Posts Tagged ‘employee morale’

The Business Case for Diversity

One of the three core expertise areas I offer in my consulting practice is diversity management with a specialization in the LGBT (Lesbian, Gay, Bisexual and Transgender) workplace and marketplace. Earlier this week I published a similar blog on another area of expertise titled “The Business Case for Career Road Mapping / Skills Development.” Click on that title to link to the article.

Senior corporate leaders and stockholders expect to see a financially based business case for practically any business initiative, and this of course would include corporate diversity programs. Can I show with actual dollars how investing in diversity initiatives (for example, targeted constituency marketing, benefits programs, management training, sponsoring employee network groups, supporting community organizations, targeted recruiting…) can add to a company’s bottom line? Absolutely yes! I agree this is important and can be done.

Many studies on diversity management highlight that robust diversity initiatives positively impact employee engagement / employee productivity, employee retention, and constituency sales. As an example, I will use LGBT diversity programs since that is my area of specialization within diversity management, though the methodology could easily be used for any other constituency (Women, Black, Hispanic, Asian …) or even for cross-constituency programs.

For this example, I will use a 2,000 person business with an average employee salary of $40,000 and annual revenue of $250M. And I will conservatively estimate that 6% of employees and business revenue is from the LGBT constituency.

PRODUCTIVITY CALCULATION: number of employees x constituency percentage x average salary x percent productivity gain = productivity gain in $. For example, with 2000 employees with 6% being LGBT, salaries of $40,000 per year, a 5% productivity gain nets 2000 x .06 x $40,000 x .05 or $240,000.

ATTRITION SAVINGS: number of employees x constituency percentage x average salary x time for fully onboarding new employees x decrease in attrition percentage = saving in attrition $. For example, again using 2000 employees at $40,000, if it take 2/3rds of a year for onboarding and you can avoid 5% of the LGBT population from departing, the savings is 2000 x .06 x $40,000 x 2/3 x .05 or $160,000.

REVENUE GAIN: annual revenue x constituency percentage x percent increase in constituency sales = potential revenue gain. For this example with $250M in revenue, the potential net new revenue from a 5% increase in LGBT market share would be $250M x .06 x .05 = $750,000.

So overall in this case, bottom line we are looking at executing LGBT diversity programs providing a net expense savings of $400,000 and net new revenue of $750,000 to the business.

In addition you would get the “soft” benefits of overall higher employee morale, being able to attract the best talent as word spreads and your enterprise is viewed as an “employer of choice,” and overall community good will.

The Business Case for Career Road Mapping / Skills Development

One of the three core expertise areas I offer in my consulting practice is career road mapping using an innovative process where one page summary career maps of successful employees are mined for themes and then packaged for presenting to all employees in an area. In prior engagements, this methodology has been enthusiastically received by employees and has increased their engagement in career planning.

An example of a one page career map - my own (Stan C. Kimer)

But it does always come down to the bottom line. Can I show with actual dollars how investing in career road mapping can add to a company’s bottom line? Absolutely yes! I agree this is important and can be done.

Many recent articles in the HR press document that employee engagement is at an all-time low. Some 2011 articles in SHRM (Society for Human Resource Management) states that more than half of US employees are dissatisfied with their jobs and 33% plan to look for a new job when the economy improves. With this kind of mindset, these employees are far from peak productivity.

One of the key areas that increases employee engagement is a robust program of career and skills development. Employees are more likely to be engaged when they believe their company truly cares about their development.

Estimated return on implementing a robust career planning program can be calculated in two areas: increased employee productivity and savings in employee attrition.

PRODUCTIVITY CALCULATION: number of employees x average salary x percent productivity gain = productivity gain in $. For example, with 500 employees averaging $50,000 per year, a modest 2% productivity gain nets 500 x $50,000 x .02 or $500,000.

ATTRITION SAVINGS: number of employees x average salary x time for fully onboarding new employees x decrease in attrition percentage = saving in attrition $. For example, again using 500 employees at $50,000, if it takes 2/3rds of a year for onboarding and you can avoid 2% of the population from departing, the savings is 500 x $50,000 x 2/3 x .02 or $333,333.

In addition you would get the “soft” benefits of overall higher employee morale and being able to attract the best talent as word spreads and your enterprise is viewed as an “employer of choice.”

NEXT BLOG: The Business Case for Diversity

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