Diversity Bonuses: Band-Aid or Benefit?

Companies are taking action on diversity and inclusion with unprecedented urgency and transparency. They’ve pledged to support Black Lives Matter, they’re reckoning with public outing of internal discriminatory practices on social media and pledging to do better, and brands such as Land O’Lakes, Aunt Jemima and The Washington Redskins (now the Washington Football Team) have stripped imagery linked to racism.

Change is happening. This is both a good and welcomed shift that has raised an interesting question for boards and executives: Should we tie bonuses to diversity and inclusion goals?

That’s a question organizations are examining now as they consider awarding bonuses to top executives who hit diversity and inclusion goals. Attaching a bonus to any goal is a signal to your employees, shareholders and customers that this is important to the organization. Yet, is diversity something that we really should reward monetarily when the hope is that people will just do the right thing? 

To be clear, no organization I am aware of is rewarding people for being anti-racist, which usually takes the form of core values and expectations espoused by organizations. Some, however, are giving bonuses for their organization reaching their diversity goals. Today, the number of companies that do reward their leaders for hitting diversity goals is still small. According to a pay analysis by Pearl Meyer, only 78 of about 3000 companies offered them.  

While tying bonuses to the numeric goals set for diversity could impact the speed and number of candidates hired, it doesn’t necessarily fix any of the reasons you don’t have a diverse workforce to begin with. Bonuses can be a useful tool in helping focus on efforts to seek out and find candidates who are diverse, but to reap the rich benefits you get from more diversity and inclusion, you have to tackle your own organizational culture. Diversity is more than just plugging numbers into a chart; it’s making sure your workplace culture attracts and supports a spectrum of diverse people so they are fulfilled through their work. 

In a recent podcast , Dr. Tyrone Holmes, author of ”Making Diversity a Competitive Advantage” suggests starting by asking if diverse candidates would be interested in working for you in the first place. He says, “ Trying to recruit and retain a high quality culturally diverse workforce, … starts with us. It starts with what do we have to offer? Do we have something of great value to offer to a high-quality, culturally diverse candidate pool?” 

Before choosing to reward diversity numbers, uncover what has prevented your organization from diversity hiring in the first place. Do you have an inability to attract or find candidates? Do you have a HR team that’s “hiring for fit?” Does someone who stands out more and doesn’t fit not get hired? Employee referral bonuses are helpful tools. Often, however, people are most likely to recommend others who are most like them. Consider reframing the target: Aim to hire for disruption, instead of fit. Then you can change the bonus structure, too.

Agree upon a strategy early in the process. Why are we diversifying? Maybe the strategy is to hire more diverse people to change something or to better serve your current and future audiences. Perhaps you are hoping to create a better experience in the world, build different products, or innovate for your future.  These are not only great reasons to be more diverse, they are likely essential to your efforts.  

Be transparent. Some in the organization will look at a diversity and inclusion bonus as shallow, a band-aid on an intractable problem. When a company says it wants more women or more people of color in management, the organization needs to articulate this strategic decision using the core values and future goals that having a more diverse workforce will yield. 

Share why the new perspective can help you do something that needs doing, such as innovation, or add to collective intelligence or another goal that ties to business outcomes.  

Challenge your existing assumptions. Does tenure really make managers better? Make the bonus part of the ecosystem changes. If you hire for diversity and the problems that created the lack of diversity in the first place are still there, then other problems will result. So, what else changes? Examine your communications patterns, how you promote, what support you have in place for people, and evaluate your feedback processes. If these internal systems are not aligned to support a diverse workforce, then you are not going to reap the desired benefits.  

Put a system in place to support those who may be different, whether that is race, gender, sexual orientation, age, or religion and ensure your people experience is equitable. This means each person counts and gets heard, promoted, coached, and supported, regardless of their personal attributes. Often, these types of initiatives aren’t measured against diversity and inclusion goals, but perhaps they could be. The organization as a whole should be looking at what it’s doing internally to create a better experience for everyone so that you are taking the best care of the people who take care of the business. At WorldatWork, we formed an employee-driven diversity network to uncover unconscious biases and identify opportunities to learn and change behaviors. They are working to impact more than our numbers, as they tackle issues around creating a great experience for all.  

Whether you’re awarding bonuses or not, this focus is helpful to explore and act upon.  The next generation workforce — millennials and Gen Z –  are the most diverse group in our history and they value fairness more highly than other generations. This will go beyond talk — and even bonuses — and the better you are about building a diverse and inclusive workplace, the better positioned you will be for the future as well as being known for doing the right thing. 

Scott Cawood is CEO, WorldatWork, a nonprofit professional association in compensation and total rewards.