IMA Analysis

Thursday December 19, 2019

Diversity at the Workplace : The Current State

IMA Research

Progressive organisations know that creating an inclusive environment contributes to business results. More diverse organisations are typically more innovative and often outperform the competition. Moreover, with millennials’ share in the workforce rapidly increasing – and expected to reach three-fourths of the total by 2025 – building a diverse team is not a choice but a business necessity. Understanding best-in-class standards and knowing where one stands relative to peers is a crucial first step. This paper examines the current state of diversity at companies in India – both foreign-owned as well as Indian – and the gap with respect to the ideal ratios companies would like to reach. It draws insights from IMA India’s 2019 Diversity and Inclusion Benchmarks report as well as interviews with CHROs.

THE REALITY GAP

There is urgency and increased emphasis on D&I but actual diversity ratios are quite low at present

Actual vs ideal: far from satisfactory

With growing awareness around diversity and inclusion, more and more companies are realising its importance for talent acquisition and building the employer brand. For younger workers, D&I is not just about hiring a diverse team but also about building an environment where everyone is heard and respected. Research indicates that D&I can drive organisational performance and that diverse teams are more engaged, creative and innovative. However, despite the urgency and increased emphasis on this front, businesses still face a significant ‘reality gap’. IMA’s research shows that, at the median, diverse groups (including women, as well as groups identified on the basis of ethnicity, sexual orientation, age, physical ability or attributes, and religious or ethical value systems) make up only about 20% of the workforce against a desired goal of around 40%. In fact, only 8% of companies have actually been able to achieve their D&I goals so far, at least in terms of the basic measure of share of workforce.

Satisfaction with the current level of diversity is relatively higher in the case of frontline/junior staff compared to the Board and leadership levels. Women and minorities occupy only about 10% of leadership positions. Overall, females account for under one-fifth of the total workforce. The ‘ideal’/target ratio, on average, stands at 34%, or about 60% higher than the current level.

Stark variations exists between companies with high and low diversity

IMA India’s research on D&I classified companies with diversity ratios of 30% or more (share or workforce) as ‘high diversity’ companies and those with 12% or less, as ‘low diversity’ ones. The variance between these two categories is therefore fairly stark, with the former having 2.5 times more diversity than the latter. High diversity companies are, needless to say, closer to their desired ‘ideal’ than are low diversity ones but both still have a long way to go. For low diversity companies, the variance between current and ideal share of workforce is 2.5x while that for high diversity companies is 1.6x. As the chart shows, low diversity firms are looking to raise their diversity ratio to 29% from the current 12%, compared to nearly 50% that the high diversity firms are targetting. Cross-tabulation of data by different groups revealed that companies that spend more on D&I, have a formal D&I policy and a dedicated D&I function tend to have higher levels of diversity.

The diversity mix: yawning gaps

Huge gaps exist in terms of both female representation and the share of ethnic/religious minorities, with high diversity companies having 3x and 2x more employees in each segment respectively, than low diversity companies. More diverse firms also hire a greater number of physically disabled individuals and those that identify as being LGBT, though in absolute terms, the numbers remain small.

Women representation varies across company types and industries

Across companies, foreign MNCs have a higher ratio of women (22%) compared to Indian companies while the latter do better in the case of employees that identify as being LGBT. Across sectors, industrial and infrastructure firms are the least gender-diverse. Services and ITeS companies are at the other end with about a third of their workforce represented by women.

THE WAY FORWARD: FROM DIVERSITY TO INCLUSION

The desire to pursue D&I remains self-motivated…

…employee expectations provide a greater thrust than customer expectations in driving workplace diversity

Over 55% of the companies in IMA’s study claimed that advocacy for workplace diversity has increased considerably, while 36% say that it has gone up ‘somewhat’. In over 70% of firms, D&I initiatives are driven mainly by internal as opposed to external stakeholders such as customers. Employee expectations are twice as powerful as customer expectations in driving workplace diversity and three times more than regulatory pressures. That said, solutions built around training and awareness need to give way to ‘new rules’ that demand companies to move past the idea of viewing D&I as a ‘check the box’ activity led solely by HR. Instead, CEOs and business managers must get involved and drive accountability at all levels. In essence, the focus should shift from merely building a diverse workforce to a broader goal of building a culture that promotes an inclusive agenda.

 

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.