Does a 50/50 gender ratio target make business sense? An HR-Analytics perspective

As it turns out, a tremendous amount of research on the topic has already been conducted. For instance this recent study by McKinsey, a meta-analysis from the Haas School of Business, this study from the Harvard Kennedy School, and an HR-analytics project by Shell (Esther Bongenaar and Linda van Leeuwen) very recently.

From a quick scan of the articles it seems that companies that focus on Diversity and Inclusion (the two often come together) perform better when there is simultaneous attention for things like inclusive behaviour, inclusive team leadership, the absence of strong sub-groups and training for group-process skills.

For BHP the conclusions of their analytics seem to be in line with the conclusion above. “BHP Billiton’s 2013 Employee Perception Survey showed that increased inclusion correlated with increased performance”. In addition, Andrew Mackenzie, BHP Billiton’s CEO, indicated that at the company’s “most inclusive and diverse sites” performance is 15% higher.

All in all, I think we can say that diversity and inclusion can indeed impact performance if it is embedded in a broader context. Companies should investigate and measure wether they have created the right circumstances.

Under the supervision of Rohini Anand, Sodexo performed their own HR-analytics project, which focused on, among other things, this question. Although this analytics project is just one observation, the case offers a good starting point for an answer to the above-mentioned question. According to the study the male/female ratio should be between 40% and 60%. “Teams that fit within this gender balance zone generate, on average, results that are more sustained and predictable than those of teams with less than 40% or more than 60% of either gender”. For instance, gender-balanced teams achieved on average, a 12% increase in client retention; positive organic growth, growth profit and operating profit over three consecutive years. If BHP implemented the Diversity policy purely to boost company performance, it might be better to aim for a 40/60 ratio as that would be easier to achieve than a 50/50 ratio. However, if corporate citizenship is also a driver, then 50/50 might be the right target.

It is hard to find input for this question, probably because the answer to this question very strongly depends on company context. For example, some industries attract fewer women and in some regions, access to education and the labour market is less straightforward for women than in other regions. Even BHP indicated they don’t really know if their ambition is realistic – they speak of an aspirational goal and indicate it will be a challenging change.

However, research in combination with analytics can provide an answer to this question. As a first step, BHP could identify the skill sets that they are looking for, and they can also formulate skills that are similar / substitutes. Next, they could scrape the Internet, or buy labour market data, to build a labour market demand and supply picture for these skills. This would give them insight in the total labour pool and the share of candidates that they are looking to recruit. Moreover, they can conduct research amongst the people in the supply base to assess company attractiveness, predict the willingness of people to relocate to other BHP locations and identify the factors that influence joining decisions (e.g. pay and development opportunities). These insights will help to calibrate and influence the supply picture. Once demand and supply have been modelled, BHP can get an idea of whether their ambition is achievable.

Under question 1, I set out that by focusing on diversity and inclusion companies are likely to enhance performance, as long as they properly embed the concepts in the business operation. To answer this last question about value creation, it is vital to understand how much it will cost to create the more diverse and inclusive teams. Because in financial terms, value is: revenue minus costs.

To get a better understanding of the costs, BHP could look at the historical data of their more diverse teams, and investigate which costs emerged when these more diverse teams were created. One could for instance think of answering the following questions: are sourcing costs different when a more diverse pool of candidates has to be identified; do attraction costs change because we have to build a segmented labour market brand, because we may have to tap into new candidate pools and/or we may have to bring people in from further afield; do investments in retention change to keep women aboard; how much investment in training is required to establish the right behaviour, which impacts the value that can be created by focusing on diversity?

If the performance increase is higher than the total of investments made to become more diverse, then the decision will indeed create shareholder value and would probably be the right one.