“What gets measured gets improved.”
Legendary management consultant Peter Drucker famously said these words 40 years ago and they’re just as relevant today.
Corporate America has taken this advice to heart. The business community has a long history of using bonuses to get their executives and employees to shape up and improve performance. Bonus programs, when they’re well-designed and implemented, can be an effective accelerant for change. When a company ties business goals to financial benefits, it sends a strong signal the firm takes the goals seriously.
These days, organizations have become well aware that creating a diverse and inclusive workforce culture is not just a nice-to-have. It’s not only beneficial for recruiting and employee morale, it’s good for the bottom line. According to research by McKinsey & Company, organizations with a more diverse senior management team (gender and ethnicity) and an inclusive culture outperform their industry peers who are not as diverse.
But, despite the increasing awareness about the benefits of diversity, we haven’t seen traction at the macro level in terms of the closing wage gap and opportunity gap for women and minority groups. The majority of leadership positions in the largest firms in the U.S. are still occupied by men. And, women and minority groups like Hispanic and African American workers are still underpaid and underrepresented in higher level positions compared to their white, male counterparts.
To inspire the right kind of change fast, bonuses provide a viable solution
Catalyst CEO Deborah Gillis strongly advocates increasing monetary bonuses for leaders who deliberately promoted women and docking the pay for those who do not.
“We know that women face a glass ceiling [and] for women of color it’s a concrete ceiling,” Gillis said in an interview with Fairygodboss in 2016. “Given that 95 percent of leadership positions at some of the largest companies are occupied by men, they need to be champions of gender equality.”
Tying diversity goals to financial benefits signifies that companies take diversity advancement goals more seriously and pushes leaders to be accountable for their behaviors and confront their unconscious biases.
“Who gets promoted? Who gets that new opportunity?” says Gillis. “It should be people who manage in a way that’s inclusionary.”
This idea is starting to gain traction. In fact, a few pace-setting organizations have already implemented this idea.
Companies That Tie Bonuses to Diversity Goals
Microsoft and Intel have both said diversity is one of the strategic performance goals that determine 50 percent of executives’ annual cash incentives. This is described in the companies’ proxy statement, as reported by TheCorporateCounsel.net. For Microsoft, this move came in 2016 following a year of decline in the number of women that make up its workforce, as reported by Bloomberg.
In 2015, Intel’s then CEO Brian Krzanich set a goal to reach “full-representation” by 2020, as reported by WSJ. Intel defined full representation as having a workforce that is reflective of the available talent pool in the technology industry, and earmarked $300 million to spend towards strategic initiatives to achieve their goal. Intel baked diversity and inclusion goals into the business strategy, with seven percent of all employee bonuses tied to hiring and retention goals. To encourage referrals of more diverse candidates, Intel doubled the referral bonus for staff who referred diverse candidates.
The chip-maker also invested in initiatives like Warmline, which catches workers who may be thinking about leaving because they do not feel challenged or included. In October 2018, the firm announced they had achieved “full representation.” According to Barbara Whye, its Chief Diversity and Inclusion Officer, women and underrepresented groups like Hispanic and African-American workers are now leaving at a slower rate.
Johnson & Johnson: Each Johnson & Johnson department is held to very specific goals based on metrics styled similarly to other business objectives. “Until you actually put metrics on these things… you don’t get the right outcomes,” Sandra Peterson, Johnson & Johnson’s Group Worldwide Chairman, told The Wall Street Journal. “The signal of the importance of something is whether you’re actually measuring it and you’re holding people accountable to improving those numbers.”
Facebook: Staff recruiters were given points for successfully recruiting diverse candidates. These points apply to Facebook’s internal ratings system and lead to stronger performance reviews and potential bonuses. While the company still has a long way to go (the number of Hispanic and black employees has remained stagnant within the U.S. offices), the percentage of female employees rose to 33 percent in 2016.
Just last month, Facebook added a new metric to its employee bonus formula: employees’ ability to tackle problems like misinformation and hate speech on its service. As reported by Fortune, this change came about after Facebook faced mounting pressure from consumers, advocacy groups and regulators to clamp down on illicit content and privacy breaches.
Uber: Former U.S. Attorney General Eric Holder’s report regarding his investigation of Uber’s sexual harassment problems endorsed the “bonus as carrot” approach. Under this tactic, Uber would incorporate “ethical business practices, diversity and inclusion, and other values from Uber’s Business Code into its executive compensation program.” Based on public information, it’s not clear the extent to which Uber baked D&I targets into its executive compensation program. However, Uber now supports Employee Resource Groups (ERGs) and published on its website that “employees who showed significant leadership in ERGs receive a special bonus in recognition of their work to further inclusion at Uber.”
At this point, there is a strong business case to be made for taking diversity seriously. Companies that aren’t proactive from within may soon face pressure from shareholders and employees.
Google ShareHolders Call on Board to Address Gender and Racial Diversity
Photo by Office Snapshots
In the summer of 2018 and again just last month, shareholders of Google’s parent company, Alphabet Inc., have called on the Alphabet board to address issues related to gender and racial diversity, and tie these metrics to executive compensation.
A proposal delivered by Google shareholders and backed by Google employees calls for the board of its parent company, Alphabet, to address issues related to gender and racial diversity, and tying these metrics to executive compensation, Bloomberg reports.
The shareholder resolution states the lack of diversity in tech is a “crisis” that “threatens worker safety, talent retention, product development, and customer service.” The resolution also notes Google employees are not satisfied with the company’s response to a series of concerns raised in the past year, including ending forced arbitration and adding a worker representative to its board.
“We believe executives are out to lunch on several key social risks facing the company,” Pat Tomaino, Director of Socially Responsible Investing for Zevin Asset Management LLC, a Google shareholder, told Bloomberg. Last year, Zevin and others introduced a similar shareholder proposal backed by Google employees that would tie diversity metrics to performance. Alphabet rejected the proposal.
The most recent resolution claims Alphabet “has not responded adequately to key demands” made by workers in a massive walkout in November, such as adding a worker representative to its board and ending forced arbitration for its entire workforce. It also asks the board’s compensation committee to look into including “sustainability metrics”—such as executive diversity— into its bonus system or stock vesting protocols.
Tell Us What You Think
Does your organization have diversity targets? To reach your goals, what programs and initiatives have you implemented? Tell us what you think in the comments below or on Twitter.