Diversity audits: What they are, their benefits, and how they work

From onboarding new talent to managing existing employees, HR professionals are in charge of providing a positive employee experience. Unfortunately, biased and discriminatory practices not only disrupt this goal but also increase the risk of legal issues. 

Conducting regular diversity audits can help you maintain compliance and build an inclusive work culture. But what exactly are diversity audits, and what do you need to implement them?

In this article, we discuss how you can use diversity audits to improve the employee experience.

What is a diversity audit?

A diversity audit is a comprehensive evaluation of a company’s demographics and culture. Its purpose is to determine how well a company is supporting underrepresented individuals. It’s also designed to identify areas a company can improve to make it more inclusive. 

A lack of diversity can manifest itself in many ways. For example, 32% of Black women are more likely to leave a company that lacks diversity within two years. Underrepresentation can also be specific to certain industries. For example, only 15% of leadership roles are held by women in investing.

Companies can collect various data for a diversity audit to take meaningful steps toward developing a more inclusive and diverse workplace.

What does a diversity audit do for employers?

A diversity audit can help employers:

• Identify opportunities to better support underrepresented people in their company

• Comply with localized labor laws and anti-discrimination laws

• Address potential biases in their company policies and procedures, including

  • Dress codes

  • Hiring procedures

  • Performance reviews

  • Career progression 

  • Flexible workplace arrangements

  • Salaries and benefits packages

What are the benefits of a diversity audit?

The main benefit of a diversity audit is reducing discrimination in the workplace. But there’s more to gain. Inclusive hiring practices can help your company attract top employees, boost sales, and innovate. 

Mitigation of bias and discrimination

By identifying biased and discriminatory practices through an audit, you can take meaningful steps toward making your workplace more welcoming to people of different backgrounds, beliefs, and capabilities.

This can improve your company culture, making it one where everyone is equally welcome and has the same opportunities to advance in their careers.

Improved reputation

Companies that prioritize inclusivity and diversity are more likely to have a good reputation. As a result, it’s easier to attract and retain talent.

56% of US employees say that increasing diversity, equity, and inclusion in the workplace is a good thing. Three in ten workers say it’s extremely important to work in an environment with employees of different races and ethnicities.

But it’s not just employees who will see your company in a more positive light. 59% of consumers say diversity and inclusion impact their buying decisions — they’re more interested in purchasing from companies that prioritize diversity.

Financial advantage

A diverse workforce isn’t just nice to have. It leads to better financial performance. Companies with more than 30% of women employees are more likely to outperform those with 30% or less. Also, companies in the top quartile for ethnic diversity had a 27% financial advantage over others.

Avoidance of groupthink

Groupthink refers to a mode of thinking where a group of similar people tend to agree on a viewpoint or idea perceived to represent the group's consensus.

The problem with groupthink is that people stop thinking for themselves. They’re too heavily influenced by the group. This stifles innovation and creativity. 

If a workplace consists of people of the same or similar backgrounds, then this may limit their ability to think outside the box.

What should you focus on during a diversity audit?

The four key areas that a diversity audit focuses on are diversity data, policies, processes, and culture. Let’s take a closer look at all of these.

Diversity data

Diversity data contains protected (or sensitive) information about a workforce. Companies typically collect it from applicants during the interview process or from successful candidates during onboarding. This data is usually made anonymous to avoid bias or discrimination. 

Diversity data may contain one or more of the following data points: 

• Sexual orientation

• Gender identity

• Disability status

• Ethnic identity

• Pre-existing medical conditions

A lack of diverse job applicants may signal a poor company's reputation. Otherwise, your job descriptions may discourage underrepresented people when applying for a role.

Policies

A diversity audit can help you evaluate the consistency, effectiveness, and legality of your company's policies. Ideally, your policies should be up-to-date, compliant with relevant labor laws, and able to meet the expectations of both job applicants and existing employees. 

By conducting a diversity audit, you can identify what’s wrong with your existing policies and make the necessary improvements. This helps ensure that:

• No one group or person is at a disadvantage because of a company policy

• Any potential biases, inconsistencies, or discriminatory practices are eliminated

An example of a biased policy would be having dress codes for men and women but not for transgender or non-binary people. The 3% of the global population who identify as transgender or non-binary/gender-fluid may consider such a policy to be biased against them.

Processes

A diversity audit can help identify bias and discrimination in processes within your company on:

• Hiring, onboarding, and offboarding employees

• Conducting performance reviews and check-ins

• Taking disciplinary action

• Providing viable career progression pathways

How you perform certain processes in your business is important, as underlying bias or discriminatory actions can cause serious issues. 

Here’s an example of how bias can affect the hiring process:

• After conducting several interviews, the list of candidates is narrowed down to two. One is a single man who is ready to start in the role at any time, while the other is a single mother who requires at least a week’s notice to arrange caretaking duties for her children. The male candidate is less qualified and has less experience than the woman; however, because he can start sooner, he is chosen over her. This decision could be flagged as a bias in the hiring procedure.

Since women may be less readily available to start work at short notice, this type of scenario is common. And at scale, bias makes accessing high-paying jobs more challenging for certain groups. This is why it’s so important to evaluate your hiring and managing procedures.

Culture

Company culture typically refers to the shared values, ethics, attitudes, and beliefs that define how you run your business. It reflects the way you interact with your employees and clients, defines your company's policies and procedures, and advertises your business. 

You may engage directly with your employees as part of a diversity audit to uncover what they think about your company and your existing culture. This process may involve the following:

• One-on-one interviews

• Group focus sessions

• Online surveys

Depending on your approach, it may be wise to give your employees the chance to submit feedback anonymously.

What do you need for a diversity audit?

To start a diversity audit, you need a combination of the right data and skills. Here’s how you can prepare each of these items.

Data

When preparing to conduct a diversity audit, it’s a good idea to establish goals. Think about what you hope to achieve out of the audit.

Consider setting goals that follow the S.M.A.R.T. formula — goals that are Specific, Measurable, Achievable, Relevant, and Time-bound. For example, you can set a goal to "improve the retention rate of female employees by 25% within six months."

After setting goals, you can consider gathering the below data to conduct the diversity audit.

• Demographics: Gather demographic data from current and former employee profiles as well as job applicants.

• Satisfaction: You can collect this type of information from employee satisfaction surveys and online reviews of your company.

• Retention rate: Look at employee profiles, performance reviews, and exit interview notes. This data can help you uncover which people are leaving, why, and whether bias is a factor in their decision.

• Promotion metrics: This looks at the career progression ladder in your company. This data is typically gathered from employee profiles and performance reviews. It can help you compare the progression levels of different employee groups.

Skills

Assemble a team of people who can not only conduct the diversity audit but also share valuable insights. You can build a diversity audit team with people from the below teams.

• HR: Your HR team should gather data from talent acquisition and management procedures (e.g., surveys, performance reviews, or exit interviews).

• Legal: Your legal team can review your company's current policies and procedures to make sure they are compliant under local laws.

• Communications: Appoint a professional who can communicate the results of the diversity audit. Have the person share how the company plans to change in response to the results.

What tools can help employers execute diversity audits?

Even the most skillful people need the right tools to maximize the results of your diversity audit. Here are some assessment tools that diversity audit teams often use to get results.

Equality impact assessments

An equality impact assessment (EIA) is designed to identify and address biased, discriminatory, and inconsistent practices within your company's policies and procedures. The process typically involves having employees fill out an EIA template form, which is personalized to your company. 

An EIA can help you not only identify issues with your policies and procedures but also measure the effects of those shortcomings. You can then use this data to initiate proactive remediation measures.

Pay gap analysis

A pay gap analysis involves reviewing your workforce’s salaries and benefits. Its purpose is to identify potential pay discrepancies between your represented and underrepresented employees. 

Identifying a pay gap doesn’t necessarily mean that your company is being discriminatory. However, it does mean that you should take the necessary steps to understand why the gap exists and see what can be done to help close it.

Diversity and inclusion diagnostics

A diversity and inclusion diagnostics report is designed to help you learn more about your employees and their experiences with your company. It involves one-on-one interviews, group focus sessions, and online surveys.

The results of a diversity and inclusion diagnostics report can help you:

• Identify strengths and weaknesses in inclusivity (e.g., are certain groups of people more at risk of being disadvantaged than others — and if so, why?)

• Align your inclusion strategy with your overall business goals (e.g., how will reaching your diversity and inclusion goals help benefit your bottom line?)

Improve your company’s diversity and inclusion initiatives with Remote

A diversity audit is an effective way to measure progress and make meaningful changes in your organization.

Remote HR Management takes the stress out of diversity audits by providing all the data you need in one place. Remote Talent connects you with the world's top talent, so you can build a diverse team from a pool of qualified applicants.

Chat with us to improve your DEI initiatives today.

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