How to use compensation programs to improve workplace DEI performance

According to McKinsey, the majority of employees report that their managers aren’t held accountable for diversity and equality in their workplace. This fact starts to get to the heart of why so many companies struggle with improving workplace diversity, equity, and inclusion (DEI). Although as an organisation they hold DEI as a cultural value, this doesn’t automatically translate into cultural practice and everyday operations. Saying and thinking “we value equality and diversity” alone won’t correct bias or unbalanced systems and processes, developed and ingrained into organisational culture over time.So what can you do to successfully bridge the gap between what you theoretically value, and what actually happens in practice? If equality, diversity and inclusion for all employees is the overall business goal, what concrete measures should your company take to achieve it?

"In contrast to what companies say about their commitment, only around half of all employees think that their organisation sees gender diversity as a priority and is doing what it takes to make progress. Around 20% of employees say that their company’s commitment to gender diversity feels like lip service" [McKinsey]

To be clear the exact combination of required solutions and activities will always vary to some degree from organisation to organisation. However, one strategic approach is critical for all companies wishing to improve workplace DEI.

→Create a leadership culture of top-down accountability for DEI
Change management is hard for businesses, but it almost always comes down to whether there is true buy-in from leadership. Is change being driven throughout the organisation from the top down? If leaders are not persuaded to put DEI as a key priority, how will anyone else?

→ Design & implement a DEI compensation model to support accountability
If a company truly values DEI and creating change, one of the most effective things it can do is design compensation models to incorporate DEI performance targets.

Why compensation models can have a large impact on DEI strategy

As the old maxim states: in business, what gets measured gets done. Business is inherently comfortable with using performance metrics to drive change.  

A bonus program is developed to reflect what the company views as key business priorities, and thus communicates (both implicitly and explicitly) to its employees what they focus on day to day.  This same principle can be used for DEI performance, so that the bonus model functions to bridge the gap between overall strategic goals and everyday actions:

• The whole company understands DEI as a strategic priority
• Most of the actual implementation work of DEI work at the coalface of everyday operations is carried out by middle and senior level managers
• This creates systematic incentives and real-world consequences to prioritise DEI to better align overall company strategy with company practice
• It doesn’t target individuals or isolated parts of the company, but supports change at an organisational level by measuring and improving systematic impact

Compensation models are what your organisation and team are trained to respond to

How does your company usually work with business areas that are underperforming, or you would like to improve?

Imagine your company wants to improve sales performance next year. Do you:

A) Implement a couple of measures based on educated guess work and intuition; then wait a few months; and when results haven’t improved, conclude that there’s nothing much more you can do, other than address individual sales reps underperforming?

B) Collect and analyse data related to your sales operation (for example, number of new meetings, calls, new opportunities, customer renewals. etc), perform pricing and market analysis etc, in order to understand and clearly identify areas of weakness or opportunities; then incentivise your sales team on the areas/opportunities that have been identified as likely to increase revenue?

How to incorporate DEI performance into your compensation model

Improving workplace DEI performance is the same as every other core business area. If leaders and mid-level managers are held accountable and measured on diversity in the same way that they are measured by sales and profits, their motivation to prioritise and deliver on diversity increases.

1. Measure & track DEI performance data across your core business operations
   1. Download our free guide to using KPIs and performance DEI to improve your DEI strategy
2. Use this tracking process to set clear, definable KPIs for each area
   1. DEI is a sensitive topic, so incorporating it into compensation and performance targets should be done with a focus on tracking and demonstrating systematic improvements, rather only individual performance
      • Create KPIs relevant to your core business areas overall as a company, but combine them with KPIs that are relevant to that specific department or team. This helps ensure managers are held responsible for their team's improvement and the impact on the company overall.
   2. Build flexible bonus structures with an emphasis on rewarding success rather punishing failure
3. Balance motivation and overall strategy by combining both short-term and long-term goals for setting your  targets
   1. Short-term goals make progress feel attainable and easier to observe
   2. Long-term goals maintain alignment with overall corporate strategy
4. Create a training & communications plan to help with the performance areas you have identified
   1. For example, if you have targets to develop a more diverse recruitment pipeline, provide training on how to create inclusive and unbiased job descriptions.