Over the past five years, views of appropriate ways to account for human capital have undergone a remarkable shift, moving from treating human capital as a cost to an asset. Emerging guidelines from the SEC point out that, in 1973, over 80% of the S&P 500’s market capitalization was held in tangible assets (like property, manufacturing plants, and equipment).  However, by 2020, 90% of the S&P 500 was based on intangible assets like human capital. This focus on understanding the asset of human capital has challenged all organizations — whether public or private — to think about how they measure and report on human capital, the investments in their workforce, and the impact of those investments.

Organizations are Shifting From DEI to Inclusion and Belonging Frameworks

The 2022 U.S. Supreme Court decision on affirmative action has also driven changes in how organizations frame the value of human capital. In response to that decision, many organizations moved toward focusing on metrics that measure inclusivity while demonstrating that their organizations continue to “access and develop new sources of talent, and to evaluate the effectiveness of these efforts.”

This evolving landscape creates an imperative for human resource leaders to have a clear strategic framework for measuring belonging and inclusion and tying these data to business outcomes. That framework must include demographics, attitudinal data and business metrics with a strong focus on pattern-seeking, analytics and inspiration. Let’s explore those ideas.

Start With Demographic Data — But Remember They are a Rear-View Mirror

Demographic data provide insights into whether organizations successfully develop the diverse and inclusive workforce they need to compete. These demographic variables are readily available and represent many social identity categories, including veteran status, age, disability status, socioeconomic status, race and gender. They are the starting point for describing the organization’s current workforce and setting benchmarks to measure change over time.

Demographic data are foundational to understanding inclusion and belonging. However, they tend to be lag indicators — a rear-view mirror that reflects past hiring decisions, promotions and the overall composition of the organization. Reviewing demographic trends over time is a solid way to look at whether the organization is progressing toward its inclusion goals. However, relying solely on demographic data can hide opportunities. Supplementing demographics with other data will deepen understanding of the organization’s inclusivity culture. Below, we offer suggestions for exploring demographic data and adding new data to create insights.

Get Curious and Explore Data Patterns in Your Demographic Data

Take time to explore your existing demographic data. Be thoughtful and creative in how you can slice data to find both challenges and opportunities. Do you see different patterns of data by organizational function? By specific regions or locations? By specific managers and leaders? As you look, ask the question why: Why do some functions have greater representation than others? What actions do some managers take that result in that greater representation? Get curious about what is happening and investigate. Your goal is to find patterns in the demographic data so you can dig in to ask new questions.

Add Data From Employee Engagement and Organizational Culture Surveys

Most companies collect employee engagement data, typically on an annual basis. Engagement surveys typically measure two things: 1) soft outcome metrics, for example, likelihood to recommend the company as a place to work, stay intention and engagement itself; and 2) key drivers of those outcomes, such as relationships with managers, role clarity and perceptions of pay equity. These additional driver questions often measure perceptions of inclusion and belonging: Do employees believe their organization has created an inclusive culture? Do they feel like they belong? Inclusion culture surveys can also measure feelings of belonging.

These attitudinal questions ground the next step of linking inclusive cultures to hard business metrics.

Tie Inclusion to Business Outcomes

With the foundation of demographic data and perceptions of inclusive cultures, the framework can now extend to focus on business outcomes. What is the impact of diverse teams (measured by demographic data) and perceptions of belonging and inclusion (measured by attitudinal data) on a specific business outcome?

You must now append hard business metrics by working with your internal human resources information system (HRIS) business partners. Only request data that answer relevant questions you have generated from your initial data explorations. Do not take unnecessary time and resources, and always adhere to your organization’s required policies and procedures for collecting and handling personally identifiable information (PII data).

Categories of hard business metrics appear below, and as you explore the metrics, you will once again seek patterns in the data: Do the business outcomes differ by demographic segment? By perceptions of belonging and inclusivity?

Begin appending and exploring the metrics that specific business functions own and explore patterns within each function. For example, sales may own “new revenue contracted” or “number of contracts in the pipeline.” Examine whether the scores for revenue and contracts differ by sales groups — and whether those sales groups differ in their demographics or measures of inclusion and belonging. What patterns do you see?

Appending business metrics can help the organization get specific on which areas of the business have opportunities to improve their hard business metrics while investing more in inclusion and belonging. These categories represent a rich suite of metrics and data that can become predictors of those outcomes — the levers of change. They form a world of possibilities for seeing the impact of diversity, inclusion and belonging on important business outcomes. Examples might include:

• Sales: Revenue growth, number of new contracts, deal size.
• Technology innovation: Number of new products introduced, revenue from new products.
• Call center: Number of calls answered within a time period, customer satisfaction for issue resolution.
• Information Services: Uptime, number of tickets, time to resolve tickets.
• Retail units: Foot traffic, year-over-year sales per square foot.

Inspire by Connecting Inclusion Initiatives and Outcomes to the Greater Good

Most organizations have a vision, mission and/or values that state the organization’s commitment to a greater good. Many employees want to work for purpose-driven organizations: Linking your diversity and inclusion initiatives and metrics to these goals is a powerful way to make the connection between purpose and performance. Organizations can use benchmarks and inspiring goals like the UN Sustainable Development Goals to inspire and motivate employees.

You may be surprised to know that some independent organizations provide benchmark data for inclusivity and belonging metrics, comparing companies and industries in their annual reports. These benchmarks can provide data for comparing your organization’s results to others. Potential resources include:

• Human Rights Campaign: Focuses on the LGBTQ+ community. Provides comparative benchmarks for corporate inclusion and equality and a report on healthcare equality.
• Disability Quality Index: Focuses on disability inclusion across six categories for 485 companies.

Organizations can also inspire employees by linking corporate goals for building inclusive organizations to the UN Sustainable Development Goals. Demonstrating how your organization’s work contributes to the global community can inspire and engage employees. For example, the UN SDG goals that specifically relate to inclusion and belonging investments include:

• Goal 4: Quality Education: “Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all.”
• Goal 5: Gender Equality: “Achieve gender equality and empower all women and girls.”
• Goal 8: Decent Work and Economic Growth: “Promote sustained, inclusive, and sustainable growth, full and productive employment, and decent work for all.”

Many corporate social responsibility (CSR) reports and environment, social responsibility and governance (ESG) reports can also inspire and motivate employees. Take advantage of this format to report on your workforce investments and highlight advances in creating inclusive organizations and the impact to both purpose and performance.

In Sum

Developing the framework for measuring inclusion and belonging — and its impact to the organization — requires a focused, strategic approach coupled with curiosity. The framework includes the lag indicator of demographics as well as attitudinal data and business metrics. Exploring patterns in data by leader, function, location or other views will identify both challenges and opportunities to improve and invest in inclusion and belonging — and linking those goals to the organization’s commitment to a greater good can inspire and motivate employees.