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The Costs and Benefits of Diversity European Commission

Center for Strategy andEvaluation Service

Murad KhanSajjad Rizvi(Workforce Diversity)-Professor Aftab10th September -2011

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Salient Points

• Companies that implement workforcediversity policies help to strengthen long-term competitiveness

• Systematic measurement of the costs andbenefits of workforce diversity policies is

important for building the business casefor greater investment

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Obstacles to investment

•  A complex group of obstacles limit thescale of investment in WFD

• Public policy has an important role to play

in tackling these obstacles•  As the business case for investment in

WFD is fragmented, actions by Govt. andother actors is required to overcome thechallenges – esp. by using the experienceof firms that have invested in WFD

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EU Directives

• EU directives – equal treatment inemployment

• Methods and indicators to assess thecosts and benefits in the EU context

• Indicators will form a critical part of thebusiness case for WFD

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Project – in three parts

• Setup activities + Fieldwork + Main report•  Assess existing indicators – how effective

are they in a European context?• Develop a new PM framework for the

costs and benefits of diversity policies• Literature review – survey of 200

companies in four EU countries• Extensive programme of interviews

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WFD in Enterprises

•  A diverse workplace is difficult to define• Depends on the internal culture• Difficult to measure the shifts in values• WFD policies are adopted for three main

reasons – ethical, regulatory andeconomic) – here the focus is on the

economic reasons and linked tocompetitive advantage

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Economic reasons are:

Diversity investments are taking place dueto changes in =• product markets• Labour markets• Capital markets• Government influence• Wider social values

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Benefits of WFD

• Strengthen long term value drivers

• Improve cash flows (ROI benefits)

• Resolve labour shortages

• Open up new markets

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Costs of WFD

• Legal compliance

• Cash costs of diversity

• Opportunity costs of diversity

• Business risks of WFD

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Performance MeasurementFramework

• Why are the costs and benefits of investing in WFD measured by firms?

• Measurement drives action•  Assess ROI• Justify the opp. cost• Learn lessons for future similar 

investments

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Proposed Model Approach

This has three parts:

I. Programme implementation

II. Diversity Outcomes

III. Business Benefits

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Indicators of WFD•

PROGRAM IMPLEMENTATION• Top management commitment;• • Diversity strategy and plan;• • Organisational Policies;•

• Employment Benefits;• • Managerial incentives;• • Organisational structures;• • Reporting process (monitoring and evaluation);•

• Communication;• • Support networks;• • Education and training; • Productivity losses

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Diversity Outcomes - I

• Workforce demographics(‘representation’); and

• • Employment culture/working

environment

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Business Benefits - I

• Cost Reductions;• • Labour shortages;• • Access to new markets;• • Improved performance in existing markets;• • Access to talent;• • Global management capacity;• • Innovation and creativity;• • Reputation with governments and other 

stakeholders;• • Marketing image;• • Cultural values

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CONCLUSIONS

• The business case for WFD is fragmentedand complex

• More advanced in the USA than in Europe• Dissemination of this report has to be

effective

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RECOMMENDATIONS

• Develop case studies• Invest in company surveys across the EU• Support for a network of diversity promotion

organizations• Develop new tools for measuring the benefits of 

WFD programmes• Support EU level conferences• National studies – links between diversity

investment and business benefits