Stop squinting at stats

3 deceptive DEI metrics companies use to tout success

Companies may be limiting DEI success by looking at 3 incorrect statistics (and what to use instead)
3 deceptive DEI metrics companies use to tout success
Illustration: Pavlo Plakhotia (Shutterstock)
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When I was a senior leader at a large organization, one of the metrics I had to hit for my bonus was a 75% rate of women managers on my team. Why, I asked, when women are only 50% of the population?

Their answer? To balance out the lack of women at the top three levels of the company—the C-Suite, those that reported to the C-Suite, and the level below them—where there were less than 5% women. That way, the company could boast that they had 50% women in leadership when the actual number was 5%.

This is deceptive. And all the women in the company knew it. This same scenario played out for people of color as well.

Unfortunately, there are three deceptive ways companies measure the success of DEI efforts, which are practiced far too often within companies. They give the impression they’re more successful than they are, and it’s a hurtful process that does more harm than good for those companies while directly impacting their employees.

Companies need to measure diversity by rank

Measurement is an essential tool to capture your goals, set new goals, and assess progress toward those goals. But it can also be used to obfuscate reality. For example, one way that organizations tend to exaggerate is by counting the number of women and people of color in their C-Suite and then boasting about the diversity of that team.

Of course, I’m the first one who wants to congratulate them. But, when you look closer, all the women and people of color executives are in staff roles while the white male executives are in operating roles—making strategic decisions regarding the company’s overall direction.

This is known as horizontal segregation, where women and people of color are concentrated in supporting roles while white males are calling the shots. There is a bias—conscious or unconscious—that sees some groups as supporters of the leaders. And those support roles tend to pay far less than the operating roles.

How to view diversity in leadership roles

Many women and people of color are at the bottom of the ranks in most companies. There are so many at the bottom that, in total, most companies are at parity without even trying. This is a metric some companies like to tout. But it’s deceptive and doesn’t point to a significant problem many organizations still face: diversity in the highest earning positions.

There can have parity across your company and still have few if any, women or people of color at the top ranks. It’s a version of reality that is misleading to the real diversity issues in the company—at the top, where the gap is the widest. It exacerbates the pay gap, given women and people of color are in lower-paying jobs than white men. It also perpetuates a reality in which their white male counterparts make most of the critical decisions because they hold most or all of the top jobs.

Evidence supports the need for diversity in senior ranks, too—according to McKinsey, executive teams in the top quartile for gender diversity are more likely to be more profitable—25% more likely, in fact—than companies in the bottom quartile.

How to solve for the unadjusted pay gap

The third area of deceptive diversity measurements is pay parity. There are two measurements: the unadjusted pay gap and the adjusted pay gap. Both are important. The unadjusted pay gap—defined as comparing the average pay across all jobs—is the number we are all familiar with—for example, women are paid about 20% less than men in the US.

The adjusted pay gap, or comparing pay for the same jobs, is often far closer, like 1% for women, which is an acceptable range. This means that men and women when adjusting for tenure, education, experience, and so forth, are earning near equal pay for equal work. That’s what we want, for sure. But how can we have near pay parity at the job level and still have a 20% gap in pay across the company?

While women and men are paid nearly the same within each job, women are more often found in the lower paying jobs while men are in the higher paying jobs, thus creating the 20% gap overall. If a company is only measuring the adjusted pay gap and declaring victory—as most companies can—they are missing the bigger picture of women relegated to support roles and men to decision-making roles. It makes it difficult to feed a balanced pipeline of high-potential employees for executive operating roles when women don’t qualify because of their growth track in the company. And, while the metrics may vary, the experience is the same, if not more acute, for people of color.

Metrics matter. But the right metrics matter more and can pierce through the veil of deceptive numbers that might make a good sound bite, but they aren’t pushing your DEI program forward.

3 DEI metrics that will accelerate progress

1. Measure parity at every level in the company. But recognize that the most important metric is the one measuring executive and governance leadership. This is where the gap, for most companies, is the largest. Women, who represent 50% of the population, strive for 33%-66% of small, uneven-numbered groups of leaders—perhaps 3, 5, or 7 leaders—and 50% of larger or even-numbered groups. People of color, who represent roughly 40% of the population, strive for 40% representation.

2. Measure horizontal integration, or segregation, of women and people of color by job type. Strive for 50% and 40% representation in each job category, congruent with the nation’s population.

3. Measure both the adjusted and unadjusted pay gap. Report on both and explain what each means and the importance of both. The solutions are different.

Be candid with where you are. Gender and racial parity is a journey. There is nothing to hide as long as you make honest and intentional strides toward equality. Measuring and reporting on the right stuff will make your company stronger and, by all accounts, more successful.

Cathrin Stickney is the founder and CEO of Parity.Org and the ParityINDEX, a DEI measurement tool that sheds light and insights into true representation, pay parity, and the employee life cycle.