In June President Biden issued, Executive Order (EO) on Diversity, Equity, Inclusion, and Accessibility in the Federal Workforce, to:

“. . . strengthen [government’s] ability to recruit, hire, develop, promote, and retain our Nation’s talent and remove barriers to equal opportunity.  It must also provide resources and opportunities to strengthen and advance diversity, equity, inclusion, and accessibility across the Federal Government.  The Federal Government should have a workforce that reflects the diversity of the American people.”

It could be a model for state and local government.  Last August the National Governors Association surveyed states on DEI “activities, goals and challenges.”  Only twenty-three states responded.  In four the DEI lead was a cabinet-level position or reported to the Governor.  Four others are on the Governor’s staff or report to someone within the Governor’s staff.  The White House commitment still has to be fleshed out but on paper only a handful of states have made a similar promise.

DEI Has Become a Business Concern

Here the business world is ahead of government.  Prominent companies were on this bandwagon several years ago.  Today companies like Microsoft and Johnson & Johnson link achieving diversity goals to year-end executive bonuses.  They recognize that discriminatory hiring shuts out more than half of the potential applicants.

Recruiting to add essential talent has become a global concern.  A paper posted on the World Economic Forum website highlights 6 ways the COVID-19 pandemic could change our approach to human capital” –

• Fair Pay”. “. . .conversations about racial injustices and fair treatment of all cohorts . . . are raising questions of whether pay programs have biases, beyond gender.  . . . concern with “fair pay”, as “pay issues can be symptomatic of broader talent diversity issues.”
• “Well Being”. “Now . . . workforce health, resilience and well-being are even more critical to sustaining operations.”
• “Inclusion and Diversity”. “A robust I&D strategy will . . . enhance levels of innovation . . . as more people from different backgrounds share their insights.”
• “Future of Work: Fast-Tracked”. “The ‘future of work’ was well underway before the pandemic, but COVID-19 hastened its arrival.  The pandemic necessitates actions to realign, repurpose and (re)skill talent . . .”
• “Leadership: promoting a culture that encourages well-being.” “Boards are relying on leaders “to espouse a culture that promotes physical and psychological safety, all while delivering business results.”
• “Culture: values and purpose move to the forefront”. High-performing companies “should work to create a culture where purpose and values help employees understand what to do support the overall strategy.”

The Business Roundtable has released a strongly supportive statement “Promoting diversity, equity, and inclusion.”  Universities recognize their continued success rides on their reputation for an experience that welcomes all applicants.  In healthcare, Health Professionals for Diversity (HPD) is a coalition dedicated to improving the health of all U.S. residents.  Support is growing in all sectors.

Understanding DEI

DEI advocates have argued ‘diversity’ is too narrow.  In keeping with traditional thinking, the term carries connotations of quotas and focuses on compliance.  Diversity is too often summarized in metrics that are useful only to document change over time.  ‘Equity’ in HR parlance suggests fairness and surfaces only to state a need for corrective actions.  ‘Inclusion’ is broader and implies individuals feel accepted and their capabilities integrated in day-to-day operations.

However, promoting diversity does not insure a culture of inclusion.  A McKinsey survey found 52% held a positive sentiment on diversity but only 29% were positive on Inclusion.  Two barriers appear to stand in the way of sustained change in company culture and individual mindsets and behavior.

• The first barrier is a lack of purposeful follow-through on diversity pledges. Many companies have publicly committed but have not adopted a systemic, business-like approach.
• A second barrier relates specifically to inclusion and failing to address misconceptions about fairness and meritocracy. The “everything should be the same for everyone” argument fails to consider the reduced, sometimes absent, support and mentorship for women and minorities.

Simply adding women and/or minorities can be seen as a token unless they believe they are treated equitably and gain acceptance.  Acceptance as valued contributors is the key.

The Argument for DEI

Of course, there is an argument that DEI is “the right thing to do.”  However, there is extensive evidence that a DEI commitment benefits organizations.

Perhaps the strongest argument for DEI was in a speech last September by Allison Herren Lee, an SEC Commissioner.  (For reference – https://www.sec.gov/news/speech/lee-cii-2020-conference-20200922).

From her speech,

• “How can one justify – in economic terms – the systematic exclusion of a major portion of the talent base from the corporate pool.” (Women and minorities account for more than half of the workforce.)
• “A recent study by McKinsey . . . found that companies with the greatest ethnic diversity on executive teams outperformed those with the least by 36% in profitability.”
• “Fortune 500 firms with the highest proportion of women on their boards outperform those with the lowest.”
• “There is growing recognition that a lack of diversity represents a significant reputational risk for companies and may hamper their ability to recruit and retain top talent.”

The evidence suggests once the DEI promise is engrained in the culture, it contributes to improved morale and that raises performance levels.  That is important in every organization.

Although not from the speech, last year the SEC amended its rules to require companies to “disclose a description of their human capital resources and “’any human capital measures or objectives that the company focuses on in managing the business” beginning in 2021.  The information disclosed will not necessarily allow comparative analyses but it will be publicly available.

As the Biden EO argues, the reasons are even more compelling for government.  A simple step would be to require agencies to report DEI metrics annually.  Allowing discriminatory practices to continue undermines the promise of government for all.

Confirming Human Capital Practices are Fair

Employee salaries are a composite of decisions made throughout their careers.  That, to illustrate, is the reason many pay equity laws now preclude asking applicants to disclose their pay with a current employer.  Adjusting salaries to comply with “equal pay for equal work” suggests an organization is static and says nothing about fair career opportunities going forward.

Recognizing that bias and discrimination can affect careers at any point, the Biden EO stated:

“Agencies are to develop strategies to support DEI and eliminate barriers to equity at each stage in employee careers — recruitment; hiring; background investigation; promotion; retention; performance evaluations and awards; professional development programs; mentoring programs or sponsorship initiatives; internship, fellowship, and apprenticeship programs; etc.”

It’s not stated but implicit that agencies should plan to assess the fairness of their practices at each stage.  Toward that end, the EO requires agencies to adopt an “evidence-based and data-driven approach”.  Where career decisions are made primarily by managers, as opposed to a centralized HR office, bias or discrimination can be a local problem, which makes the assessment more extensive.  Many government human capital practices have never been subject to a rigorous evaluation in the past.

How employers approach audits will depend on the size of the covered workforce and the available database.  Missing or unverified data is a common limitation.  Data elements like prior experience are not always verified.  Plus, the information governing hiring and promotions are often not documented.  Analyses of promotions, for example, should include everyone considered.

Most of the practices on the Biden EO list can be assessed with simple descriptive statistics and documentation – counts, means, summaries of skills, etc.

Pay equity is more complicated.  They require a more complex, multivariate analysis for two reasons.  First, that’s expected.  It’s been the standard practice since the 1980s.  Second, in contrast to the practices largely controlled by HR, individual salaries are a composite of decisions by managers over careers.

Men and women have been paid differently for decades; that’s been confirmed by countless studies – or more correctly stated, the statistical analyses confirm only that men and women have been paid differently.  It is not correct to argue a pay gap is evidence of discrimination although it could be.  In this context statistical analyses summarize the mathematical relationships between pay and the “independent” variables – in concept, that is skill, effort responsibility, and working conditions.

A caution — Early in the push for comparable worth, the advocates began relying on statistical models that include age and education, specified in years and degree level.  Education is a proxy for skill; age is a proxy for experience.  It’s certainly not a surprise that older workers earn more than younger workers.  Better educated workers also get paid better.  The analyses commonly result in pay gaps but its important to recognize that no employer by policy ties pay to age or years of education.  Using those variables is contrary to a widely shared pay policy.

Although it’s not always acknowledged, pay equity analyses narrowly focused on occupations would generate a new equation each time.  That is to say, the statistical results based, for example, on accounting jobs would not be the same as one based on engineering jobs.  Regression analyses simply summarize the relationships between data points; they do not “explain” the statistics.

Employers should plan similar analyses to understand the differences in pay increases, bonus/incentive awards, stock grants, promotions, and performance ratings.  It should also include the use of market data and the reclassification of jobs.  It’s those decisions that govern compensation levels.  There is another phrase, “fair pay”, that follows from the staffing strategy and should be the ongoing goal.

Despite careful planning, it’s highly likely that the analyses will produce statistical evidence that suggests bias or discrimination – but the differences could be fully justified.  Decisions will be difficult.

A suggestion is to create Employee Resource Groups (ERGs) or Affinity Groups to assess current practices and develop plans for the future.  They often play a similar role in high ed and healthcare.  The idea is highlighted on the website, Great Places to Work.