Originally published by the NACD Blue Ribbon Commission.
Organizations are facing pressure from stakeholders and shareholders alike to prioritize diversity, equity, and inclusion (DE&I). Activist investors are pressing for information, and the US Securities and Exchange Commission recently issued a human capital reporting mandate that appears to encompass aspects of DE&I. Organizations themselves need to ensure that they can access and leverage diverse talent to drive innovation and performance. To meet these growing standards, boards need to access the right data to provide oversight and drive success.
Mercer has supported many of the companies leading the charge on DE&I with analytics to measure and accelerate progress and to support disclosure. Informed by that experience, we provide a framework to analyze data here that boards should consider to ensure that they can effectively support their management teams and report to shareholders on this critical topic.
An organization hires employees, develops and advances them, and, potentially, sees them leave. The movement of these employees within the organization, and the rewards allocated to them as they move and perform, constitute an internal labor market (ILM). ILM analysis is a framework to assess how these workforce “flows” and associated rewards occur and can be adapted to drive desired change.
A core diagnostic tool of ILM analysis is an ILM map, which can be readily produced by the human resources information system (HRIS) reporting team. The ILM map is a single picture that shows employee headcount by career level, and for the most recent one to three years, average annual hires, promotions, and exits from each level. In breaking down the ILM map by gender and race/ethnicity, a board can assess representation deficits across the hierarchy and identify questions to ask management about specific pain points (e.g., hiring shortfalls, career “ceilings,” and points of retention risk).
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