How DEI Metrics Can Drive Meaningful Change

Now more than ever, fund leaders are recognizing the need to address the mounting pressures around improving workplace fairness and equity. They’re answering to growing regulations around pay transparency, countless LP requests for diversity and ESG reporting, employee demands for inclusive workplace culture, and more. This work extends into the portfolio as portco leaders seek out guidance on improving workplace fairness and LPs request portfolio-wide diversity, equity, and inclusion (DEI) metrics. Nearly 40% of funds received portfolio-level DEI reporting requests from LPs in 2022, up from 30% in 2020, based on a recent Deloitte study.

Increasingly, funds are implementing DEI strategies and establishing DEI goals: in 2022, 63% of funds either had specific DEI goals in place or planned to within 6 months, according to Deloitte. The effectiveness of these strategies, however, is hard to capture without data.

To start, leaders need data to identify trends and areas for improvement within their organizations and portfolios. Over time, leaders need data to track progress, compare against benchmarks, and measure the impact of DEI efforts. At its core, a successful DEI strategy must be rooted in data. 

Whether you are looking to improve diversity, equity, and inclusion (DEI) within your internal organization or among your portfolio companies, there are a number of key metrics that can help you assess progress and drive improvement. Some common DEI metrics to measure and focus on include:

1. Diversity in hiring and leadership: Organizations with racial, ethnic and gender diversity outperform their industry peers in terms of total return to shareholders, with ethnically diverse companies being 36% more likely and gender-diverse companies being 25% more likely to achieve such financial success, according to a study by McKinsey. To track progress, organizations should capture employee-disclosed demographic data. This includes information on race, ethnicity, gender, sexual orientation, and other factors that influence an employee's experience in the workplace. Some of this data may be tracked in existing HR systems, often captured during onboarding, but self-ID surveys are often helpful to collect deeper demographic data.

2. Pay equity:  With the rise of pay transparency laws, pay equity across gender, racial, and ethnic groups has been top of mind. 66% of organizations recently surveyed by Payscale said pay equity analysis was a planned initiative in 2022, up from 20% in 2021.

3. Promotion velocity: Workforce diversity tends to decline as you get into more senior levels of an organization. A recent MIT study found that female employees were on average 14% less likely to be promoted than their male colleagues despite receiving higher performance ratings. Measuring the rate of promotion across different demographic groups is an important indication of workplace equity.

4. Employee retention and engagement: A study by the Kapor Center for Social Impact shows that 40% of men of color from underrepresented groups and 36% of women of color from underrepresented groups claimed unfairness as the reason for leaving an organization. Beyond hiring diverse employees, organizations must create fair workplaces to retain them. Organizations should track attrition trends by demographic to identify areas for improvement and track progress against retention goals.

5. Inclusive culture and accessibility: More than 50% of millennials say they would leave their current job for a more inclusive one, according to a recent Deloitte study. This growing desire for inclusion in the workplace underscores the importance of a robust DEI strategy. 

For meaningful DEI progress, organizations need to track these DEI metrics on an ongoing basis and measure improvements over time. As shareholder demands and legal standards make DEI reporting increasingly necessary, adopting a software platform can help automate the often manual process of pulling in data from disparate systems and spreadsheets and reformatting into bespoke templates. Implementing a software platform also enables fund leaders to visualize trends and uncover insights from the data, both internally and across their portfolios, and drive improvements. 

About Arbor

Arbor enables fund leaders to easily capture, analyze, and benchmark on DEI outcomes, both internally and across their portfolios. Built by investors, for investors: Arbor’s self-ID surveys and integrations into existing HR systems enable organizations to compliantly and securely capture employee-disclosed demographic data, while staying compliant with data privacy and security regulations. Beyond collecting the data, Arbor’s dashboard enables leaders to visualize trends over time, benchmark outcomes against industry averages, and easily export into reports for shareholders. 

Contact us at hello@findarbor.com to learn more about how our platform can help your organization.