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How to Calculate Diversity
Return on Investment (DROI®):
"An Overview"
by Dr. Edward E. Hubbard
Diversity performance is challenging to measure for
the following reasons:
 | It is not always obvious what results should be measured. Many diversity organizations
will not use any measures at all or they will use the obvious measures without asking what
results they should be producing and how they will know when they have done a good job. |
| Even if you know what to measure, it is often not clear how the measurement process
should be conducted. Not everything can be easily measured with numbers, thus the
diversity practitioner may give up when faced with measuring something like
"creativity" or "diverse work team productivity" or
"innovation". |
| Diversity impacts individuals, teams, the organization, customer markets, and
communities at large. Therefore measurements must be done at all of these levels, which
has an exponential effect on the size of the measurement task. Portions of this
measurement task can be complex and difficult without direction. |
This approach will:
| Provide a road map for this difficult measurement task. It is easy to get lost when the
task is as hard as measuring the impact of diversity on organizational performance. If you
have a process, you can focus on getting to the goal instead of deciding on what steps are
the best to take next. |
| Help you reduce the cycle time to create diversity measures and perform a diversity
measurement study. Organizations have spent months and virtually years trying to create
measures and processes to evaluate the contribution of diversity to the bottom-line. This
process will help you cut that time down into weeks or days. |
| Provide a way to measure the "difficult to measure" work. It will also suggest
ways to acquire and create performance standards for diversity. |
| Help you link diversity goals to the goals and objectives of the organization. Line of
sight helps motivation, but it can be difficult to achieve. Employees and stakeholders
must be able to see how diversity activities and results will help the organization
achieve its goals and objectives. The process must also help employees know what’s
required of them to reach the organization’s goals. |
| Provide a way to combine diversity and organizational measures such that they support
each other and do not work at cross-purposes. |
| Provide options for varying the process, given the type of organizational work or
process being measured. |
Because there are many different aspects of diversity applications in organizations,
the diversity measurement process is not always linear. You’ll need to have a clear
understanding of the organization’s business operations, its strategic focus and
challenges, and where you want to end up. As you proceed with the diversity measurement
study, you must make choices along the way to find the most efficient path to help reach
your goal.
For most diversity organizations, the goal is to demonstrate diversity’s
contribution to the organization’s bottom-line and utilize a measurement system that
everyone involved can understand. It must delineate what is expected of them in the
process and provide tools and helpful hints along the way to achieve a successful outcome.
To that end, this process will help you:
| Build a business case for a specific diversity initiative’s contribution. |
| Create a roadmap of consideration made along the way. |
| Utilize tools that support consistency in analysis and performance tracking. |
| Show value-added results with diversity measures and performance standards. |
The example shown below highlights a portion of a diversity value chain that reflects
value-added results, standards, diversity metrics and their impact that may be suggested.
There are seven steps to calculate Diversity
Return-on-Investment:
1. Know what you want to know. This step will help you:
| Identify a Business Problem Related to the Organization’s Strategy |
| Formulate Research Questions |
| Begin with the End in Mind -- Your Report |
| Create the Diversity Measurement Study Objectives |
2. Prepare and Collect data. This step will help you:
| Identify Data Collection Measurement Areas to Check |
| Review Historical Data |
| Conduct Interviews |
| Conduct Focus Groups |
| Analyze data using the Hubbard Diversity 9-S Framework |
| Create or Purchase Evaluation Instruments |
| Survey the Organization |
3. Isolate diversity’s contribution. This step will help you:
| Select a Method to Isolate Diversity's Contribution |
4. Convert the contribution to money. This step will help:
| Identify the Hard and Soft Data Contained in the Diversity Contribution |
| Select a Method to Convert the Hard Data Contribution to Dollars |
5. Calculate the costs, benefits and DROI. This step will help you:
| Identify the Major Cost Categories |
| Identify the Major Benefits |
| Calculate the Benefit-to-Cost Ratio |
| Calculate the Diversity Return-on-Investment (DROI %) |
| Identify the Intangible Benefits |
6. Report it to others. This step will help you:
| Identify the Report Timing / Other Needs |
| Identify Reporting Vehicle(s) |
| Create Report |
| Deliver Report |
| Evaluate Feedback |
7. Track and periodically assess progress. This step will:
| Provide follow-up data for analysis and benchmarking purposes |
| Introduce new automated Diversity Measurement Software Systems for monitoring, tracking,
and reporting results |
| Introduce a companion survey development software tool and its statistical analysis
capabilities. |
This article is a chapter excerpt from the book: "How to Calculate Diversity
Return on Investment (DROI)" by Dr. Edward E. Hubbard, President & CEO of
Hubbard & Hubbard, Inc.
You can order this book on-line by
Clicking Here:
Dr. Edward E. Hubbard, Ph.D., President and CEO of Hubbard &
Hubbard, Inc., and author of the books: "Measuring Diversity
Results" and "How to Calculate Diversity Return on Investment", can be reached
in Petaluma CA, at phone 707-763-8380; fax (707) 763-3640. "Measuring
Diversity Result" is available from Hubbard & Hubbard at the telephone numbers
shown. A complete description of the book can be found in the H&H Bookstore on
this web site. Other books by Dr. Hubbard that are available now include:
| "The Diversity Scorecard" |
| "The Manager's Pocket Guide to Diversity Management" |
| "Implementing Diversity Measurement and Management" |
| "Measuring Diversity Results" |
Also, be sure to check our Measure of the Month
and Formula of the Month on our Tools-U-Can Use page.
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