How ERG Leaders Can Use Data to Drive Inclusion and Performance with Paolo Gaudiano

Speaker A: This is ERG Power Talk and I'm your host, Joe Santana. This program is for ERG and BRG leaders, executive sponsors and business unit leaders who want to unlock powerful, measurable business impact through their ergs while championing the goals and needs of the communities these ergs represent. Our vision is a future where ergs aren't just appreciated. They're seen as essential to business success, driving revenue, cutting costs, powering marketplace growth, and creating workplaces where everyone can thrive. Our, uh, goal is simple but powerful. To help you deliver so much value that your organization sees your ERG as a must have investment worthy of more resources, greater influence and stronger support. We know you'll get top value from every episode. So now let's get to the show. Hello and welcome to another episode of ERG Power Talk. I'm your host, Joe Santana. One of the biggest challenges ERG leaders face is proving that their work drives real business results. Now, many groups generate insights and run initiatives, but they struggle to show how these efforts increase revenue, reduce costs or improve performance. And without clear data and measurable impact, their work is often seen as supportive rather than strategic, limiting funding influence on long term relevance. So what can ERG leaders do to help us address this and other related topics? We have the perfect guest. He is chief Scientist at Elyria and arc, an award winning author, entrepreneur and advisor with over three decades of experience applying data and analytics to complex business challenges. He has pioneered the field of measuring inclusion by developing methods to quantify its impact on organizational performance and financial results. As a professor of NYU Stern and a contributor to Forbes, he has helped global organizations move beyond assumptions and use real time data to improve decision making, strengthen performance and align inclusion with business outcomes.

Speaker B: My name is Paolo Gaudiano and I'm founder, Chief Scientist of Aleria and arc.

Speaker A: Paolo, thank you for joining us today on ERG Power Talk. We're going to jump right into this because I've got a bunch of questions for you that I think will bring out some interesting topics and ideas that our listeners will get value out of. So from your experience, why do most organizations struggle to quantify the business impact of inclusion?

Speaker B: I believe in my SO in my experience it's because we have been historically focused on. Even though we talk about dei, we've been focusing primarily on the D alone on representation. And the problem is that representation is really an outcome, right? It's a little bit like the balance sheet from m the financial perspective. It's telling you a snapshot of where things are today, but they don't really tell you why that's happening. And so what happens is that people look at diversity. They say companies that are more diverse tend to perform better. So that means that diversity itself is driving performance, which is actually a questionable assumption. It's really more of a correlation. And then they try to use that indirect link and then they try to understand it's because more diverse teams are more innovative. And one of my questions is how many members of your team are actually doing innovation on a day to day basis, on a minute by minute basis, or oh, it's great because you can access broader markets. While again how many people in a large company are actually dealing with reaching out to entirely new markets? It's not that many. And so I think the problem has been that we've been focusing too much on the outcomes and, and uh, using the outcomes to try to tell us what has gone right and what has gone wrong. And instead what I uh, try to do in my work is to understand how the actual day to day experiences as well as the more long term outcomes in terms of the ability to succeed in your projects and getting promoted and things like that, how those impact the ability of your company to succeed. And so it's really about measuring things that are more directly related to business outcomes rather than doing it backwards and trying to correlate representation to potential business outcomes through a very indirect chain of events that we often have no control over.

Speaker A: What are the risks that organizations and inclusion efforts in those organizations when they're not measuring the financial performance in a more direct way as opposed to using these indirect, as you said, indirect routes to get to those numbers?

Speaker B: Well, I think that there are two ways of answering that question. One of them is I, when I first wrote the book on measuring inclusion, I actually developed the methodology that I talk about in the book because I had this very interesting experience. A lot of my work came from building computer simulations of complex systems, which sounds like a very geeky thing and it is actually. But it's about literally building almost like a video game where you replicate everything that happens in an organization, whether it's the people, the products, the marketing, whatever the case might be. And so I applied that specifically to DEI and I was able to show in a computer simulation that if, for example, you create biases in the way that you treat men relative to women, what will happen is two things. You're going to have one group of people, namely the men will be more satisfied than the women, but you will also have an impact on the diversity in a way that matches the Data that we see in the real world, where you see increasing numbers, proportion of men as you go higher and higher up, and fewer women. And so when I did that, I actually had somebody come to me and say, oh, this is phenomenal. Can you customize this to my company? And what I realized that just knowing their diversity data was useless. What I needed to understand was what are the things that are actually happening that are causing some women to be less satisfied and be more likely to leave? And that's how we came up with this idea of measuring inclusion. Later. What I realized is that, look, when we quantify, or not just quantify, but when we want to manage finances, what do we do? We don't have just one report. So when we look at diversity, it's a bit like the balance sheet, right? You're looking at a snapshot in time of what an organization looks like, but you don't know why that happened. So imagine being a CFO and being told the only thing that you have to manage the company's finances is the balance sheet. That would be pretty useless, right? And so one of the aspects that I talk about in this book in measuring inclusion and also the one that's coming out on meritocracy, is the recognition that you need to think about, or rather than saying you need to, it would be wonderful if companies treated their human or managed their human assets, if you will, the same way that they manage their financial assets, measure the right things at multiple levels and then accumulate them and roll them up to the right level. So, for example, at the individual level, day to day, when we measure inclusion, we're literally measuring daily things that increase and decrease the value of your people. So it's very much like cash flow. We then also, look, when we talk about measuring merit, we're essentially measuring things like promotions, advancements, compensation, task assignments, and seeing are there disparities there? And if there are disparities there, are they a reflection of a meritocracy working well, or is there something going on that maybe has to do with unequal opportunities? And that's a little bit like measuring a profit and loss in an organization, right? You look over a quarterly basis. And so to me, the real issues are, one is, again, don't focus on just one metric because you need to have more. And to make sure that you have to think of this as a business, because ultimately, look, the CEO's responsibility is one and only one, which is to make the company successful, to drive revenues, to drive profitability, and anything that does not directly link to that is going to be always treated as a nice to have or as an act of corporate social responsibility. Which means that the moment that the, uh, political or societal or economic winds turn, all of that goes out the window. So I think that those are really the two main reasons why people need to be much more keen about how do we link experiences, feelings, emotions, satisfaction, diversity, equity and inclusion? How do we link all of that to business?

Speaker A: What I hear you saying is that right now what's being measured is pretty sparse in terms of a few outputs. And saying, so what are these outputs? What's going on here? And those outputs tend to focus very narrowly on representation. They don't focus very much on business impact. But even more so, what I'm hearing you saying as well is that you need to measure a lot of inputs too. You need to measure what are the different inputs and the different actions. The same way you do on a financial basis where you're not only looking at the outputs in a richer way, but you're also looking at all the inputs as well. Is that pretty much a good summary of that?

Speaker B: That's a very good way to put it. It's a very good way to put it. And that's exactly. Again, if you go back to finance, imagine back in the day before the. The typical financial statements were as common as they are today. You'd be suddenly, you'd be looking in the bank and realizing, I'm, um, running out of money. And then you're like, okay, why am I doing that? Let's look at individual parts of the company and see who's losing money, who's making money. And then ends up being, okay, that's more like the P and L. And then it's, okay, we see that this division is losing money. Why are they losing money? Let's figure out, what are they spending money on and how are they earning money? And that's kind of like your cash flow in a way, I'm simplifying here. And we should do exactly the same thing with the way that we manage human assets. And by the way, this is something that a lot of people. It's something that surprises me how unaware most people are of a very basic fact of companies. People are the single most expensive line item of the operating budget of every company on the planet. Okay. In the United States, companies spend roughly, on an annual basis, about $300 billion a year on advertising. And they spend more than a trillion and a half a year on payroll and benefit. There's actually roughly a 32 to 1 ratio, so what? I also always ask people, it's if you have a marketing analytics team of 10 people in your company, you really should have about 300 people working on DI, right? Which is a joke, right? What team do you know? What company do you know that has that? But it's like you have the biggest asset of your company, which is the people, the largest budget item of your operating budget, which is the people. And we treat it like some squishy little thing. And so how do you treat financial assets rigorously? You measure measurements, you come up with better measures at the balance sheet level. Again, diversity to me is just one example of a metric that you can use to tell you how your human assets are doing, the talent health of your organization. But there's many other things that you can measure. You could look at promotion rates, you could look at all sorts of examples, retention. And companies do measure some of those things, but they have a hard time linking those to the finance. And that's where a lot of my work comes in. It's not just measuring things but saying why should I measure inclusion? What is it going to tell me? How is that going to link to the financial KPIs that I care about? And that's to me not the secret sauce because we write books about it, uh, talk about it. But that's really the key is understanding how you can link those things and measure the right things in the right place.

Speaker A: That makes perfect sense. Erg leaders and inclusion leaders writ large tend to rely on anecdotal type data. And it seems like the only thing that's being measured are uh, programs are these groups putting on, are ah, they celebrating various heritage months and things like that. And then the anecdotal data of look at how happy everyone looks and so forth. But why is that not enough to influence executive decisions?

Speaker B: There is a very interesting gap that, that I think again I, I it sometimes it takes me time to extract some very simple concepts from the very complex ideas that crowd my head sometimes. Right. This is the problem with being a former scientist and professor and all these things. But I realized that right now and you capture that with what you were saying. There's this weird break between what HR does and what the financial side of the company does. Right. So on the financial side you'll have the CEO will say oh uh, we're not profitable, so let's fire a thousand people. But they don't know. They understand what the accounting impact will be, but they don't know what will be the impact on the well Being of the people in the organization. So they may go to HR and say, we're about to fire a thousand people. Can you all come up with some way to make sure that the other 5,000 don't leave? And so there is that gap on the other side. Exactly what you were saying, hey, let's do an initiative to create multicultural awareness. Let's do this, let's do that. And you can tell how much it's going to cost you maybe to do a certain initiative. But in terms of calculating what is the financial roi, how do I link that to the accounting books? There is no way of doing that. And that's basically what needs to happen. What we need to do is we need to fix that link. Ah. And the way that we do it is actually which again to me it seems in retrospect surprisingly simple. We have actually a calculator on our website and I uh, talk about it in the book, which is taking two very simple aspects of that relationship. The first one is that if you are less satisfied than another person, then you are going to be less productive. And there is a ton of research on the individual level that shows that if you are less satisfied, you're more likely to be late for work, you're more likely to take more time to do your work, you're more likely to generate work that is lower quality. All of those have an impact on your revenues. So if I have a thousand people in my company that are a, ah, lot less satisfied than the other people, those 1,000 people will generate less than they could if they were more satisfied. And we can quantify that. The second piece is that those 1,000 people will also be more likely to leave. And of course when people leave in unexpected way, because what's called unwanted churn, that costs you money. Because replacing an employee, depending on the level can be anywhere between half a year salary and two years of their salary. So if you average to one year of salary and you say, okay, let's say for example, a company that has 1,000 women and those women are 10% less satisfied than the men, as a result of that, their churn rate is 10% higher, let's say, okay, so that means that you're losing 100 women a year simply because you're allowing those women to be less satisfied than the men, 100 women a year, if they're averaging $100,000 in salary that cost you about $10 million a year that you're losing invisibly, plus the fact that they are, let's say that the Average. A typical average revenue, uh, per employee is a couple hundred thousand dollars a year, $250,300,000 a year. If their productivity goes down by 10%, you're losing $30,000 a year. For each of those women, that's $30 million. So you could literally be losing $40 million a year simply because of the fact that you're not finding a way for your women to be as satisfied as your men. When you put it that way, all of a sudden it's, uh, oh, okay, I get it. I should look to see how men and women, or people of color, white people with disabilities, without disabilities, if I find that there are significant gaps in there, whatever you want to call it, satisfaction, sense of belonging, sense of include, whatever metrics you're using, then you know that you're losing money and you have a problem. And then the next question is, okay, how do you go in and find out why the women are less satisfied than the men? And that's where the measuring, inclusion, and more recently the measuring merit that we're doing is essentially digging into the day to day experiences to figure out, okay, what is happening by virtue of you being male versus female, being white versus being a person of color, being whatever that is impacting your satisfaction. Why I don't want to know. If you do a survey and you find out that, oh, lo and behold, people with disabilities are less satisfied than people without disabilities, it's duh, uh, what do you do now? Oh, let's do some interviews. Okay, great. Now you got 10 people's ideas of what you should do, and you're going to bet your entire farm on hoping that you get the right idea. And so we try to flip that upside down and say, measure what matters and then link it to the financial outcomes.

Speaker A: You covered a lot of different things that sometimes executives don't think about that they should. Like, for example, there's not only the cost of turnover, which obviously in a company, you know, the company that you measured, the model where they're losing 100 women, that could be many fold many times that number when you're talking about organizations that have 10, 20, 50,000 employees. So those numbers can blow up very quickly depending on how many people you're talking about and what that represents in terms of percentage. So you have that cost, but you also have opportunity costs. If a person's underperforming, not because they can't perform better, but because the structure doesn't support their performance, then they are producing less than the average yield per employee that you would get if the person were fully supported. And also the opportunity cost of when you have that empty seat that you're trying to fix because that person left. So you've got the cost of replacing them plus the opportunity cost. So this can mount up to big numbers. I think Accenture a while back came up with the fact that companies in the United States alone, just in the United States, not globally, were losing somewhere in the neighborhood of $1.4 trillion as a result of many of the factors that you just mentioned right now. So those are huge numbers and they're invisible. They're basically a hole in your profit and loss sheet that's invisible. And there was something else that you mentioned that I thought was really interesting when you talked about when the leadership of the organization says we need to cut costs by 10% or 5% or whatever, and our biggest expense is employees, so we need to shrink our staff. And then they throw that over the wall to HR and they say, figure out how to make this so. So cut our costs and make sure that everybody else doesn't run out the door while we're doing that. But the one thing that I believe is missing from that equation is it's like me saying, let's say I'm a pilot and when I'm in an airplane, I say we need to have less weight in order to be able to do this flight. And then I pass that over to someone else who randomly begins to remove motors and other pieces of equipment that actually are the things that make the airplane fly. So you have to be judicious about not only saying we have to reduce the company by 1,000 people, but where are they going to come from? And how do you minimize the impact on the business? And are you removing people that you think are underperformers because they're underperformers, or are you removing people because they're not able to perform to their best to. Because they're not properly supported. And after you remove them, that problem is just going to go somewhere else, but it's still going to be present. So there are so many things there to unpack that just thinking about that is food for thought for any executive in terms of when they're making these types of decisions. What type of data, Paolo, do you think, erg leaders, let's say you're running a woman's group or you're running the black resource group, what type of data do you think they should be collecting so that they can tie their work to revenue, cost, or performance instead of just blankly Saying we did an African American history or a women's history month and 100 people attended or whatever, what are some other things that should be measuring so that they can make that financial linkage or at least help the inclusion leader and others help them make that financial linkage?

Speaker B: So it's an interesting question. I think that there is a bit of a catch 22 there, right? Which is that in my opinion, the responsibility of measuring things should not fall on the ergs, right? It should be. The company should say, here are some standardized things that we're going to be measuring. And why do I say that? First of all, because most ergs, by virtue of the fact that they tend to focus on specific groups, often underrepresented groups, means that they're only representing a relatively small portion of an organization. So there is a question of even if I could measure all the right things, and we have worked with ergs where we do our measuring, what we call our inclusion assessment. And you can certainly initiate that through an erg. And if it's a large enough company, large enough erg, then it can by being linked to the financial impact, that can be a wake up call for the whole organization. But again, I think that to me, the. And by the way, I've seen ergs in many different kinds of ergs, many different styles in terms of who they include, what they measure, what they do, etc. I would say the erg should definitely make sure that to the extent that the organization as a whole is measuring, for example, inclusion or merit or any of these other things, that they encourage participation. Because ultimately you want to make sure that the voice of people, especially if they're underrepresented numerically or in terms of proportions in the organization, you want to make sure that their voice is heard. But I think that where it becomes critical is it has to be more than just, I don't want to say complaints because too much of a negative word, but it's not enough to say, oh, the people in my erg are very dissatisfied because of this particular issue, because ultimately it ends up sounding like you're just complaining about things and it sounds like you have a problem. And I think that what a lot of leaders react more positively to is how do I fix the problem. So to me, what I would recommend again also to ergs, is make sure that you're focusing on the actual root causes, not the symptoms. Don't just tell me in my group there is this high level of dissatisfaction. Find out whether you do it through interviews or focus groups, or whatever way you use, try to find out the actual experiences and capture enough data that it's not an isolated, oh, look, this person had this horrible experience because of what somebody said to them. So you need to make sure that if you do use anecdotal data, if you use qualitative data, I should say gather enough of it, uh, that it becomes evidence and not simply the canary in the gold mine kind of thing. Because, yeah, the canary in the mold mine analogy is useful, but ultimately you need to argue why this is actually going to hurt everybody in the entire gold mine and not just the canary. Right? Yeah. Uh, of course, for selfish reasons. I would love for people to look at my book Measuring Inclusion and figure out. Because that one literally lays out step by step, how you can measure inclusion. And as I said, we've done that with some ergs. And the next book that's coming out in June on meritocracy goes beyond that and also shows how you can define merit in a way that becomes measurable. Pardon me. And how you can combine those two sets of metrics. And so I would say those are definitely resources. But more generally focus on trying to understand what is causing the levels of satisfaction to be different rather than just simply reporting on, um, the levels of satisfaction.

Speaker A: One of the things that came to mind while you were talking about that is that in many cases, when I talk to people about ergs, a lot of times, you know, in the inclusion space, people will say, we want our ergs to focus on business impacting opportunities or challenges and to address those and to pick up the right metrics on those. But from what you're saying, and I agree with it wholeheartedly, the people who are managing these groups or the people who are the liaison between those groups and the rest of the company, which usually is the inclusion function, need to set the parameters for that. They need to say, here's the big picture, and these are some of the things that we need and need to collect information from these individual groups. Information that maybe is collected through things like internal focus groups or uh, or other types of data collection methods so that they could take the data from, let's say, the seven ergs they have, put it together and begin to form a comprehensive picture that then the inclusion leadership can turn around and present to management and say, hey, we collected a lot of data here from these different groups and here's a common denominator, opportunity or challenge. Here's a way of handling it. This is the cost of handling it, and this is the benefit that we get whatever we estimate is going to be the return on investment on taking that particular action.

Speaker B: Yeah, I agree. I think that the. Really, the very last thing that you said is the one where most ERGs and most organizations in general have stumbled, which is that roi, it ends up being. It's kind of the old saying. It's measure with micrometer, mark it with a chalk, and then chop it with an axe. Right? There's like this decreasing level of accuracy. And unfortunately, I'm seeing a lot of. Even the best with the best intentions where a lot of that happens, where it's, oh, blah, blah, blah. We do this and then the outcome is going to be, oh, look, we're going to increase satisfaction of our people by 5% or we're going to have more engagement. But ultimately, if you're the CEO or the cfo, you cannot. There's not a place in your accounting books where you can put that number unless you actually find a way to linking it in a very legitimate way that is specific to your organization. A lot of the problems that I have with, like, the McKinsey data everybody talks about. Oh, McKinsey proves this McKinsey area. A. They're looking at correlations. And one of the things I ask people is how many functions of a company does the CEO make decisions on based on correlations across a bunch of other companies? Oh, look, there is a, uh. We did a study where we found that red products, on average do slightly better than new products.

Speaker A: Great.

Speaker B: Every single product in a company now is going to be red. We don't run companies that way. What we need to know is we need to have an understanding of the inner workings of the complexity of how our company is generating money, how they're spending money, and to be able to link it to those. So one of the pieces of advice that I would give to ERG leaders is find, make sure that you have someone, whether it's an ally or a member of the erg, that is deeply embedded in the financial aspects of the company that can help to vet what you're doing and help you to figure out how do we link this to the actual things that we're doing. So it could be. It doesn't have to be that complicated, right? It could be, yeah. Let's look at retention rates, let's look at promotion rates, let's look at things of that sort. And those numbers can be, as you were pointing out, they can be actually quite significant. There was a. You mentioned Accenture, but there was a. I think a more vivid Example there was a. It's much more powerful when you can show something that happens in a specific company rather than looking at, oh, the economy overall is losing $1.8 trillion. That's okay, how do I contribute to that? Amazon, in late 2022, there was a leaked memo in which by their own estimate they were losing 8 point something billion dollars a year in unwanted churn. 8 billion with a B dollars a year in unwanted churn. Okay, now that's a company that year made about 33, 34 billion dollars in net profit. 25% of their net profits was going out the window by their own recognition. And that was just, just the cost of the estimate of the amount insurance. So if you can go into your company, talk to your cfo, talk to somebody on the finance side and find out what is our, how many people did we lose this year and what is the average cost of replacement for our, for our company. And by the way, the calculator that we have on our website is actually open to the public. And there is a simple version, we have a more advanced version that we use when we're doing our own projects. But even in the simple version, you can go in and you can put in numbers, just high level numbers for your company. You can say, this is how many people we have, this is what our top line revenues are, this is what groups we have and how the typical satisfaction level for these groups. And it will spit out a number and it's dynamic. You can sit there and tweak it and it will show you here's how much money we're losing. And our estimate is that a typical company is losing very easily 20% of their net profits without realizing it. And so if your ERG leaders can talk to somebody in finance and find any link to any specific numerical thing that is a loss for the company, that will get people to pay attention.

Speaker A: That is powerful advice. That's great advice. And I think I want to put an underline on something that you said because it's something that I preach all the time. If you can translate a number into financial numbers, that has power. As you said before, there is no line item for a CFO to put down things like low satisfaction score. There is no line item to put down like even 20%, 10% turnover or whatever. Okay, so here's what we learned from the first half of our discussion with Paolo. One, you need to stop relying on representation as proof of progress and instead measure what actually drives results inside the business to focus on daily employee experiences. Because those directly affect productivity, retention and the financial outcomes. 3. Measure multiple layers of data, individual experience, advancement outcomes and overall workforce trends, just like finance tracks cash flow, profit and balance sheet. 4. If you want executive attention, you need to link satisfaction and experience gaps to lost revenue because that is how executives understand business impact. 5. To do that, quantify the invisible losses such as reduced revenue per employee and the cost of turnover because those are often large multimillion dollar expenses that go ignored. And finally six Employees are generally the largest expense item on a company's profit and loss statement, accounting for 30% or more of the total expenses. Yet the average company spends more time and money maximizing the value they get out of other smaller expenses such as procurement and vendor contracts, real estate and facilities, technology and cloud spend, logistics and distribution, marketing and capital expenditures with tighter controls and metrics and ROI scrutiny than they do workforce costs. This lack of effective oversight creates a huge opportunity for inclusion and ERG leaders to find and leverage high impact opportunities to cut costs, grow revenue and improve PNL while accomplishing pro social goals as a highly supported byproduct. In the first half of our discussion, we learned that inclusion only gains traction when it is measured like a business system and tied directly to financial outcomes. And there are many opportunities to do this. In the second half of our discussion with Paolo, we're going to focus on how to translate these insights from HR Speak into business executive language that influences real decisions. All of this and more when we come back. But first, this I'll see you on the other side. Are you an ERG group or committee chair struggling to balance your ERG activities with your day job responsibilities? Well, you're not alone. There are hundreds of thousands of passionate ERG leads all around the world that find themselves in the same boat. The only solution found by many is to give up lunch hours and personal time with family and friends. But there is a better way. And that better way is to master the powerful skills that enable you to 1 set realistic and achievable compelling goals and priorities 2 distribute the workload by effectively delegating tasks and responsibilities to others 3 communicate in a way that increases your impact with less time and effort on your Part 4 Secure the full and active support of executive sponsors and other senior business leaders and five Fit your ERG leadership work into a reasonable set of time boundaries. And that and more is exactly what tens of thousands of your colleagues have learned to do effortlessly by participating in supercharged workshops. Supercharge Workshops was developed by us along the same easy and powerful how to framework Found in our popular Supercharge your ERGs book. The modular, customizable programs are loaded with fun exercises and tools that will immediately give you back hours of time each day, while increasing your ability to achieve high impact and measurable results in both your ERG work and your job. For more details on how you can schedule a supercharged workshop session in your organization, go to supercharge workshops.com that's HTTPs:// forward/forward/supercharge workshops. One word with no spaces. So don't suffer silently. Take that first step towards stopping your struggle today. Check out Supercharged Workshops. So if you can translate, let's say, use the example you used earlier. Women are turning over faster than men by 10%. If you can complete that sentence with, women are turning over faster than men by 10%, it's costing us $10 million. Now you've got the tension.

Speaker B: Exactly. Exactly. And by the way, Joe, this actually brings up something that I've been. I've been. I don't want to say adv, because it sounds maybe too arrogant, but when people talk to me, my friends and colleagues in the DEI space, or in the space formerly known as dei, right. And they ask about, what can I do? I find one of the things I always tell them is this. Whatever arguments you use, try to make sure that you end it with something that aligns with the interests of the people that you're talking to. So if you're going to say, oh, we should do this because it's going to be increasing the engagement of LGBTQ population, you should say, and that means that they will be more productive and make more money for the company and cost less when they leave. And I feel like a lot of times in the DI space, there is a tendency to define the benefits themselves as being, oh, getting people to be more engaged is the benefit. Getting people that are higher, more represented is a benefit. And the answer, the point is, that's not what the CEO cares about. That's not what the CFO cares about. And it's not that difficult. You say, look, if we can reduce the churn, it's going to save us money. Instead of just saying, oh, wouldn't it be great if we could reduce the churn of black people because we're losing all these black people. It's, yeah, it would be great. But make it in the language that the cfo, the CEO will actually. And to some extent the CEO. It's also about an operational issue. When you lose somebody, it's a headache. If you're the manager and you have to go out and rehire somebody, train, find the candidates and hire them and train them and bring them on board. That there are a lot of expenses that never figure in the balance sheet that are nonetheless profoundly important to the success of the organization. And yeah, I completely agree with you. And it's both. It's the numerical aspect, but it's the mindset. It's. Stop thinking I want to have greater representation. To me, that's one of the biggest flaw that we make. I, by the way, if I may, a little story that I tell people. I talk about why I predicted in 2018. I wrote an article in which I said, if companies continue to focus on diversity alone, we talk about di, but it's always about representation. If they continue to focus on diversity alone as the yardstick for progress and the only metric that we measure, there will be backlash. I literally wrote an article in which I said there will be backlash from white people complaining of discrimination, and it might spread to other parts of society, like affirmative action. I wrote that in April of 2018. In fact, it was exactly April 2nd. So it was exactly eight years ago that I wrote that article. Okay, now, what's interesting about that is that I, uh, talk about reverse discrimination. I say, look, if you're in a company and the, uh, let's say that you have a thousand people of. Of whom 70% are white men, and the rest are a mixture of, let's say 20% white women, 5% men of color, 5% women of color. And the CEO says, oh, I see the light. We're going to increase the percentage of women from 20% to 30% and people of color from a cumulative 10% to 15%. If you're a white man, the math is very easy. You're cutting out 15% white men, and not doing that would be almost impossible. You have to, like, triple the size of the company to achieve those numbers. But then I ask people the following. I say, let me ask you a question. For those of us. For those of. Sorry, not of us, because I'm a white man, right? But for those who are not as privileged as me, imagine you're in that same company three years later, and you open your eyes and you have two choices. Choice number one is you have exactly hit the targets that you set out to hit, but you're still treated like crap. You still get interrupted in meetings, People don't listen to you. You don't get promoted as fast. You're not compensated as much as you should be. That's option one. Option Two is you haven't hit those numbers. You've improved a little bit. But people care about what you say. They listen to you. You have the same opportunities as everybody else to advance. You see your pathway to becoming a leader. Which do you want? And I guarantee you that 99.9% of the population says, I want option B. That's inclusion. That's not diversity. And I think that's something that we people, when civil, uh, rights came around and more women and more people of color started to get into corporate roles and they were treated like crap and they could tell there was something wrong, the only thing that they could point their fingers to is say, look, why is there only one of me here? Why are there only three of us in this organization? And so diversity became the beacon because it's the easiest thing to measure. But somewhere along the way, we substituted the beacon for what is actually valuable. Right. Diversity. And is an outcome. It's an indicator of the fact that there is something wrong in the organization. But you can't just fix the symptom. You have to figure out, why do we have low diversity? And unless you have an inclusive organization, unless you stop that leaky bucket of higher churn rates for women, for people of color, for people with disabilities, hiring more people is like pouring water into a leaky bucket. It's just going to make a bigger mess on the floor. So, you know, I try to encourage people to really think about what you really want. I believe firmly that most people, I have people that are like, oh, yeah, in my company, we have this level of diversity. I do not believe that there is a single employee in an organization that has a true representation understanding of who is in the company. You look at the people around you and you cannot expect to have exactly the same level of diversity throughout the company. So diversity is a bit of a chimera. We chase after that. But to me, it's really the wrong thing. We should not be aspiring to increasing diversity. We should be aspiring to creating an environment where diversity will naturally increase as a result. That's. It's a mind shift that I think is very important for ERG leaders for DI people to recognize that let's be very careful what we're asking for, and let's be careful that we don't mix up the symptoms with the causes. And when we look at representation, that's really a symptom. And you can't fix that diversity. You can't just put the band aid on it.

Speaker A: Yeah. And that's a wonderful area to focus on it's something that I think in many cases, some of these groups are not actually pointed toward, but that's actually a better area to focus on, so. Totally agree. There's something you were talking about earlier that I wanted to bring back and just make sure we put a little bit of a circle around because I think it's really important. And that is when you were talking about, when you're talking to executives about what you're doing and what it means to make sure you close that gap between what it means to you and for your group and what it means for them. And I always quote this because I'm a fan of Dale Carnegie and a lot of his work, which is speak in terms of the other person's interests. Always make sure that you speak in terms of the other person's interest, because when you don't do that and you just assume that the intelligent person is going to make that, they're not going to make that bridge. In many cases, it sounds like you're talking about a meat problem and not an our problem. Right. So you need to make that connection always in terms of, hey, we have high turnover, and this is the financial impact to our entire organization and to all of us. We're not getting this particular market because we don't have the clear understanding of how that market buys, how that market thinks, and this is what it's costing the entire company in terms of lost revenue. Always making that connection. Paolo, I'd love for you to share with us an example of, let's say, an organization you've worked with where measuring inclusion and really focusing on inclusion led to a clear business improvement outcome.

Speaker B: It's interesting because we have. So the most vivid example that we have of that was with a smaller organization by virtue of the fact that the work that we do when we measure inclusion, it takes time. We do what we call these inclusion assessments and we get a bunch of data and we take whatever, a few months to collect the data that we do. We do the analysis, and then we identify what exactly is happening. Where do you have the biggest problems of what exactly is happening? And we had one smaller organization. It was a growing startup that was around 50, 60 people when we started working with them. Um, and they actually went through. In two years, they went through three cycles of you measure inclusion, you identified the biggest problems, you fix those problems, and then you measure inclusion again and you keep going through that cycle. And what was very interesting is that they found two things that they were very pleased about. One of them was that the retention rates went through the roof. They literally, in fact, that there was an interesting situation where one of the leaders was ousted, as unfortunately often happens with small startups, is that the board basically got rid of one of the executives in a way that was shocking, unexpected. In spite of that, nobody was leaving the company. But what was also interesting is that it served as a great recruitment tool. They grew pretty dramatically and they said it was amazing the quality of people that we're getting because when they heard about what we were doing and how we're doing it, um, it was so it was literally the level of satisfaction was tangibly better and people wanted to be associated with the company. Now in larger companies, the issue there is that it takes a long time. So there is a bit of a sad story, which is that we had a couple of great examples where we would, we do an inclusion assessment. We work with the organizations, we help them to set up some kind of initiative and then come back maybe a year later and measure it again and see what happened. And uh, last year we were supposed to do follow up measurements with a couple of different companies and then all of that went the way of the dinosaur. Unfortunately, we were knocked down like everybody else in the DI space basically. And we literally had numerous clients that just hung up the projects that we were doing. So I don't have, I cannot speak to the financial outcome of being measured. But what I can tell you is, for example, an organization, and I'm not going to name names because I want to be a little bit careful about, especially in these days, but there was an organization, about 9,000 people, in which, uh, we did an inclusion assessment and they found that. So we have what we call these, include these experience categories, right? We collect data in a way that we asked people to share specific experiences of what happened in the workplace that impacted their ability to do their work. So we're very careful about not making it sound like that made you feel excluded. Because that feeling of exclusion can be the result of a lot of things. We just want to tell us something that happened to you and then we categorize it and we use that to generate quantitative data that tells us where are the biggest issues and then the narratives tell us what exactly is happening. This organization found that they had a real issue with respect, respect in the sense of acts of disrespect toward people, whether it was openly insulting somebody or whether it was making a bad joke during a meeting or whatever the case might be. And so they decided to embark on a campaign where they did a campaign called the 1000 Acts of Respect. And they basically encouraged people to, first of all, to proactively be more respectful and then to share stories of situations in which they felt that they were being particularly respected in a way that they hadn't m before. And it was a very successful campaign that people loved it. People really. It was the combination of showing the results of the process that we did where we showed specific examples of things that were happening to people in the organization, attaching them to numbers and saying, see this story. This is one of 55 that we've collected from your data of 2,000 people, whatever the case may be. And that was incredibly powerful. It was giving the extra visibility and then giving them a very clear understanding of what was going on and how to fix it. And so we have lots of examples of that. And I can tell you that a lot of the companies that we worked with, they, as much as they value the data, they love how it changes people's way to think about diversity and inclusion. It really removes that sense of, oh, you're white, therefore you're an oppressor, and I'm not white, therefore I'm oppressed, or even just thinking about, oh, I need to tell you all the negative experiences that I have because of what's happening to me, et cetera. When you change that narrative, you make it more visible. You change the focus on inclusion instead of diversity. It opens everybody's mind. And that I found to be the biggest impact for most of the companies I've worked with. We now have a much more systematic way that we've just launched where we're actually measuring merit m and inclusion and helping people to track it over time, linking it to business outcomes. It's a little bit early. I asked me again in a year or two, and I hope to have a case study where we can literally say, this company saved $10 million a year by doing what we suggested.

Speaker A: You mentioned earlier, a, uh, calculator that you have out there that people can access. Can you give us a URL for that calculator?

Speaker B: Yeah, if you go to. Actually, the easiest thing, if you go to the website Aleria Tech, which is Aler a L e R I a T E C H and then if you just look up on the menu, up in the navigation menu, because that's the easiest way to find it, there is actually a menu for our approach. So there is like menus for solutions, training and speaking. And then under approach, there is a link to impact calculator. I think the URL is actually Aleri text impact calculator. But if you go there you'll find that there's actually a new version. We just launched a version that has AI in it. So that if you by default it has some parameters built in there, like three scenarios that you can choose from. They're like hypothetical companies. But then if you enter your name and email, it will actually give you access to the at least being able to change some of the data. You can put in a big data about your company. And there is a little AI. We're still working out some of the kinks. Sometimes it answers weird ways, but it'll tell you a bit about how the calculator works. It will help you to analyze some of the things that you're seeing in the calculator. So it's fun, it's interactive, so it's a fun, engaging widget and we use it very extensively. Especially when, if we are working, let's say with an erg, we do these, uh, what we call discover inclusive meritocracy where the first thing we do is that we customize the calculator for their company and then we put together a presentation for their leadership. And when we go to the leadership and we say, hey, we think that your company is losing $85 million a year because of based on the data that we have from your company. That's a big eye opener, great conversation starter.

Speaker A: So I'm sure, I'm sure it's really funny. The reason I was chuckling before when you were talking about AI is in some of the notes that we've exchanged. I, uh, come to realize that you probably spend as much of an unhealthy time communicating with AI as I do. And the more you communicate with AI, it is a helpful tool for research, but you do find that it has quirks. Like it'll answer something and you'll say, no, that's not what I'm looking for. And then it'll look for something else and then it'll come back to what it said before because it wants to press that point.

Speaker B: I just spent the week in Salt Lake City visiting my daughter and her family and these two wonderful grandkids and four and two and the two year old is speaking now, but you realize that you have to learn to speak like them. So it's like sometimes my grandson would say things and my daughter and her husband would understand what he was saying. I was like, I have no clue what he's saying. It's like you learn to speak the language of the babies and they learn. And it's funny because I see that. I completely agree with you. I do use AI somewhat extensively, and there are times when I feel like I am learning how to speak AI language. People talk about prompt engineering, but there is definitely a learning component that goes into that. But I totally agree. But no, I. Look, I'm a big fan. AI is another one everybody wants to talk about AI. How is AI going to impact biases? There is all these arguments about the fact that AI algorithms can be biased. If you're just using it for research or to help you build a piece of software, not to analyze the data, then I think that it has the potential to be a bit of an equalizer, because in principle, anybody today can build things even without having an engineering degree or being a software developer. And so, in principle, people can learn how to use that. Potentially could be an equalizer. In reality, unfortunately, just like everything in our society, when there is an opportunity to make money, it seems that the most privileged groups are the ones that are the fastest to move, that have the greatest resources to do it. And unfortunately, with AI, we're seeing some of that as well. Hopefully, we'll be able to use that as a weapon to improve things. And not to make matters worse, but we'll see.

Speaker A: Yeah, it is becoming a ubiquitous tool that's available to so many people that it just. It does increase what you can do, but you have to use it judiciously. You have to be able to rein it in sometimes and say, wait a minute, uh, let's not go too much in that particular direction. Paolo, if an ERG leader wanted to demonstrate some measurable business impact in the next 90 days or so, what do you say they should do first?

Speaker B: Honestly, what I would say is go grab a copy of Measuring Inclusion and read chapter six, skim through it, then read chapter six, which tells you step by step what to measure and how to measure. It's something that we have a platform that facilitates that process. We have an analytical engine behind it, and we have visualizations. But really, anyone can do it. And it's about changing your mindset about what you should measure and how you should measure. It's really about learning to get away from. I want to measure how people feel and measure what causes people to feel that way. I have this little analogy in the book where I tell people, imagine you walk in your house in winter and it feels very cold. You look at the thermostat, it reads 50 degrees. I know how to fix it. I'm going to light a match under the thermostat. That's what, unfortunately, a lot of DI has done. We're lighting the match on the thermostat, and meanwhile, the windows are. Drive to the front door is open, and you're going to burn the house down. And unfortunately, that's exactly what happened. And so, uh, my suggestion is stop thinking about symptoms and learn to understand the difference between the symptoms and what you might. So all we're saying is don't ask people how they feel. Ask them to tell you experiences that interfere with feared with their ability to do their work. And then if you find that a lot of those happen to be more frequent with one group than with another group, great. But then the solution is wonderful. Because if I can give you a very quick example, a lot of companies say. A lot of times will say things like, my manager forgot to invite me to a meeting where they made decisions that impacted my work. Okay, that's not good. And if you see that in a company, a hundred people complain about that, fix it. Tell the manager, you have to have a spreadsheet of everybody that should be invited, and make sure that. And you will be measured as a manager on how accurately you're invited. You're supposed to invite. When you focus on that as a problem, guess What? Of those 100 people, probably 80% were not white men. But you're not saying, oh, let me fix the problem for women, let me fix the problem for people of color. You're saying, let's find the biggest problem and let's fix them. And when you do that, two things happen. One is that you're not discriminating against the white men, because some of the white men will be impacted by that as well. The shy one, the one with the accent, whatever the case might be. And two, it turns out that always the biggest problems tend to have the biggest impact on the most vulnerable populations. So if you are benefiting 100 people, chances are that you're doing a, uh, disproportionate benefit for the people that are the most underrepresented. And so I flipped. People say, this is another thing, if I may, that drives me a little bit nuts. People that talk about, oh, look at these technologies that were developed for people with disabilities, and now everybody uses, um, it. Look at curb cuts, look at the. The closed captions. Yeah, they're like 10 examples. And you know why we know them? Because they're so rare. Right. Instead of finding the most vulnerable population, understanding what problem they have, let's fix the problem. We'll probably Benefit other people. That's completely backwards. Find the biggest problem. Don't focus on identity. Find the biggest problem. Fix that problem. And I guarantee you, you will have a disproportionate benefit on the most impacted people. And that completely avoids the backlash. Because you're not saying, I want to do this for this group of people. You're saying, we're having problems that are impacting the performance of our entire company. Let's fix those problems. And lo and behold, all of a sudden our retention rates have gone up, particularly for people that were the most impacted by those problems. So that's another thing that I would say I, uh, would encourage a lot of ERG leaders is really try to train yourself to stop thinking identity first. We really need to stop thinking identity first. Identity will follow. Diversity is an outcome. Right? You need to fix the. Not the symptoms. You need to understand what are the actual causes that lead to those symptoms. And if you can find those causes and fix them, you're going to be in much better shape.

Speaker A: Very well put. I think that, uh, the examples that you gave and everything are really spot on. It's the idea, if I were to encapsulate that, it would be find the biggest problem, because those problems affect everyone and probably disproportionately affect people who belong to underrepresented groups. Find out what causes that problem and then address the cause. And then to tie it back to comments from earlier, then take that and tie it to an impact, the financial impact that affects the entire company. In other words, we've identified that this condition exists. That's the big problem. We've identified that these are the causes. We're going to take action on these causes and the benefit to the organization. Save $10 million in loss, you're going to probably be able to capture another $20 million in business that you wouldn't have, et cetera, et cetera, et cetera. So it's really a neat package. And one of the things that I like to say, and that I say a lot in my own writing, is the fact that inclusion, and if we're lack of a better word you want to call it, social progress is usually the byproduct of these solutions. When you try to chase these solutions directly. My analogy that I use is the young dog and the old dog. The young dog runs around chasing its tail. Never catches it. It always eludes him. He lays down next to the big dog and he says to the big old dog, don't you ever try to catch your tail? And the Big Dog says, no, I never tried to do that because I realized that when I walk away, it always follows me. It's a byproduct. Love all those examples. So, Paolo, how can our listeners reach you?

Speaker B: The easiest way is go to Aleria Tech, A L E r I a dot tech. If you come look for me on LinkedIn, there are not a lot of Paolo Gaudianos and pretty easy to find. Or if you look up the book Measuring Inclusion, you can find me that way as well. If you go to the TED website, I've given two TEDx talks that actually one of them is now featured as a main talk on the TED site. So I'm very easy to find. But I would say come to my website, reach out to me on LinkedIn, always happy to talk to people and, uh, keep an eye out for the new book that's coming out on June 9th on meritocracy. I'm very excited about that because I think that will really. It just doesn't just add to what we've done before, but it really tries to bring together viewpoints that have been seen as opposite, which is Meritocracy. And Di and I argue in the book that's absolutely a, uh, false dichotomy. Not only is it a false dichotomy, but you really need both merit and inclusion in order to have an idea of whether your company is working well and whether you're getting the most value out of your employees and whether they're getting the most value out of their jobs. So, yeah, look up, look for up my books, look up the website and, and reach out on LinkedIn if you'd like to connect.

Speaker A: Paolo Gaudiano, chief scientist at Olyria and arc. Thanks again for being on ERG Power Talk today, Paolo. I appreciate it.

Speaker B: Thank you, Joe. Really appreciate having the opportunity.

Speaker A: Okay, so here is what we learned from the second half of our discussion with Paolo. One, you need to translate every argument into financial terms because that is what drives executive decisions. Two, a big key is to always align your message to what the business leaders in your organization already care about, whether that's revenue, cost and operational impact or other things, but not engagement or representation alone. Three, stop treating increased diversity as the goal and start focus on fixing the conditions that drive performance and retention, which generally have an overwhelmingly positive impact on underrepresented people in your company. Four, identify and address the root causes of challenges, not the symptoms, because hiring more talent into a broken system is just increases your losses. Five, find the partner in finance to validate your assumption and help to connect your work with real business metrics that your executives use and care about. And finally, six Also leverage that financial partner to build your business cases using company specific data, not external correlations, because executives don't make decisions based on Generalized studies from McKinsey or Deloitte or think tanks or consulting groups. An ERG member at a national retailer learned from a UH colleague in data analytics who's also a member of their group that one distribution center had higher turnover and a 12% productivity gap that was costing millions in delayed shipments. That same site also had a higher concentration of employees and clients from the demographic that her ERG supported, and they were the ones most affected by this inadequate training and support experiencing the greatest performance drag. But instead of framing this as a culture issue, she analyzed the workforce data, identified the root causes, and with a team from her erg designed a targeted pilot to fix them. She partnered with finance to quantify the losses and the cost of the solution to validate that there was a big return on investment. Because she positioned this work as fixing an operational performance problem, the business leadership at that distribution site backed it. The result was millions recovered promotions for those involved and stronger performance across the entire operation. And while the entire workforce in that location benefited, the greatest gain went to the underrepresented employees who had been the most constrained by the old system. The takeaway from this is simple. Stop positioning your work as inclusion for the sake of inclusion. Start positioning it as finding and fixing costly gaps in how the work gets done in today's environment. Every organization is sitting on millions of dollars in these hidden opportunities. So go find them. Go fix them, and when you do, you will improve business results, get the support and attention you seek, and deliver the greatest impact to the people who need it the most. Thank you for tuning in to ERG Power Talk. If you enjoyed and got value out of this program, please like us and leave a favorable review at your podcast provider site. Also, invite others to listen to the show. By the way, contact me if you're looking for an ERG Symposium keynote or a leader for your strategy workshop. New Chair Onboarding and or ERG Bootcamp. I can run these for you either in person or in a virtual setting. Also, for more great ideas and tips for your ergs, get my books Supercharge youe Ergs 18 tips to power up your error ERG BRG strategy and the new DEI and ERG Frontier how you and your efforts can rise and thrive in the new world of constant disruption. Both available on Amazon.com. i'm Joe Santana. Thanks again for tuning in.