Companies have posted messages on Twitter and Instagram. They have held listening meetings with employees. They have made vows to buy more from Black-owned firms. A few companies are contemplating further showing how much they want to increase diversity and inclusion by paying their senior managers to adapt or cut back their total compensation if they fail to perform.

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Not long ago, one bank announced a goal of expanding its number of Black leaders, which was at 6% of senior management in less than five years. Throughout each of those years, leaders will adjust their compensation depending on how well they have enhanced the representation and the inclusion of diverse employees they direct.

The change comes within the period where the business world's reckoning with systemic racism gained momentum consequent from the heartbreaking death of George Floyd in police custody. As a result, most institutions have learned it's an effective way to announce to both internal and external groups that you are serious regarding diversity and inclusion.

Previously, several companies have begun to tie performance pay to metrics other than profitability. The interest has been prompted by stakeholders urging organizations to be more responsible about the environment, broader society, and their governance. 

These actions could, if done correctly, make a positive difference to an organization's reputation with employees. The role of a CEO is no longer satisfying investors but the broader stakeholders, including the community. 

Even so, pay-for-diversity performance plans haven't often succeeded when attempted. Many of the projects have been poorly designed, and there have been instances where people have manipulated diversity stats. At other times, plans have started during the middle of a company's fiscal year, limiting time to attract or develop Black leaders.

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One more problem is rewarding or disciplining based on only a total quantity of senior Black leaders. In conjunction with the actual group of Black executives modest, less than 9 percent of the most senior leaders listed in the Fortune 500 are Black. This incentivizes them to go from one company and to explore possibilities with another. Where they invariably create additional costs and fatigue a business's compensation system. Simultaneously, existing employees could assume that new hires received positions because they are minorities, not on their merits.

The issue is why some professionals assert that if pay-for-diversity plans are going to work, they need to focus on creating pipelines by targeting lower levels of the company, incentivizing mid-level managers to recruit and develop diverse, high-potential talent.

Companies also need to determine whether employees, particularly people of color, are engaged. In addition, they should have a high degree of trust in leadership, feel appreciated, and additional factors that commonly assess inclusiveness.

About Jim Woods

Mr. Woods serves as president of Woods Kovalova Group. He has more than twenty years of experience in recruiting, diversity and inclusion on behalf of Woods Kovalova Group where he serves as President. He has taught human resources at Villanova, Colorado Technical University, and Dickinson University.

He has been a trusted advisor to numerous respected clients. Mr. Woods incorporate the use of psychometric assessments into his senior-level assignments, to aid his clients in the hiring process, and ensure a great fit with the organization. Work with Jim.

Mr. Woods's experience in human resources services covers a broad range of functional and industry-specific assignments in over 39 countries. He served in the United States Navy as a Seabee and is the author of three children’s books on diversity. Mr. Woods is also the co-author of six business books.

Mr. Woods earned a Master’s degree in Human Resources and Organizational Development.