“What gets measured, gets managed.” - Peter Drucker 

 

If words are the welcome, then data sets the agenda. As with any  area of business management, what is measured, is managed. You  never set out to grow a division of your business without sourcing  key business data to inform your planning. The same is true with  inclusion and diversity. If you understand that this is a critical driver  of strategic growth, then you will approach it with the same rigour  and thoughtfulness. However, there are challenges when it comes to  what data you should gather and how to go about the data collection  in a sensitive and legal manner. Many firms fear what measuring  their inclusion and diversity data will tell them. Others are worried  about the legality and consequences of disclosure. But knowing  where you stand is better than not knowing at all. We are living in  a time where the risk of not measuring the data far outweighs the  fear of collecting it and what it may reveal.

Information Power It is important to appreciate that social sustainability data is an  emerging area. There are very few companies that have been collecting  and managing inclusion and diversity numbers for more than a  decade. Many companies have not even begun the journey. The issue  therefore, ranges from a total lack of information at some firms, to  the inconsistency, the infrequency and the lack of transparency at others. In the UK, the concept of diversity data was put squarely on  the agenda by mandatory gender pay gap reporting. 

The new legislation, introduced in 2017, targeted companies with  250 or more employees and covered 34 percent of the UK workforce.  However, in 2020 the government decided to pause the reporting  requirement due to the Covid pandemic. It was the only company  reporting requirement deferred in that year. An unfortunate case in  point of the inconsistency and infrequency that can often accompany  social sustainability data. However, the tide is turning and it is  only a matter of time before the race pay gap will be introduced,  alongside gender pay gap reporting.  

Richer Data and Rewards 

Companies who anticipate and embrace inclusion and diversity  data now will see huge benefits. This will mean capturing more than  the basics of gender diversity, such as the gender pay gap or the  number of women on boards. This is not to say that this isn’t a good  place to start. If you work for a firm that doesn’t even have this data  captured or published then either measure it, or ask for it. However,  it is not the gold standard. Measuring the number of women on  boards as the main indicator of inclusion and diversity at a company  is as limited as sourcing data from one competitor’s product to  develop your entire pricing strategy. Diversity data needs to be  broader and richer than gender ratios at the most senior level of  a company. The braver companies will be about asking their  employees for diversity and inclusion data, the better the quality  of the data and the decisions that are made as a result. 

 

"Companies who lead on social sustainability data measurement and management reap more benefits."

Balance and Breadth 

An additional risk that emerges from being too reliant on one or  two individual diversity and inclusion metrics can be found in  “Goodhart’s Law”. This concept is named after British economist  Charles Goodhart, who advanced the idea in a 1975 article on mone tary policy in the UK, when he wrote that “any observed statistical  regularity will tend to collapse once pressure is placed upon it for  control purposes.”25 The anthropologist Marilyn Strathern later  recognised that this law could apply in domains beyond economics.  She summed up Goodhart’s Law as: “when a measure becomes a  target, it ceases to be a good measure.”26 

Part of the reason for this paradoxical law is that a single data point  can be too easily manipulated. When data is collected, people will  refine their behaviors to optimise for that data point, which makes  it a less valuable measure than before. An example of this from  my consulting experience was with an investment firm claiming a  significant increase in female board representation over the past 12  months. The reality was that they had managed to find one female  board member and persuaded her to sit on four of their boards. This  is an increase in the key metric, but not to the extent that one would  imagine from the headline number. One of the ways to mitigate this  risk is to have a broad and robust set of metrics across diversity,  equity and inclusion that reduces the ability or temptation to mas sage a single data point.

 

 


Hephzi Pemberton, Founder and CEO

"It is concerning to see there has been a decrease in the number of ethnic minority CEOs since the report by INvolve was published in 2018. After three years, one would also hope to see more female CEOs appointed, but we have only moved by one percent. When so many companies talk about valuing DEI, it’s disappointing to see the lack of visible results at the most senior levels of leadership."