IMA Analysis

Thursday February 27, 2020

The Sweet Spot for D&I

THE SWEET SPOT FOR D&I

Speaker: Adit Jain,Editorial Director, IMA India

It is commonly believed that diversity and inclusion at the workplace, a phenomenon that probably originated in advanced countries like the US and Europe, would be better practiced amongst multinational corporations belonging to those countries. However, IMA’s analysis reveals that this is not necessarily the case and homegrown, domestically-oriented Indian companies often out-peform their MNC counterparts. Our research also suggests that there exists a ‘sweet spot’ for D&I initiatives in terms of the size of a company’s workforce, where most measures of success appear to peak. This paper, based on IMA India’s 2019 Diversity and Inclusion Benchmarks report, offers a perspective.

MANY WAYS TO MEASURE DIVERSITY AND INCLUSIVENESS

There are several measures of diversity…

There are several measures of diversity and inclusiveness in an organisation. The most direct one is of course the share of diverse employees – women, ethnic and religious minorities, the elderly and retired, the physically disabled and those with alternate sexual orientations – in the total workforce. Others can include the percentage of diverse hires in total recruitment, the average of tenure of diverse workers, and finally the percentage of diverse employees in managerial and leadership positions.

…and for most of them, the statistical evidence is not very flattering

The overall averages are not flattering. Median diversity stands at just 20% of the workforce, most of which comprises women. A second category that is seemingly significant is ‘ethnic and religious minorities’ (15% of the employee base, on average) but since most of these individuals are also women, they do not ultimately contribute towards the net diverse share in the organisation. On the hiring front, diversity stands at 23% on the median while in managerial and leadership positions it stands at 13% and 10% respectively. The average tenure of diverse employees is 4 years which is perhaps the only statistic that could be called respectable.

The gap between high performers and low performers is very significant

Deeper analysis of this data suggests offers three broad observations. The first, and least surprising, one is that the difference between companies that have high levels of diversity versus those that do not is actually quite stark. Highly inclusive companies (those in the top 25% in terms of overall diversity share) have a diversity share of 38% in their workforce against just 7% for the poor performers (bottom 25% in terms of diversity). 33% of their new hires belong to diverse groups against 10% for the bottom group. In managerial positions, 18% are occupied by diverse groups in high performing companies, against 9% in the bottom category. Interestingly however, diversity in leadership positions stands at 10% in both groups (see table below).

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Domestic Indian companies often do better than multinationals

The second, more interesting observation is that domestic Indian companies out-perform foreign companies as well as Indian MNCs on most measures of diversity: they hire more diverse people as a share of the total; they witness higher average tenures amongst their diverse staff; and have a higher percentage in managerial positions.

Organisations that are too large or too small can struggle

Thirdly, and perhaps most strikingly, companies that have very large or very small workforces do not do as well as those in the middle. Even as the very biggest firms do well on some measures of D&I, the ‘Goldilocks’ size appears to be 500-2,500 people (see table below). This may sound counter intuitive, but perhaps isn’t so. Very small companies would not have the wherewithal and bandwidth to make space for diversity initiatives while the really large ones are unable to keep diversity ratios high given the sheer magnitiude of the numbers involved. Clearly, industry dynamics and the nature of business also play a role which may explain why industrial businesses are generally at the lower end of the scale on the above metrics while Services companies, particularly IT, ITeS and financial services, are at the upper end.

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This paper is based on IMA India’s 2019 Diversity and Inclusion Benchmarks report which evaluated about 300 companies – large, medium, and small – across the manufacturing and services space on a detailed set of diversity-related metrics. These include D&I spends, current state of diversity, drivers of D&I policies, D&I advocacy, satisfaction with diversity at each level, measures to promote diversity, metrics to assess D&I success, and outcomes of D&I initiatives. The ensuing benchmarks are intended to serve as a baseline against which organisations can measure their progress and performance. The report is available for purchase from IMA’s offices or online at this link