Recently Diversity Best Practices President Andrés T. Tapia discussed the importance of developing a “CFO Mindset” when it comes to diversity. He explained that because of the harsh financial climate, diversity budgets are feeling the squeeze. Therefore, diversity leaders must be sure they have developed programs that can stand up to financial scrutiny.
A successful diversity and inclusion leader must have a firm understanding of the diversity ROI – as well as a thick skin. He wrote:
“We, as diversity practitioners, need to get very well grounded in what is going on in the CFO’s world view so that we can not only present our budgets or investment plans in a way that speaks to the CFO mind, but also best counter the push back, the skepticism that will come from the CFO and other business leaders in a process where only a third of all investment requests are approved.”
Plus, he continued, some diversity practitioners may feel so justified in the righteousness of their cause that they may not be successfully presenting their case for funding in a way that is appropriate for the people who hold the purse strings. He writes, “But just and right are not enough in business. Our work also has to be economically valuable in ways that the business can understand and support.”
But how can this be accomplished?
Methods for CFO-Proof Planning
Last year, Gudrun K. Granholm published “The CFO’s Guide to Winning Your Business Case” [PDF]. She wrote that one of the key features of a successful business case is creating an executive focused presentation, to perform research and analysis in a way that is appropriate for senior management. She explains, “If you don’t feel that the business case deserves the time necessary to hit this standard, the project should probably stay on the shelf.”
Granholm also suggests ensuring that all team members are on board and in support of the plan, and to consider the marketing opportunities that may be presented by the plan. For example, when Campbell soup increased the level of women in senior management, it managed to better appeal to the interests of female customers – and develop a $200 million dollar product. What new customers or clients could your diversity plan reach and what kind of revenue could it generate externally?
At the same time, Granholm suggests, revenue forecasting tends to be the weakest part of a business case. She writes, “Here the weakness often lies in a failure to quantify the benefits in a credible fashion.”
Diversity practitioners creating a business case for their initiative should be careful to check their own assumptions about the forecast success of their program, and perform a deep scan for weaknesses and address them in a thorough manner. She explains, “You will either win or lose here. If you can create a compelling vision of the positive financial impact this will have, you have a much higher chance of project approval.
How else can diversity save a company money? According to The Guardian’s Simon Walker, having fresh, outsider voices can help ensure that compensation levels are appropriate at the executive level. An increase in diversity on boards may serve to make pay rates for executives for fair and transparent. He wrote:
“Finally, a greater degree of diversity on boards would assist remuneration committees in making more socially grounded decisions on executive pay. This is not only about increasing gender diversity on boards. It is also about bringing exceptional individuals from different professional backgrounds on to the boards of large listed companies as independent non-executive directors.
“Most non-executives tend to be serving or former senior executives from other companies. Although the business expertise of such individuals is invaluable, their perspectives may reflect their own personal expectations in respect of executive remuneration. Their contribution should therefore be balanced by the presence of a more diverse group of well-trained decision-makers.”
Walker seems to be implying that greater diversity in the boardroom would mean paying senior management less. Many internal pipeline diversity initiatives work to prepare diverse candidates for board service. The question is: would a CFO really support a diversity program that may, in the long run, save money by trimming back their own compensation package?