary turnover. How much does voluntary turnover cost you? There is definitely a cost, and studies have shown that it’s anywhere between $50k and $350k depending on the level of the role and the tenure of the person with your organization.

“Figure out how much it costs you.

Then, look at why people leave your organization. There will always be people that leave, but the ‘why’ is the important part. If they leave because they are moving to the other side of the planet, or going back to school, you have no ability to impact that. If they leave because they’re tired of the racism/sexism/homophobia/etc. or have been consistently overlooked for promotion, then those are things you can affect.

“If the reason they leave is something you can affect, that’s where the potential savings are. Figure out how many people left your organization for those reasons.

“Finally, look at your rate of voluntary turnover – based on the reasons you identified as things you can affect – and see if it’s reduced as a consequence of your D&I work. You’re not going to eliminate voluntary turnover entirely but if you can reduce it by one percent, that might save your organization hundreds of thousands of dollars if not more. And that proves the return on the investment.”


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