Companies seeking to improve their performance on diversity, equity, and inclusion face a critical question: What works? A year ago, Grads of Life and Bain & Company published a report detailing 10 actions, based on available academic literature, as well as our own work with clients, that show the strongest evidence of being effective. We found that some, such as offering voluntary DEI training or creating mentoring programs, are common among companies seeking to advance DEI, while others, such as skills-based hiring or offering family-sustaining wages and benefits, remain rare.
In an effort to take the pulse among companies displaying a strong interest in improving their DEI practices, we created an Opportunity Identifier (OI) tool, an online “lite” version of the more in-depth Opportunity Identifier offered to clients of Bain and Grads of Life. The responses to the online tool are not a scientific view of the state of DEI practices in business today—in a question about living wages, for example, it’s clear the survey responses diverge fairly sharply from what other data sources show to be actual trends. But they did provide us with an initial glance at how a self-selected cohort of 170 respondents with a clear interest in DEI evaluated the efforts at their own companies and how they scored the relative state of development of each of 10 tactics we earlier had identified (see table).
Overall, employers are still early stage in their DEI journeys
These respondents assessed themselves at “early stage” or “developing” for 9 of the 10 actions. Given the wave of companies that made serious commitments to DEI for the first time in 2020, it is unsurprising that many remain early stage in the work. Improving DEI outcomes takes a sustained commitment and rigorous approach over a multiyear time horizon. One common challenge that can hinder employers’ progress is a gap between employers’ DEI initiatives and broader business strategy. In our experience supporting clients, from smaller firms to some of the top employers in the nation, many businesses neglect to tie DEI efforts to specific, measurable efforts, goals, and outcomes. Many also lack dedicated resources—leaders, teams, budget—to drive critical DEI programs: Only 34% of HR and DEI leaders say they have what they need for these programs. Any business strategy without mechanisms to measure progress and the appropriate resources to prop up initiatives is likely to stall or move slowly; DEI is no different.
Yet there is growing momentum in the private sector to double down on DEI investments and make progress on outcomes, as evidenced by the growth of groups like OneTen and shifting statements of priorities from groups like the Business Roundtable. Meanwhile, shareholder demand for DEI data is mounting, as are calls for companies to conduct racial audits, and a growing number of companies are tying executive compensation to DEI progress. We believe these forces will further push companies to strengthen DEI data measurement and become even more intentional about DEI actions.
Skills-based hiring remains underutilized
Although a robust body of academic research supports these actions as particularly effective, they are also underutilized. Let’s look at one where we were particularly surprised to see respondents assess themselves as “early stage”: skills-based hiring. Skills-based hiring focuses on the skills and competencies candidates need and deprioritizes credential-based criteria such as college degrees.
Skills-based hiring can require a significant mindset shift at many companies, and most find they need to invest in internal DEI education. At the same time, they need to:
- train hiring teams;
- conduct an inventory of roles to determine which are eligible for skills-based hiring;
- define and map required and preferred skills for target roles;
- build partnerships with workforce development organizations;
- eliminate degree requirements from job descriptions wherever possible; and
- revamp screening and interview processes to center around skills and competences.
These investments pay off. As we described in our report, skills-based hiring results in higher retention and increased representation. Early leaders include Google, which has reduced reliance on degrees in job postings by 17% since 2017, and IBM, where only 29% of IT roles require degrees.
Yet even among the respondents to our online tool, the vast majority (85%) described themselves as “early stage” or “developing” when it comes to implementing skills-based hiring, meaning they had adopted fewer than 50% of the best practices above. And the fact that 1 in 6 respondents have not started on skills-based hiring at all suggests that other stakeholders (coalition leadership, academics, researchers, consultants, etc.) have an opportunity to promote its benefits more widely and offer more support to employers.
Unsurprisingly, the online self-assessments showed that revising job descriptions to focus on skills had the highest level of adoption among the best practices that make up skills-based hiring, closely followed by eliminating unnecessary degree requirements and training hiring teams on skills-based interviewing. These are important steps at the heart of skills-based hiring.
But respondents reported far less adoption of equally important tactics, such as mitigating bias in the hiring process via masking of candidate names and intentionally building diverse candidate slates. This reveals that companies have an opportunity to better connect skills-based hiring to DEI. Four-year degree requirements automatically exclude 76% of Black Americans and 83% of Latino Americans, so, when paired with these bias mitigation tactics, removing those requirements and shifting to skills-based hiring can be a powerful way to build a more diverse, equitable, and inclusive workforce.
Companies also appear to be slower at partnering with nontraditional recruiting entities (such as nonprofits and community colleges) to source candidates. Companies that commit to skills-based hiring open their roles to previously excluded talent. But to maximize the benefits of skills-based hiring, especially its DEI benefits, they also need to invest in new sources of such talent.
Companies seem to focus their DEI efforts inside their organization
It is no surprise that companies are naturally focused on strategies that directly affect their people. For example, our self-selecting group of responding employers gave themselves high marks on offering family-sustaining wages and benefits. More than 60% said they meet MIT’s living wage standards and offer at least 60% health insurance coverage to all employees (full-time, part-time and contract workers). As noted above, we know these results are not reflective of the American workforce more broadly: Nearly 52 million US workers make less than $15 per hour. For frontline workers, women, people of color, and the intersecting groups therein, economic stability remains largely inaccessible. We also recognize that for those groups historically excluded from the economic mainstream to truly achieve economic stability and move from surviving to thriving, they often need more than what is commonly defined as a “living wage.” As employers vie for talent, we hope that the optimistic picture painted by our respondents begins to take wider hold and translate across business sectors.
There is more opportunity for companies to focus DEI efforts externally to broaden their impact. One key tactic—supplier diversity programs—also showed up in the responses as “early stage.” Again, this reflects what we see in our work. Yet supplier diversity initiatives are a powerful way for companies to have an exponential positive impact outside their walls. We encourage employers to learn more about the benefits of diverse supply chains.
While benchmarking and measurement of DEI actions remains in a nascent state a year after our report, we hope that companies are beginning to understand the opportunities and areas where they can take greater action.