5 Eclectic Approaches to Corporate Diversity and Inclusion
By: Gabe Kwakyi
Tags: Diversity, Social Responsibility, Diversity And Inclusion, Esg, Diversity In Tech

Continuing on in my research into how companies are approaching societal profit, I came across an encouraging number of initiatives by American corporations that took of all different shapes, sizes and degrees.

In particular, many of the programs I came across were dated in the wake of the murder of George Floyd in particular. In this time period, many companies produced diversity-focused advertising campaigns, made donations (typically $500k to $1 million) to BLM-related philanthropic causes, reiterated their diversity and inclusion policies, touted their D&I executives, and produced D&I reports. Yet some approaches went beyond this common set, standing out for their uniqueness.

Here is a summary of several of the most interesting instances I found of companies taking novel approaches to innovating in their pursuit of racial and gender-based societal profit, from both equality and equity-based perspectives.

Microsoft — Diversity and Inclusions Efforts of the World’s Most Valuable Corporation

Microsoft is arguably the world’s most valuable company, and is a company injected with the corporate ethos of one of the world’s most successful entrepreneurs, who plowed $37 billion of his own money into his namesake charity. Given its wealth of resources, global footprint, and ability to exert influence as a corporate role model, Microsoft is also uniquely positioned to make a highly substantive impact on the norms, values, and reality of society at-large.

From my experiences working for the software giant in the 2010s, I saw firsthand how Microsoft had come a long way from its portrayal in stories from days as the corporate bully of early Silicon Valley. In this millennium, Microsoft has made and continues to make clear commitments to growing its societal profits in addition to its dollar profit. Of all the D&I news I found, I came away with the feeling that Microsoft’s efforts are the most noteworthy for their scope and specificity, and can serve as an excellent case study into the strategy and tactics of how a large corporation can pursue societal profit. Furthermore, the fact that the world’s most successful company by stock price terms values societal profit is a ringing repudiation of the Milton Friedman doctrine, which urges the leverage of every dollar a company has access to in order to return the maximum profits possible to its investors.

In the wake of the racial tragedies of 2020, Microsoft’s expanded D&I efforts were detailed in a letter from CEO Satya Nadella, which began by calling out its immediate increase in its investment into its own diversity and inclusion efforts by $150 million over the next five years. This expands Microsoft’s investment into D&I efforts by another 50% on top of its previously reported $300 million commitment of 2018. On a related tangent, Apple and Walmart each also announced commitments, to the tune of $100 million each for the creation of D&I research centers and other efforts.

Microsoft’s new $150 million investment is revealed throughout the rest of the letter to stand on top of close to $1 billion in other commitments to other, external efforts, which are broken down into the following three pillars of action:

Raising leadership diversity:

Rolling out a required D&I training, which includes coverage of the specific experiences of the Black and African American community.

This idea of actually immersing people in the experiences and shoes of others to deepen the training is particularly interesting. This addition could be an innovative way to establish connections to affected communities and build new, two-way streets of structured interaction, discussion, and learning that wouldn’t otherwise exist.

Doubling the number of Black and African American managers and leaders (Satya commented that Microsoft’s D&I efforts would expand to Hispanic and Latinx over the next five years).

For context, Microsoft’s current Black and African American leadership rate sits at ~2.7% (of ~4.5% company-wide). This initiative also includes specific efforts to plan structured career pathways, such as from mid-level management to director, and director to general manager. When paired with Microsoft’s commitment to expand the diversity of its talent and supplier pipelines (covered below), the expansion in leadership may hopefully create a virtuous cycle in normalizing the presence of Black and African Americans in all areas of the company’s workforce and operations, which could help Microsoft (and the broader tech industry the company is a leader within) ultimately align company workforce participation rates closer to the Black American labor participation rate of 12.3% as of 2016, according to the Bureau of Labor Statistics.

Increasing the D&I component of senior leader compensation/promotional decisions, as well as assigning leaders coaching aimed to help them grow their performance against D&I goals.

This follows a rising trend of expanding executive compensation from profits/growth to D&I performance outcomes, and is phenomenal to see growing in adoption. Microsoft’s addition of D&I coaching may be a luxury affordable by its high profit margins, but the purpose (padding added executive requirements with key support in figuring out how to achieve their new performance goals) may also be able to be accomplished by other means for other businesses which cannot afford coaches for all relevant stakeholders.

Supporting Black and African American businesses:

Doubling the number of Black and African American-owned suppliers that Microsoft works with, as well as increasing its investment into these suppliers by $500M. As part of these efforts, Microsoft elaborated that it would also ensure minority business were represented in incoming RFPs, adjust diversity weights in the selection process, and even evaluate the D&I efforts within it top 100 suppliers as part of the RFP process.

The last detail of this particular strategy is a fascinating and indeed bold extension of the influence of Microsoft’s D&I commitments into the operations of other companies it works with. While the argument for over-reach may be made here, it should be considered that the free market works both ways and that this is a prime example of a free-market mechanism. Given that Microsoft is not only a seller but a powerful customer as well, it should be afforded the same right as end-customers to decide who to buy from, and free to wield its influence according to its own internal decision-making criteria. It’s easy to see how this type of RFP weighting is easily translatable to other areas of societal profit, such as L’Oreal’s RFP requirements of suppliers to support its own efforts to achieve its Zero deforestation goal.

Doubling Microsoft cashflows invested through Black and African American-owned financial institutions, furthermore committing $100 million in investments into minority-run financial institutions and $50 million for Black and African American small businesses. Microsoft will also increase its number of Black and African American owned partners by 20% (partners are companies that sell, service, or otherwise leverage Microsoft products in their own core business models), as well as investing $73 million in financial support for partners.

Satya points out actions such as these represent another vehicle in which Microsoft can extend its influence as a large buyer into other participants in the industries it buys from, such as incentivizing investors considering minority-owned financial businesses.

In fact, after Netflix announced that it would deploy $100 million of its cash stockpile into Black financial institutions, Bloomberg found that stocks of multiple Black-owned financial institutions immediately popped, underscoring the real-world impact of these corporate D&I efforts.

Both Broadway Financial and Carver Bankcorp listed above have retained their D&I share price pop through today

Tackling the talent pipeline issue at its root:

Committing $50 million into criminal justice reform, increasing the reach of its STEM (Science, Technology, Engineering, Mathematics) education and training programs in K-12 and college institutions, skills training programs for adults seeking new jobs, and $5 million in grants for non-profits empowering skills training programs in global communities of color.

Working with partners to provide more affordable devices and access in urban communities, and supporting non-profit organizations led by people of color via technology cost credits and grants.

In another article, Microsoft explained how some of its efforts and technologies were deployed into efforts to reform the criminal justice system, including:

Developing tools to allow researchers, NGOs and governments to better study racial sentencing disparities, and also inform the decisions courts make in criminal cases involving minorities, such as when meting out so-called “Legal Financial Obligations” (i.e. fines, costs, restitution from criminal cases), and what level of these obligations is truly fair and just.

Providing software and expertise to facilitate surveys that listen to community members’ feedback on how they perceive the criminal justice system, in order to fuel reform efforts.

Leveraging virtual reality in order to help inmates simulate scenarios of re-entering society after release.

Microsoft’s efforts here round out a third group of Black and African Americans, seeking to impact the lives of not only people working for or selling to Microsoft, but also people in the innumerable communities that Microsoft’s overall corporate footprint touches.

Microsoft’s D&I efforts were so bold, in fact that the Trump administration’s Department of Labor sent Microsoft a letter investigating into whether its practices might be found to be reverse discrimination (see Microsoft’s response).

US Department of Labor investigates Microsoft’s D&I efforts to double the Black and African American makeup in its leadership ranks

For more insights, check out Microsoft’s 2019 Annual Diversity and Inclusion Report.

Yelp — Highlighting Black-Owned Business to End-Customers

Beyond investments of money and recruiting lies an interesting new approach, which centers on the idea of empowering customers to see how their own dollars can support Black and African American-owned businesses.

After the death of George Floyd, Yelp not only made donations to BLM-related efforts, but also put its product teams to work innovating to support the minority community in any other ways it could. In the end, the Yelp team rolled out an option that would allow Black-owned businesses to add a badge to their profile to identify their Black ownership and allow customers to decide to spend their own dollars in support of Black-owned businesses. DoorDash and Shopify also followed in Yelp’s footsteps, releasing similar Black-owned business flags in their user experiences.

Yelp’s Black-owned business badge

Soon after its initial release, Yelp followed up with a second feature aimed at addressing racial bias by alerting users of businesses that are accused of racist behavior, informed by media reports.

Yelp’s racist behavior warning

This approach to D&I innovation demonstrated by Yelp belongs to an emerging new class of D&I efforts: those that go beyond the more widely adopted but less integrated approaches of throwing donation money at D&I or even rolling out a standard D&I training risk being relegated to a “check the box” activity: done whenever PR pressure mounts or an issue occurs, but with little follow-up otherwise.

Yelp took a bold step to internalize the importance of D&I into a company’s culture by diverting resources (its product team at that, rather than free cashflows or one hour for training) that could otherwise be utilized in more direct profit-driving workstreams and also weaving the initiative into the company’s core product, where changes attain a high level of visibility and create lasting implications.

Buffer — Creating Full Transparency in Compensation

In one example that occurred long before 2020, Buffer demonstrated how transparency can be a tool for equality by removing the shadows in which bias and discrimination can hide. Even in the D&I Reports that I found I didn’t find this level of transparency; most, if they touched on pay comparisons, referred to high-level findings, such as whether pay was or was not equal, or rolled up pay gap percentages.

In 2013, the CEO of Buffer published a spreadsheet that revealed the salaries of all of its employees, along with the formulas and supporting logic which determined each salary rate. The disclosure was an outcome based squarely on Buffer’s core values and fell in with other value-driven actions, such as an open book policy for Buffer’s revenues and user numbers, as well as company-wide access to all emails, which was inspired by Stripe’s open email policy.

Buffer’s example of radical compensation transparency may be risky, given that some employees may not wish for their income to be public knowledge, and the act of volunteering information that is not legally required is anathema to companies in highly competitive industries. Yet, it is this high degree of transparency that is precisely what is so innovative and can be effective at discouraging discrimination, or at the least offering hard data to facilitate objective discussions about potential discrimination or unfair treatment between employees on the basis of race, gender, sexual orientation, and even company role/seniority/level.

Years later in 2017, Buffer continued building on its core values by sharing its profitability figures and creating an employee profit-sharing pool, as well as carve-outs for charitable donations. Buffer pointed to examples from other companies offering employee profit-sharing plans including Basecamp, Mailchimp, and Southwest Airlines.

Airbnb — Protecting Customers From Discrimination

With the rise of the gig economy, technology marketplaces have found themselves at the center of complaints of discrimination, such as suppliers declining service to minority groups. Gig economy companies such as Uber have responded with a variety of means to combat racism, such as anti-discrimination policies and training for corporate employees and gig workers, specialized customer support, D&I recruiting/leadership targets and goal-based compensation tie-ins, and others.

And while Uber’s approach in particular is certainly notable given its goals to doubling Black leadership rates and continue pressing its executive compensation tie-in commitments, I found Airbnb’s approach to addressing D&I to be another interesting study for pushing the envelop of D&I a bit further than other marketplace companies.

First, Airbnb grounds its anti-discrimination work in a specialized team (which is not novel to the industry approach). What is novel (or is at least marketed well) is that Airbnb clearly takes pains to ground this team’s work with expert input from and collaboration with relevant organizations across a diversity of racial and ethnic focuses. Trying to tackle the D&I problem internally is noble; but trying to tackle the problem with help enlisted from organizations who have been on the front lines of the topic for much, much longer than a company has been in operations is both admirable and intelligent.

One particular project from its anti-discrimination team, called Operation Lighthouse leverages a 3rd party to categorize the perceptions of guests and hosts by race, based on inputs like name and profile picture, with the goal of identifying bias decision-making on the platform, which can be used as data to inform future decisions by Airbnb anti-discrimination teams.

For instance, one decision that Airbnb took was to change its reservation flow to prevent customer profile pictures from being shown to suppliers before bookings are confirmed, to reduce visual bias. Also, as a result of its anti-discrimination research, Airbnb reports that it has removed 1.3 million suppliers from its platform due to bias-based behavior.

It will be interesting to keep tabs on Airbnb’s expert-informed partnership to see what other innovations in D&I they think up.

Notably, news from Bloomberg indicated that Airbnb was considering dual-listing on the Long Term Stock Exchange, underscoring Airbnb’s commitment to social responsibility.

Ideas from LinkedIn for Cultivating Diversity and Inclusion

Lastly, I came across an imaginative article published on LinkedIn, which covered 50+ ideas for cultivating corporate diversity. Here were several that I found particularly interesting:

Ensure that office supply needs are included that cover all employee needs, such as including tampons in restrooms. Consider surveying employees to determine the best mix of supplies to provide. Create a Diversity and Inclusion Slack channel or other communication vehicle to create a dedicated space and help instill discussions in this vein as a normal value in company culture. Bring expertise and experiences into your organization by inviting a D&I speaker to touch on important topics in a guest speaker session with your team, including leadership. Encourage employees to politely point out interruptions during meetings, in order to heighten awareness and encourage a socially-accountable evolution in the communication patterns of employees (such as males) who tend to speak over and discourage others from sharing their own opinions. Also, consider using a round robin technique to encourage people who don’t normally volunteer to speak in meetings — or consider implementing a follow up process that provides the opportunity for people who didn’t get a chance to speak to be able to add their 2 cents. Hang a poster in highly visible area of offices (or on the walls behind leadership members’ home offices during the age of WFH) that highlight the D&I policies and initiatives that your company runs to maximize the chances that employees are made aware of your company’s D&I efforts, and once more — to normalize thinking about D&I every day.

Stay tuned for part 3 to the Evolving American Capitalism essay series, as well as one similar to this exploring innovations in planet sustainability.