The Center’s
most recent survey on the topic showed that almost half of Subscribers either have an existing diversity and inclusion metric in their incentive plan or will be adding one for 2021. However, there is clearly much to be learned about the best way to implement a metric like this; even for companies with a long-standing practice of setting diversity goals, tying those goals to executive compensation is a new proposition.
Among the plethora of consultant papers on this topic,
Semler Brossy’s framework stands out as particularly useful. Semler outlines a “decision tree” to help prioritize company objectives with regard to D&I goals:
- Identification of Critical D&I Priorities. The company has to start by articulating which aspects of diversity, equity and inclusion are most material to long-term strategy and success, then identify a plan to execute and key goals to measure progress on execution of that strategy.
- Determine Key Objectives. Next, consider whether process and behavior or outcome is more important, while identifying objectives (is the company responding to external pressure? Desirous of signaling the importance of D&I internally? Wanting to change its culture?)
- Decide Whether Metrics Are Appropriate. Having completed the above exercise, the company can determine whether its goals are better addressed by inclusion of D&I metrics in the incentive plan or by other means, such as public commitments or tying performance reviews and promotions to D&I achievements.
Semler concludes with an equally useful list of conditions that must be met in order for D&I metrics to be effective in an incentive plan. These include a well-articulated strategy, willingness to retain the goals for a long period of time, willingness to set real, stretch goals and willingness to disclose why goals were not met. In addition, a scorecard approach may provide more balance and less risk of achieving one diversity goal at the expense of others (i.e., meeting short-term hiring goals but failing to develop an inclusive culture).
