Demographic data is the backbone of an effective DEI program. Organizations with DEI goals have the momentum and accountability required for measurable DEI progress. Just as with any business goal, using data to understand your current state enables you to set specific, achievable goals that are relevant to the organization. Many organizations are wary of the legal risks associated with this data; on one hand, data is necessary to identify challenges and measure progress but, on the other, recent legislation in the U.S. has created fear that using diversity data in the workplace could open employers to litigation.
Is collecting DEI data too risky for organizations?
In light of a June 2023 Supreme Court ruling in the U.S., organizations globally are questioning the future of DEI. While the court ruling applied only to race-based college admissions in the U.S. the broader concern is whether this opens the door to lawsuits regarding the use of demographic information in the workplace and, ultimately, of the legality of workplace DEI initiatives.
While this article should not be considered legal advice and any recommendations should be reviewed with your own legal teams, it is helpful for DEI professionals and their organizations to have a framework so they do not become paralyzed with inaction.
In a recent HBR article, Lily Zheng states: “The key to sustaining DEI progress and commitment through this volatile time lies in acting intentionally: curtailing your usage of racial data that is the most legally risky, while taking decisive action to continue using racial data to eliminate discrimination, remove bias, and create fairer workplaces.”
Disclaimer: This blog post is not a substitute for professional legal advice. If you want guidance on what, if any, impact this ruling will have on your own organization’s specific DEI practices, please seek advice from your legal counsel.
What did the ruling say?
The court ruling did not say anything about collecting demographic data for an organization’s workforce; it only applied to race-based college admissions. What the ruling said is that an institution of higher education cannot factor race into the decision-making process about individuals who have applied.
Businesses are reacting to the precedent set with the court’s ruling on affirmative action in higher-education admissions and are concerned how this impacts the perceptions of a company’s legal risks regarding DEI programming. This reaction was spurred by a political message to Fortune 100 CEOs warning about reverse discrimination. While the legislation could have a direct impact on the pool of candidates an organization has available for hiring, the reaction from private workplaces is related more to what lessons they should take away from the ruling to avoid future risk of litigation themselves.
As a result of this ruling, DEI professionals will be more focused on managing risk than in the past and can anticipate working closely with their legal teams. The most important takeaway, though, is that while organizations should be aware of risks, they should not be afraid of them.
What are the key takeaways for DEI programming, especially in the U.S.?
- Avoid overly-focusing on one side of the legal risk spectrum. While there is now a greater awareness of the legal risk related to reverse discrimination claims from majority groups, there still exists the very real risk regarding claims of disparate impact (seemingly "neutral policies" in an organization that show a negative impact for individuals belonging to a legally protected demographic group). Historically, these disparate impact or discrimination cases can be very damaging, as well; some organizations (Coca-Cola, Sodexo, Uber) who are now considered proactive in their DEI strategy came to this work as a result of these types of lawsuits. Over-reacting to the recent concerns of reverse discrimination and watering down DEI could also create more risks of future cases claiming disparate impact.
- Individual talent decisions should be identity neutral. It has always been important that individual talent decisions are based on merit, although DEI professionals will argue that merit, itself, is subjective and the criteria used to evaluate candidates may reflect systemic advantages and disadvantages. For example, the interview process looks at subjective criteria like 'culture fit' that could be masking bias in favor of those who mirror characteristics of current employees. A role should never be given to a less-qualified candidate when a more qualified candidate exists. However, in the past, there have been cases where demographic identity has been used as a tie-breaker when two candidates are equally qualified and one of them belongs to an underrepresented minority. The use of this positive action is more well-defined in countries such as the U.K.; using demographic identity data in the decision making process about individuals is now seen as legally risky in the U.S.
- Use confidential or anonymous data collection to separate data on groups from data on individuals. Because data analyzed by demographic segment is now critical for justifying a DEI program, it is more important than ever to survey your employees to understand how experiences may vary by segment. To mitigate the risk of demographic data being used in conjunction with talent decisions, many organizations will choose to use third party systems/providers to collect and store their employee’s personal demographic data, either confidentially or anonymously, rather than storing this data in their own HRIS.
- Differentiate between gathering data and how you use the data. Collecting data to understand your workplace is not illegal; it is prudent to monitor the diversity of your workforce and their experiences in the workplace. Organizations may now see it as legally risky to make decisions about individuals knowing their race/ethnicity without a prior analysis showing disparity.
- Collect data on patterns of workplace experiences to highlight systemic inequities. Effective DEI programs will still require organizations to de-bias their workplaces. It is impossible to identify disparities and know whether de-biasing programs are effective without data to assess the equity of experiences and outcomes.
- Explain how your programs are being used to create a more level playing field. Now, more than ever, DEI programs need to be justified by data that reveal gaps in diversity and inclusion that can be addressed with specific programs. Lay out the facts by collecting data, analyzing the statistical patterns, and building initiatives to reduce gaps in inclusion, representation, advancement, retention, etc. Demonstrate the necessity of your solutions to level the playing field.
- Set aspirational goals. Current legal guidance suggests that strict diversity representation goals or targets with accountability or consequences now have a greater legal risk - especially when tied to performance and compensation, which was previously considered a leading edge practice. It is still important to set aspirational goals with a logical reference point. You can use evidence to set market based representation targets, but remove performance and compensation criteria to create a robust legal stance. You can also set internal reference points to monitor bias in processes by examining proportional representation or equity. Some examples:
-If people of color are 30% of the candidate pool, you could set a goal to have 30% racial diversity at every successive level of the hiring process, although race can not be a factor in the final decision.
- If women are 20% of middle managers, you can set a goal to have women represent 20% of promotions from that level in a calendar year. Although gender cannot factor into the final choice of a candidate, you can look back across the year to evaluate that goal; if women were less than 20% of promotions you have reason to examine your system and de-bias your promotional processes. - Focus on leading indicators. Diversity goals are about representation and are a lagging indicator of what is happening within the organization. As discussed above, it is important to monitor lagging indicators but even more important to focus on leading indicators. Lead indicators monitor “activities and behaviors that you want to encourage…by measuring inclusive actions and behaviors, you build in day-to-day accountability, rather than setting targets and hoping for the best.” Measuring inclusion, while once seen as difficult, has been made easier with tools like Pulsely’s.
- Inspire inclusive leaders, especially among your senior executive team. Since DEI goals without accountability are futile, and accountability measures are limited, it is essential to bring leaders into partnership, shift mindsets, and build personal commitment to the work of DEI. Provide the opportunity for self reflection and engage leaders in constructive conversations to understand the dynamics around inclusion. Catalyst says, “we believe many individuals are in the “movable middle”—open to supporting DEI but at risk of being convinced by opponents that DEI initiatives are unfair or otherwise inappropriate. Remind yourself of both the moral and business reasons why DEI is so important, and be prepared to advocate for those values in internal and external conversations.”
- Stay motivated. The work of DEI is as important as ever. While there may be a shift in emphasis, our more globally diverse workforce will continue to require more inclusive workplaces. Your workplace will not only benefit from the well-established advantages of diversity but also from talent attraction and enhanced reputation.
What is the bottom line message for DEI leaders regarding data collection?
Resist the impulse to over-react in response to recent events as you will risk being unprepared for the greater trend of increased DEI expectations from employees, investors, and the public. Affirmative action in the workplace is still legal (as of the publishing date for this article). Bias still exists. DEI programming is just as important as ever for building equitable and inclusive workplaces. However, to reduce potential legal risk, many organizations are proactively changing their approach to DEI strategy.
It is legal to collect data but observe caution in how it is used; ensure that demographic identity is not used in individual talent decisions.
Anonymous data collected about racial (or other identity) groups among your employees is essential; it is necessary to capture data demonstrating where the playing field is not level to justify DEI programs. Employers must have evidence of a disparity (unequal patterns of experiences or outcomes) to implement an initiative such as mentoring, sponsorship, affinity groups, leadership development, etc. This data is also critical for monitoring the effectiveness of de-biasing efforts.
Strategic and intentional DEI leadership, driven by statistically valid data, is essential.
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