By Barbara Frankel
As resource groups grow in popularity (100 percent of The DiversityInc Top 50 Companies for Diversity now have them), common questions arise over their structures, their best practices, and assessing the impact of their efforts. We decided to explore these issues through a research project/survey. Our findings indicate an increasing interest in using these groups for multiple business goals internally and externally and in having leaders from a variety of levels and functions within the organization.
We worked with our corporate research sponsors (Wells Fargo, Novartis Pharmaceuticals Corporation, Boehringer Ingelheim, AT&T, ConAgra Foods, Eli Lilly and Company, Chrysler and Target) to develop questions for this survey that ascertained specific areas not being addressed in The DiversityInc Top 50 Companies for Diversity survey and in other research projects. The areas of particular interest were in how to accurately count employee-resource-group participation and how to include hourly/unionized workers; how to find, develop and sustain leaders for employee-resource groups; and what role the executive sponsor should play.
We identified, based on DiversityInc Top 50 data and our knowledge of these companies, 20 organizations that had the best track records for employee-resource groups in these areas based on the participation level of employees in these groups. We surveyed these companies, and nine companies from these industries—financial services, consumer-packaged goods, retail, pharmaceuticals, auto and telecommunications—filled out the questionnaire.
We have interviewed these companies to ascertain their best practices and also have included in here aggregate responses to certain similar questions asked on the DiversityInc Top 50 survey—average responses for The 2011 DiversityInc Top 50 Companies for Diversity and, for comparative purposes, for the 535 participants in the 2011 survey.
RESOURCE GROUP PARTICIPATION/COMPOSITION
In this section, we surveyed the companies about the structures of their employee-resource groups, how they define and count members and how they differentiate between different types of employees (hourly, unionized and contractors) in efforts to be inclusionary but practical.
We note that the DiversityInc Top 50 survey has put increasing emphasis on the percentage of employees who are employee-resource-group members as well as organizations that have these groups consistently across business and geographic units. The primary reason is the direct impact of these groups on recruitment, engagement and talent development of all employees, but especially those from traditionally underrepresented groups: Blacks, Latinos, Asians, American Indians, women, LGBT people and people with disabilities.
In the past five years, we have seen a direct increase in the percentage of employees reported as members of employee-resource groups. Last year, the DiversityInc Top 50 averaged 23.4 percent of employees as “members of employee-resource groups” while the average of all 535 participants in the DiversityInc Top 50 survey was 18.9 percent. Six years ago, when we started asking this question on the survey, the DiversityInc Top 50 averaged 11.2 percent.
There is a direct data correlation between higher membership and increased racial/gender representation at various management levels, according to analysis of the DiversityInc Top 50. For example, companies in the DiversityInc Top 50 with employee-participation rates above 25 percent in these groups have 18 percent more Blacks, 26 percent more Latinos, 65 percent more Asians and 11 percent more women than companies with employee-participation rates below 15 percent. How, then, do companies define membership and participation? That is the question we sought to explore in this research project.
We asked our survey participants which of the following criteria they used to assess membership: formally signs up for membership; attends events; attends minimum number of meetings; and actively contributes (not necessarily a leadership role but not passive attendance either). The criteria was not mutually exclusive, so a company could check as many as were applicable.
All of the companies (and others we interviewed) considered formally signing up for membership via email, online check-off or a written form to “count” as membership. Only 67 percent considered attending events to “count,” and a few companies told us they don’t count attendance at events. “Just showing up shouldn’t mean you are really involved,” one company stated. Others disagreed. “We want to be as inclusive as possible, and that means that people who attend events should be counted as members.” Sixty-seven percent also said that attending a minimum number of meetings per year (usually three) qualifies a person as actually being a member of the employee-resource group. And only 22 percent counted “actively participating.” “That’s too hard to define,” one company stated.
The determining factor, as with many of these diversity-management definitions, seems to be a company’s comfort level in determining how conservatively—or aggressively—it counts inclusion. In this case, we note that the consumer-packaged-goods and retail industries tend to be more conservative, probably because they employ more hourly employees. This brings us to the next issue: participation of hourly and unionized employees.
EXCLUSIONS: HOURLY/UNIONIZED WORKERS
As the chart here indicates, more than half (56 percent) of the surveyed companies exclude contractors, 22 percent exclude hourly workers and 45 percent have different membership policies for hourly workers. The DiversityInc Top 50 companies, which cover more than 14 industries, report that 30 percent exclude hourly workers. The differences, however, are very strong between industries.
As indicated above, retail and consumer-packaged-goods industries, as well as the hospitality industry and telecoms, employ more hourly and/or unionized workers and have very different policies on their participation. Some companies exclude all hourly and/or unionized workers from participation and only count membership for salaried employees. This limits the talent pool, the opportunity for innovative ideas and the ability to create an inclusive culture throughout the organization, and we do not recommend this. However, we do understand the challenges of including these workers and we did pick up several best practices from our surveyed companies. Highlights include:
• Hourly workers may participate fully but may only be excused from shift work if they assume a leadership position in the employee-resource group
• Hourly employees may participate. However, they are prohibited from assuming leadership positions
• Hourly workers may participate, but they cannot receive overtime for attending events after regular hours without supervisory approval
• No policy excludes approval, but hourly workers are expected to get supervisory approval based on job content
• ERG social events and membership meetings should be conducted during non-working hours (before or after shifts and during lunch). Hourly employees must have special sign-off from management to participate in ERG business during regular work hours
As the chart on the previous page shows, only 11 percent of the companies surveyed charge members fees to participate, with the average fee being $25. Why do this? “We want them to have skin in the game, and charging people a nominal membership fee does that,” one company said. Far more companies, 45 percent of those surveyed, require a minimum number of employees to start a new employee-resource group, with the number required ranging from 10 to 50, depending on the size of the company.
More importantly, most companies require those wanting to start a new employee-resource group to document its value to the organization, including potential members and constituents. The issue of what constitutes a constituency for an employee-resource group is more nebulous. Some organizations insist it should be a traditionally underrepresented group (such as women or Blacks) while others are eager to include more unusual groups—“parents of children with attention-deficit disorder,” for example. More popular newer types of groups deal with religion, age and disability.
Also of note, having employee-resource-group membership available across all business/geographic units is increasingly prevalent. Ninety-two percent of DiversityInc Top 50 companies tell us their groups are available at all locations.
Leaders of employee-resource groups are often tapped to take on more significant roles in the organization. But many companies are unsure of who should lead those groups (those with demonstrated experience, those who are “diamonds in the rough” or more junior), and what type of evaluation/compensation they should receive. Our survey showed there is a wide variety of leadership-selection processes and a growing insistence on performance accountability.
At more than half the companies we surveyed, employee-resource groups themselves determine the leadership-selection process, so it can vary even within the company. HR is involved in the selection process at 44.5 percent of the companies (to vet candidates and/or help generate a candidate slate).
Here are some best practices that companies share on how they select leaders:
• “ERG leaders are selected through a variety of channels: senior leader appointment, identification through talent-assessment process, ERG application process, steering-committee succession plan, or steering committee nomination process. The channel is dependent upon the process set up for each ERG chapter.”
• “We use a dual process. We ask for recommendations from the outgoing leader, vet them for any performance issues, rank-order them based on who could best deliver against the current mission while also meeting their stated development needs. But we also proactively reach out to the senior HR team for referrals based on conversations had during talent-management sessions.”
• “Each group determines their selection process; usually this occurs via a nomination process and an ERG member ‘vote.’ Sometimes, if multiple candidates aren’t competing, it is whoever volunteers.”
• “Potential candidates fill out an application. HR vets candidates for leadership potential. D&I team and executive sponsor for ERG make final selection.”
• “Candidates are solicited from senior leadership and from the talent-management data. A slate of candidates is created from the names, and the program office partners with the senior HR leadership and executive office to place advisers (two per ERG) and, in turn, the advisers place a president from the available slate of candidates.”
LEADERSHIP TRAINING/TALENT DEVELOPMENT
Most of the companies surveyed (67 percent) and most of the companies in the DiversityInc Top 50 we’ve interviewed offer leadership-training opportunities for leaders of employee-resource groups. Only 33 percent of them have metrics to assess the value of the training, usually in the form of participant surveys. For the great majority, these trainings are held annually. The amount spent on these trainings correlates with the size of the organization, ranging annually from $2,000 to $150,000 (for a summit). Those summits/forums are held by some of the larger organizations for their employee-resource-group leaders with specific workshops/topics, including business planning, communications, navigating organizational complexity, building allies, engaging leadership, time management, leadership styles, team building, motivating volunteers, company goals and objectives, cultural competence, and accountability.
How long should individuals hold leadership positions in employee-resource groups? Our survey respondents overwhelmingly favored two-year terms, but a handful also had one- or three-year terms. Two companies said they allow the employee-resource groups to set their terms, and they vary from group to group, but most organizations standardized this throughout the company’s groups. Only 22 percent allow people to serve as the leader of more than one group simultaneously. Most organizations allowed people to serve two terms, although some put no limits on how many terms a person could serve as leader.
The role of the executive sponsor in keeping the group focused on business goals (recruitment, retention, promotion, engagement, community building, customer relations and supplier diversity) is critical. The executive sponsor is the liaison between the group and senior management and, when at all possible, should be of a different demographic group than the employee-resource group’s constituency.
Most organizations rely on their diversity departments with input from human resources to select their executive sponsors, who usually are members of the top three levels of the organization. Diversity departments emphasize but usually don’t insist on cross-cultural sponsors. Here are some best practices reported by the companies:
• “Executive sponsors are recruited by the Global Diversity and Inclusion Office, and we target someone who is vice president–level and above. We also target someone who is a different affinity than the group they represent.”
• “Our Executive Champions are typically senior executives who serve on the Executive Personnel Committee (our CEO and his direct reports). We look at a variety of factors including: ERG interest in the prospective sponsor, sponsor personal interest, and affiliation with her/his organization (e.g., large number of constituents within the sponsor’s organization).”
• “Executive sponsors are required to be senior vice presidents of the company. Sponsors are required to be directors or above. After this, we look at a number of factors in talent planning/selection including personal connections and past experiences. We use sponsorships not only for their expertise in leading but also as developmental experiences for those sponsors.”
• “We determine executive sponsors by level (rank), executive-development need, experience, commitment, interest and identity.”
Do executive sponsors fund employee-resource groups or do the funds for them come from diversity departments? Fifty-six percent of the sponsors fund the groups from their own budgets, but they may not be funding every activity of the group. Executive sponsors, according to our survey, fund dinner/lunch meetings with employee-resource-group leadership teams, give money for members to attend national conferences, can fund leadership training, and pay for speakers and other activities for group events. At 89 percent of the companies surveyed, funding also comes from diversity departments and, in some cases, from HR and/or lines of business.
How much funding do the groups get from these sources combined? It varies by company—and in some cases by group within the company—but the range seems to be between $10,000 and $70,000 a group per year.
ROLE OF SPONSOR
The biggest obstacle companies face with executive sponsors is a wide variation in the level of involvement of different executive sponsors. Receiving cultural-competency training before taking on a sponsorship is recommended, as is a direct link to the executive’s performance compensation, depending on the success of the employee-resource group, measured in human-capital demographics (recruitment, retention, engagement and promotion) as well as marketing initiatives and relationships with the community and suppliers.
How often do the executive sponsors meet with the groups? Most meet monthly, but 22 percent meet quarterly. One company told us the sponsor meets weekly with the group.
As with any aspect of the business, what gets measured has value. We asked our survey participants to rank the areas in which they use their employee-resource groups. The chart here shows the areas they thought were “most important.” They were allowed to pick more than one variable as “most important,” so these do not equal 100 percent.
The metrics used to assess these successes are similar to those used in the DiversityInc Top 50 survey: recruitment, engagement, retention and promotion by race/ethnicity, gender and age, and when available, by orientation and disability. What some companies are doing, with great success, is measuring these factors in these disciplines and comparing employee-resource-group members against those who are not members. Thus, a company can state: “Our ERG members are 10 percent more engaged than non-ERG members” and can use that to convince senior management and the employee population at large of the value of employee-resource groups.
Employee-resource groups increasingly are the best vehicles for companies to find, assess and develop talent from people from traditionally underrepresented groups, and they also serve as vehicles for innovative, community-based solutions to customer/client/supplier relationships.
Since employee-resource groups have really taken off in the last decade, there is a lack of standardization in how they are structured, who leads them and how they assess their value to the organization. Our survey has determined ways companies in a variety of industries are using their groups and offers solutions/best practices to some of the common dilemmas. We will continue to research and monitor best practices and cutting-edge utilization of employee-resource groups.