Employers are dangling all sorts of sparkling lures to capture hot job candidates in the battle for top talent: Generous compensation. Stock options. Lofty titles.
But Harvard Business School research suggests that many companies fail to promote a key draw for many prospective employees today, particularly young people: the diverse, inclusive workplaces they’ve worked hard to develop.
“Job seekers are more likely to click on job ads for firms with high diversity scores when presented with this information.”
“Job seekers are more likely to click on job ads for firms with high diversity scores when presented with this information,” says Harvard Business School’s Joseph Pacelli.
However, many employers neglect to highlight the diversity of their workforce. Only 17 percent of the 3,235 public firms that Pacelli studied in a recent working paper disclosed gender or race data in their 2020 disclosures with the US Securities and Exchange Commission (SEC).
While many companies have been trying to build more inclusive workplaces, only half of S&P 500 companies had gone as far as naming a chief diversity officer as of 2021, according to the recruiting firm Russell Reynolds. But Pacelli’s research shows how disclosing genuine progress in inclusion can give companies a competitive edge in attracting talent and, ultimately, fostering innovation.
Pacelli coauthored the August working paper with Jung Ho Choi of Stanford Graduate School of Business; Kristina M. Rennekamp of Cornell University; and Sorabh Tomar of Southern Methodist University.
Investigating the value of diversity
US public firms aren’t required to publicly disclose their workforce demographics or policies, but corporations started sharing more data through the Human Capital Disclosure that the SEC added to 10-K filings in November 2020. This requires corporations to provide a section in their annual report disclosing features of their “human capital” that they deem material to their performance.
To gauge the extent that job hunters are drawn to a company’s diversity disclosures, the researchers conducted an 11-week-long field experiment in 2021 with 178,862 customers of Zippia, a career service agency. Customers seeking job postings received an email containing several recommended positions and basic information about the jobs, including location, role, and salary.
A random selection of the job hunters received an additional piece of information: a numerical ranking of the company’s workforce diversity. Zippia calculated a company’s “diversity score,” ranging from 1 to 10, based on a variety of data, including gender, race, education, and language skills.
The email recipient could click through to the job post to get more information—an indication of their interest to researchers. Participants clicked on job listings for 7,900 companies, with 7,300 companies having diversity scores.
Job applicants seek diverse firms
The average effect of providing a diversity score in job listings is 31 percent larger than the average effect of providing salary information, “which helps strengthen our claim that diversity information influences job seekers,” Pacelli says.
Interest in diverse firms was higher among job hunters with specific demographic profiles, such as younger, entry-level workers and workers living in areas where diversity issues are more salient, as measured by per-capita Black Lives Matter protests.
The results were not affected by variations in the education and gender of participants, suggesting that diversity information was relevant to a broad spectrum of the population.
Why diverse organizations are attractive
The researchers sent follow-up questions to ask why applicants value diversity information.
“Many indicate that such information was useful because it signals the quality of the company, highlights the job seeker’s chance of promotion and any potential discrimination, and also helps them find companies with similar values,” says Pacelli, the Gerald Schuster Associate Professor of Business Administration.
Plus, studies suggest that companies with initiatives around diversity, equity, and inclusion tend to perform better than more homogenous peers—and talent is drawn to organizations that are likely to succeed.
About 28 percent of respondents didn’t find diversity information useful for a variety of reasons. Some of these applicants said that diversity wasn’t a priority or that they already knew about the potential employers’ policies.
What can employers and policymakers do?
Pacelli plans to probe further into the effectiveness of diversity, equity, and inclusion programs. For example, he’s teaming with Rennekamp and HBS Associate Professor Aiyesha Dey to ask HBS alumni to evaluate how well such programs work at their companies.
“Regulators might consider providing more specific guidelines for companies to ensure that stakeholders obtain relevant information about companies’ diversity practices.”
His latest research results have important implications for both employers and policymakers:
Employers should share diversity information. “Making such information readily available,” says Pacelli, “can help companies attract talent, especially in a competitive labor market where job seekers have many options, and, in our experiment, are considering multiple positions at once.”
Policymakers should push firms to disclose diversity information. “Regulators might consider providing more specific guidelines for companies to ensure that stakeholders obtain relevant information about companies’ diversity practices,” Pacelli says.
You Might Also Like:
- Why a Blended Workforce May Be Key to Lasting Competitive Advantage
- The Stock Market Value of Human Capital Creation
- Career Advice for Minorities and Women: Sharing Your Identity Can Open Doors
Feedback or ideas to share? Email the Working Knowledge team at hbswk@hbs.edu.
Image: iStockphoto/Charday Penn