Initial Themes from Business Case Literature

 


Benefits to individual businesses or workplaces

 

Based on 912 responses to 2 employer surveys amongst companies in the 25 Member States of the EU. These show that diversity initiatives are expanding, and access to the new labour pool is the key business benefit, to resolve labour shortages and recruit and retain high quality staff. Combating discrimination in the workplace is seen as the biggest challenge to promoting diversity. One of the key findings is the lack of systematic monitoring and evaluation of the progress and benefits of diversity among both good practice companies and the wider European Business Test Panel (EBTP) companies. Nearly 70% of EBTP companies that have or are implementing diversity policies fail to regularly monitor their impact. Only a few examples of comprehensive monitoring were identified. While a range of models and frameworks for setting indicators and measuring diversity performance already exists, the challenge is to promote wider application of such tools across businesses that have adopted diversity policies. In terms of presenting the business case, those companies already implementing diversity [polices have already made a business case for such an approach. 83% of the EBTP respondents agreed that diversity initiatives had a positive impact on their business. However around half of the EBTP survey companies have yet to develop diversity policies and practices, indicating the business case needs to be more widely disseminated. Lack of information and awareness of diversity issues and practices was cited as the key challenge – with employers’ organisations and networks likely to play a major role in dissemination and adoption of diversity and equality practices.

“What is the evidence for the business benefits of work-life balance policies? There is clear evidence of a strong business benefits in the case studies, however these conclusions are context specific, and not necessarily generalisable. There is no “one size fits all” business case for work-life balance policies. The larger, econometric studies are less common that the case study work but they do find a correlation between productivity and the presence of work-life balance policies. The evidence of the business benefits of work-life balance policies is reasonably strong, and increasing.”

  • Gray, Helen (2002) Family-Friendly Workplaces: What a Performance! An analysis of the relationship between the availability of family-friendly policies and establishment performance. Centre for Economic Performance, London School of Economics and Political Science

 

Family-friendly policies have a positive impact on workplace performance especially if are more extensive and/or enable employees to maintain a full-time presence in the workplace. Workplace performance is measured by managers rating their financial performance, labour productivity and quality of their product or service. Data source is the UK’s1998 Workplace Employee Relations Survey, and this quantitative analysis was published by the Centre for Economic Performance, London School of Economics and Political science, May 2002. It includes a literature review on the business case for EEO.

Opportunity Now (2004) Benchmarking Report profiles the results from a survey of its 365 members (with 175 respondents participating). This survey found that more employers are making the business case for gender quality / diversity. “Despite the difficult economic climate in the UK over the previous year, 68% of respondents believe that their organisation has adequate resources available for this work. However more work needs to be done on long term measurement to reinforce the credibility of the business case. Just 40% of employers are measuring the cost of not getting equality right (for example measuring turnover and absenteeism) and only 33% are measuring the impact that gender equality / diversity has made on the organisation (for example higher customer satisfaction). The HRC library has a hard copy of this resource. 

 

  • Centre for Strategy and Evaluation Services (2003) The Costs and Benefits of Diversity. A study of methods and indicators to measure the cost-effectiveness of diversity policies in enterprises. Report prepared for the European Commission after the new anti-discrimination directives implemented throughout the EU. Extensive quantitative and qualitative research. 
     

“Companies that implement workforce diversity policies identify important benefits that strengthen long-term competitiveness and in certain instances, also produce short and medium term improvements. Effective and systematic measurement of the costs and benefits of workforce diversity policies is essential. A complex group of obstacles limit the scale of investment in diversity policies amongst companies in the EU – including lack of awareness about the contents, benefits, mechanisms and rationale of diversity policies. In comparison with the evidence available to support investments in other forms of intangible asset, the business case for investment on workforce diversity is embryonic and fragmented. However action by government and other actors can be taken to overcome these weaknesses, especially through the provision of more information about the experience of companies that have invested in diversity policies”. 

 

  • Australian Centre for International Business (2001) The Business case for Diversity Management . 

 

This lengthy report makes three separate business cases for diversity management ie. bottom line cost savings, diversity management that makes workplaces a better place for learning and knowledge creation; and an international business case argument based on the need to operate and compete in a culturally complex environment. 


  • Bilimoria, Diana (2000) “Building the Business Case for Women Corporate Directors”. In R J Burke and M C Mattis (eds) Women on corporate boards of directors: international challenges and opportunities. Kluwer Academic Publishers, the Netherlands. 

 

This chapter addresses the need for research that builds a convincing business case for the presence and utilisation of women corporate directors. 

 

Critiques or Limitations of Business Case Arguments 

 

 

This research into the relationship between race and gender diversity and business performance was carried out in 4 large firms by the Diversity Research Network for Business Opportunities for Leadership Diversity (BOLD), a non-profit initiative to help American corporations learn how to leverage their cultural diversity for competitive advantage, The researchers included assistant / professors at MIT, Harvard, and University of California, Berkley. They found that racial and gender diversity has neither a positive or negative effect on performance, because context is crucial. The researchers’ discussions with managers from 20 large firms also indicated that few companies are equipped to assess the impact of their diversity efforts on performance. The report’s recommendations are that managers modify the business case and look beyond it. “The simplistic business case of the past is simply not supported in our research. Our experience and findings in these companies suggest that those who want to invoke a business case to advance the cause of diversity need to modify the way they frame the argument . . which focuses on the conditions that can leverage benefits from diversity or, at the very least, mitigate its negative effects. . . . . It may be that the business case rhetoric has run its course. Diversity professionals, industry leaders and researchers might do better to recognise that . . . diversity is both a labor-market imperative and societal expectation and value. Therefore managers might do better to focus on building an organizational culture, human resource practices, and the managerial and group process skills needed to translate diversity into positive organizational, group and individual results”.

  • Charlesworth, Sara; Hall, Philippa; and Probert, Belinda (2005) Drivers and contexts of equal employment opportunity and diversity action in Australian organisations. 


This research project was designed to gather evidence about what leads organisations to take action around affirmative action or equal opportunity for women, and how organisations negotiate and implement such “EEO / diversity action” over time. The in-depth case study research in nine organisations was undertaken over a 20 month period between March 2002 and November 2003. “The most frequently reported arguments employed to secure agreement on action were couched ion terms of the ‘business case’ and it being ‘the right thing to do’. However even where the business case was a key factor in encouraging action, costings of the proposed initiative or the establishment of specific performance benchmarks of targets were rare. While the integration of EEO / diversity strategies with business strategies was seen to be important by most of the case study organisations, a direct link was not always present. Surprisingly we found that relatively few organisations systematically assessed the impact of specific EEO / diversity action and/or broader EEO / diversity strategies. Even where broad HR indicators were used to demonstrate overall progress, there was little analysis of how a specific initiative may have contributed to developments such as decreasing turnover or reducing absenteeism . . While the importance of linking diversity management to the assessment of management performance was recognised, this rarely took place in any formal sense. Managers were rarely assessed on the ways in which they implemented specific EEO / diversity action. . . . Even where there was limited evaluation and monitoring, some tangible business benefits were identified, from decreases in absenteeism to increases in gender representation at senior levels. . . . Improved retention of staff, stability and organisational commitment were also frequently cited as organisational outcomes of EEO / diversity action, even when these were not measured or quantified. . . Our research indicates that a positive business climate is not a necessary precondition to such action. In at least two case studies, continuous improvement around EEO / diversity action was seen as a key mechanism for improving performance in the face of increasing financial pressures.

 

The report’s summary of research findings ends with the following section titled Beyond the business case: promoting EEO/diversity action. “The case study findings highlight the importance of not placing too much weight on the role narrow business case arguments play in driving EEO/diversity action. While the ‘business case’ for change was frequently used in the case study organisations to secure internal agreement about action, this appeared to be largely rhetorical, with little rigorous cost/benefit analysis or measurement of business outcomes undertaken. The encouragement of organisations to take on EEO/diversity action needs to be based on an understanding of what actually drives organisational decisions, by recognising the range and interrelatedness of different drivers and contexts that may provide pressures for change. These might range from focusing on arguments about the ‘right thing to do’ in terms of meeting broader community or societal expectations, to improving organisational commitment and cohesion. One of the advantages in acknowledging different drivers to EEO/diversity action, such as the ‘right thing to do’—either as a separate organisational/social justice case or as an integral part of a broader business case—is that this provides a means of placing gender equity squarely on the organisational agenda. This is important because where gender equity is not an explicit consideration in EEO/diversity action it is difficult for organisations to manage for gender equitable conditions and outcomes.

 

 

“The key concern of [NZ] EEO practitioners was not that a business case for EEO was being used, but that it was being used in a ‘de-politicised’ way. EEO practitioners were already using a business case for EEO, along with legislative and social justice arguments when they felt it was appropriate. Some EEO practitioners used the business case – with ambivalence – as a means to and end . . ,. Others argued that they were genuinely committed to organisational effectiveness as well as to justice . . Many of the EEO practitioners identified the absence of a structural model of discrimination as the key problem with the model of managing diversity.

  • Hyman, Prue (2003) Principles for a robust analysis of the costs and benefits with respect to options for action suggested by projects for the Task Force on Pay and Employment Equity in the public service and public health and education sectors. Background paper prepared for the Pay and Employment Equity Task force.
     

This paper identified some principles for undertaking a cost benefit analysis of EEO and pay equity projects with a clear caveat that applying these principles would not be easy. It also distinguished three possible approaches. Firstly cost benefit analysis, which has strong data and conceptual requirements that were unlikely to be achievable. The alternative approaches were cost effectiveness analysis or a listing of relevant costs and benefits, quantified where possible. Hyman also noted that there has been at least one attempt to apply cost benefit analysis to EEO in the NZ public sector, undertaken by the SSC in 1998. The results showed that EEO outcomes are extremely sensitive to assumptions made about productivity gain, highlighting the need for further work to understand the relationship between EEO and workplace productivity.

  • Torrie, Rae (1994) “A reasonable request? A reasonable response? EEO and Cost-Benefit Analysis”. in J Sayers and M Tremaine The Vision and the Reality: EEO in the NZ workforce.

 

“Initial requests in the state sector for cost-benefit analyses of EEO grew out of increasing pressure on departments to become more productive and efficient within current funding, and out of the way EEO developed as an “add-on” to core organisational activities. Many of these cost-benefit requests were unrealistic . . . The strategy outlined in this paper for dealing with such cost-benefit challenges is essentially a method for ‘seeing’ an EEO activity or programme in the context of the organisation’s strategic direction and goals . . It is my view that as organisations begin to recognise the ways in which their human resource strategy and EEO programmes dovetail with their organisational objectives, there will be less call to seek justification of EE programmes on purely financial grounds”.

 

“Currently the labour shortage argument seems to be the main stimulus for employers to turn to diversity management in Europe. However, labour shortages are things which vary with time, sector and geography. . .

“ . ..perhaps diversity management will come under the axe of budget-cutters when [America] faces its next recession”

“A celebrating diversity approach alone is not going to do anything to bring about fairer recruitment practices and increase the representation in employment of second generation immigrants and ethnic minority young people in Europe, and organisations that do not have a diverse workforce cannot begin to manage diversity. . . Diversity management policies are not a substitute for strong and properly enforced legislation on access to employment and numerical representation. . . . Diversity management should be a way of mainstreaming anti-discrimination activities, not a substitute for them”.

  • Lauring, Jakob and Ross, Colin (2004) “Cultural Diversity and Organisational Efficiency” in NZ Journal of Employment Relations, Feb 2004, Vol. 29, issue 1 


“There is no doubt that diversity management is a difficult and complex discipline which sits uneasily with other management functions. Therefore, it is tempting to argue that diversity management will facilitate organisational efficiency . . Unfortunately . . the bottom line benefits of diversity are varied. While there are potential gains from diversity, the business case has not been supported by empirical research, no substantial proof has been published that cultural diversity has a positive influence on organisational efficiency and it must be accepted that in some situations there are no benefits or even a reduction in efficiency. . . The initial focus of diversity management on overcoming discriminatory employment practices is still very valid. . . Our [2] case studies have indicated that management of diverse cultures is a balance between organisational integration and differentiation . . . Cultural diversity carries the potential for both embedded creativity and conflict, which cannot be separated. “

 


Suggests that social justice and economic benefits are equally viable motivations and focusing on the business case may be a pragmatic decision. However there is a need to remain vigilant about the over-arching goals and the potential for a business case discourse to effect change. Raises concerns that if world economics were to slow down and organisations to stagnate, it may be harder to effect change based on business case arguments. 
 

Case studies   

 

Short flyer. Lists benefits for customers, employers, shareholders and the business as a whole, plus specific case studies. Includes contact details for Equality Direct – a telephone advice service for employers.

 

  •  Race for Opportunity's Benchmarking Report for 2005. 2005 marked the 10th anniversary of the Race for Opportunity campaign and the 5th year for benchmarking with member companies. 113 organisations benchmarked in this report, and 70 of these were from the private sector. 91% indicated they have a clear business case for race diversity strategies compared to 74% in 2004. The five case studies analysed include an analysis of key performance indicators. The HRC library has a hard copy of this resource.

 

  • Case studies included in a guide put out by the UK organisation Business Link
     
  • London Fire brigade case study (2004) 
     
  • UK bank Barclays case study (2002) on plans to double women’s participation in senior positions from 1% to 22% over 4 years. 
     
  • Managing Diversity at BBC Scotland (2004). Ongoing longitudinal research project. “This case arguably exemplifies that combining the business and moral aspects of managing diversity in proactive diversity initiatives can provide a catalyst for organisational change. 
     
  • 2005 Singapore study by the Ministry of Manpower and Nanyang Technological university based on interviews with 310 full-time employees of a local restaurant chain. Found a 1 day increase in annual leave taken in a month resulted in a 23% unit increase in work performance which increased customer satisfaction by 14%. Improving the Work-Life climate by a unit reduced employees’ intention to quit by between 6-14%.

Tools

 

  • The Diversity Driver – a practical diversity management tool based upon the European Foundation for Quality Management (EFQM) model. Is written in a practical way that is attractive to SMEs. http://www.fairplaypartnership.org.uk 
     
  • Opportunity Now (2001) Equality and Excellence: the business case. Includes information for employers about making the link between equality and excellence, a business balance sheet and a simple worked example for a flexible working hours programme. The HRC library has a hard copy of this resource www.opportunitynow.org.uk 
     

Reporting

 

  • Holton, Viki (2005) “Diversity reporting: how European business is reporting on diversity and equal opportunities”. In Women in Management Review, Vol 20 No 1 2005 pp 72-77. Small sample of 22 European companies. Found diversity reporting is in its infancy, with few mandatory requirements, targets, KPIs or measures of progress. Little evidence of a robust approach to evaluating progress and only a handful are confident to ask, and report, staff feedback. “”The biggest change will occur when companies seize the business case for diversity”.

    Also see these reports already cited above:
  • Charlesworth, Sara; Hall, Philippa; and Probert, Belinda (2005) Drivers and contexts of equal employment opportunity and diversity action in Australian organisations.
  • European Commission (2005) The Business case for Diversity – good practices in the workplace.

 

Overall Economic Growth / Productivity

  • EOC Response to the DTI consultation on productivity indicators (June 2004). “The achievement of gender equity is central to the three key elements of economic growth – an increased labour supply, flexibility and rewarding workers according to their performance and skills.