Running Head: ORGANIZATIONAL SOCIAL RESPONSIBILITY 1

Enhancing Performance Management Systems: The Intersection Of Diversity & Inclusion

With Talent Management For Increased Organizational Social Responsibility

By: Andrea Carter

Due: December 20, 2020

Adler University

Professor: Dr. Mike Garber

Course: Talent Management MIO-517

Abstract
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Introduction

In 2015, McKinsey & Company explored the relationship between diversity and

performance by reviewing leaders' distribution in 366 large public organizations with

financial performance. In so doing, a statistically significant relationship between diverse

leadership teams and better financial performance was discovered (Hunt et al., 2015).

Specifically, organizations in the top twenty-five percent of gender diversity were fifteen

percent more likely to present financial returns above the industry average. Conversely,

organizations in the bottom quartile of race and ethnic diversity were statistically less likely

to achieve above-average financial returns (Hunt et al., 2015). These findings demonstrated

that organizations who construct a workforce strategically with diverse skills, talent, and

experience make them stronger in competitive global economies. The evidence was further

substantiated in 2018 when McKinsey & Company released their follow-up report,

Delivering Through Diversity, which re-evaluated the business case for diversity and

confirmed its positive relationship between diverse leadership and financial performance

(Hunt et al., 2018).

While many organizations understand the importance of performance management

systems as a method of talent management, the industry trend is to create a separate strategy

for diversity and inclusion outside of the performance management system (Jayne &

Dipboye, 2004). While the correlation between workforce diversity and organizational

performance is undeniable (Hunt et al., 2018), the intersection between sufficient diversity

and inclusion methods with organizational strategic performance management processes have

been linked but not substantially explored. As organizations look for post-pandemic
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solutions, the intersection between diversity and inclusion with performance management

processes is an area that can generate greater social responsibility (Jayne & Dipboye, 2004).

Social responsibility is defined here as "an ethical framework that suggests individuals have

an obligation to work and cooperate with other individuals and organizations for the benefit

of society at large" (Wikipedia, n.d.). Corporate social responsibility (CSR) is an extension of

social responsibility as a self-regulating business model that helps a company be socially

accountable—to itself, its stakeholders, and the public (Fernando, 2020). Also called

corporate citizenship, companies become conscious of the economic, social, and

environmental impact they have on all aspects of society. To engage in CSR means that, in

the ordinary course of business, a company operates in ways that enhance society instead of

contributing negatively to them (Fernando, 2020).

For that reason, this paper will connect the intersection of diversity and inclusion practices

with an enhanced performance management system to increase organizational social

responsibility. While many talent management methods can integrate diversity and inclusion

practices with greater specificity, for the purpose of this paper, only specific performance

management processes will be discussed. The five aspects of performance management that

will be intersected with diversity and inclusion practices are; (1) needs analysis, (2) talent

diversity pipeline, (3) training design, (4) effectiveness of training, and (5) leadership

development and support. To further emphasize these processes' effectiveness, McDonald's

Corporation and the U.S. Healthcare Delivery System will be used as examples and how this

intersection is a valid means to increase social responsibility.

Finally, it is essential to mention that most organizations have separated diversity and

inclusion practices because diversity originally began as a means to meet legal and

governmental requirements (i.e., Equal Employment Opportunity Laws, National Action

Plan). Diversity and inclusion evolved into a strategic priority that organizations used for
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competition in the marketplace. Organizations spend $8 billion annually on diversity training

(Hansen, 2003) yet fail to connect it to their overall performance management process. It can

be hypothesized that the lack of connection to empirical evidence is why diversity and

inclusion training does not always lead to a transfer of training or the expected positive

impact (Jayne & Dipboye, 2004). However, research and best practices show that when

equity, diversity, and inclusion are connected to a strategic performance management

process, transfer of training and positive impacts are seen (Hansen, 2003; Human Resources

Institute, 2003).

Connecting Organizational Goals With EDI Via Needs Assessment

In order for the benefits of equity, diversity, and inclusion (EDI) training to support

organizational growth with positive impacts on both performance and social responsibility,

research and best practices indicate the need to connect them to the organization's growth

strategy and needs assessment, (including feedback and evaluation). In 2001, McDonald's

Corporation introduced significant changes into its H.R. performance management systems to

strengthen the ability to qualify and quantify leadership talent. A business and global

workforce strategy was created after a needs assessment indicated that inflated performance

ratings could be attributed to a significant growth slump (Intagliata, Kulick & Crosby, 2006).

The Human Resources Institute (2003) found in their inclusion as a Diversity Strategy study,

where Fortune 1000 companies were evaluated that a needs assessment is the initial step to

understanding what organizations are lacking. From a needs assessment perspective,

recruitment, retention, and development and understanding and developing processes to

measure external relationships with under-represented groups outside the organization,

including minority communities and suppliers, is imperative (Hansen, 2003; Human

Resources Institute, 2003). While many organizations have efforts to communicate the
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rationale and recognition of diversity and inclusion, many lack direct integrations with the

overall business strategy. They, therefore, struggle with the ability to perform a clear needs

assessment. Performing a needs assessment and integrating diversity and inclusion principles

was an effective way that helped improve the quality of policy and program decisions for

McDonald's Corporation. The needs assessment revealed that four groupings were required in

order for performance improvements or desired growth results would be possible. First,

standardizing core operations and processes needed to fit the needs of local communities.

They discovered through the needs assessment that it was critical for individuals operating

the business to understand, represent, and connect to the community and culture where the

business is located. To connect the global strategy to the local business strategy, standardized

core operations and processes needed to be assessed so that they could meet the needs of

customers in the marketplace (Intagliata, Kulick & Crosby, 2006).

Similarly, the U.S. Healthcare Delivery System has also been under pressure to transform

the organizations to represent and address consumer needs. In 2010, the Affordable Care Act

reduced uninsured consumers from forty-four million in 2013 to twenty-eight million in 2016

(Henry J. Kaiser Family Foundation, 2017). In so doing, it recognized that diversity

representation is significantly lacking in healthcare administration (Augustin & Stumph,

2018). Following a needs assessment, they discovered that recruiting a diverse workforce

requires intentional effort and strategic organizational goals to merge with the evolving

consumer base, representing immigrants, older-adults, millennials, non-whites, and women.

Historical evidence exposed that diverse groups have long received low-quality, inconsistent,

and inequitable healthcare treatment (Augustin & Stumph, 2018; Dreaschslin, Gilbert &

Malone, 2013). Both organizations, McDonald's Corporation and the U.S. Healthcare

Delivery System, relied heavily on understanding their unique needs assessments. In both

situations, this undeniably highlighted the need to understand how to meet customer needs,
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which is also a different representation and the requirement to develop and train their

leadership in essential competencies while aligning the global culture with specific and

standardized values. To that point, McDonald's Corporation spent six months in the needs

assessment process to rate, evaluate, review compensation, and differentiate their needs

before developing their pilot training programs.

By spending the time reviewing their needs analysis and performance expectations, they

were able to develop key metrics and critical behaviors that could align with their customer

service training and experience levels. With these key data points and findings, they learned

what they needed to do to appropriately feed their talent diversity pipeline and develop their

training strategies for representation that would lead to growth. It should also be noted that

each step of their needs analysis had to tie back to their strategic business goals and global

workforce strategy. McDonald's Corporation always had the first area of focus on their

people (their talent and the representation of the community as the potential customer)

(Intagliata, Kulick & Crosby, 2006).

Employee Development - Deciding The Right Training & Design

Performance management systems are most effective as continuous feedback systems

(Aguinis & Kaiser, 2008). When it comes to deciding on the right training and design,

connecting the performance management system to the organization's overarching strategic

goals is imperative for clear goals, acceptable behavior, and productive communication.

While bias in performance ratings continue to be controversial due to the negative impact that

perceptions of unfairness have on who is hired, promoted, and developed, by tying diversity

and inclusion practices into employee development through representation and corporate

culture, organizations will help solidify their value (Shondrick & Neyman, 2012). For the

right training and design to be determined, goal setting theory states that explicit goals that

are difficult and acceptable lead to higher performance on a wide variety of tasks than
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ambiguous, easy, or nonexistent (Locke & Latham, 1990). To this point, when McDonald's

Corporation decided to standardize core operations and processes to fit the needs of local

communities, they understood that for that to be accomplished, they would need to develop

and align strategies for diversity and inclusion to become part of their people development

plan. While McDonald's Corporation was already known for their approach to helping people

grow with the company and rise over time, their goal to ensure that leadership was able to

create a climate where employees were motivated to excel and give their best meant strategic

leadership training was imperative for their success (Intagliata, Kulick & Crosby, 2004). That

critical decision led management scores to become one of their most important factors to

drive effectiveness and advancement potential. Their strategic goal of being able to bring the

diverse representation of their local consumers into the direction of training for their

leadership, enabling their local training to align with their global training strategically

became a mission that had five factors of enhancement that drove their guiding decisions; (1)

Redesign the performance development system for all staff in all positions, (2) create a talent

review process for officer level positions, (3) develop and implement Leaders at McDonald's

program (LAMP), (4) Introduce the McDonald's Leadership Institute, (5) Design and launch

the Global Leadership Development Program (Intagliata, Kulick & Crosby, 2004). When

these initiatives were initially launched, it was clear that some aspects of the new system

redesign were not suited for the foreign cultures and legal structures in certain countries.

Understanding that the intersection of success is woven into the diversity and performance

management system, and how the initiatives are framed significantly affects their success

(Jayne & Dipboye, 2004) resulted in 119 countries being granted the freedom to work within

the framework to make specific changes (Intagliata, Kulick & Crosby, 2004). While they all

followed the same process to ensure the standardization of core operations and training

(rating distribution guidelines, using specific performance drivers, and having certain
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behaviors that benchmarked training), the flexibility driven by diversity made a considerable

impact on how well each country accepted the new process. Furthermore, because leadership

was driving the effectiveness of diversity and inclusion practices, based on the community's

local culture, training was more accepted, and learners were more engaged (Intagliata, Kulick

& Crosby, 2004).

Augustin & Stumph (2018) also speak to the importance of leadership engagement and

design within their Talent Diversity Pipeline original research paper, stating, "A successful

diversity initiative that is well thought out and strategic requires strong commitment at all

levels of leadership, so organizations must spend an extensive amount of time determining

their "why" behind their talent diversity pipeline" (Augustin & Stumph, 2018). They also

detail the importance of talent development through training and design, indicating that hiring

practices, mission statements, strategic plans, and institutional policies should embed

diversity values and practices into the fabric of their institution through the training, norms,

and measurement that develop their leaders to embody (Augustin & Stumph, 2018). Finally,

ensuring that ongoing conversations and feedback is brought in through leadership training

enables top-down sentiment that powers a diverse talent pipeline and fuels employee training

with represented hiring standards (Augustin & Stumph, 2018).

Evaluating The Effectiveness of Diversity & Inclusion As It Intersects With Strategic

Goals, Performance Management Systems & Social Responsibility

It is widely understood that by tying diversity strategy to business results in realistic ways,

organizations can create the foundation for successful performance management systems, be

it in recruiting, hiring, promotions, development, or otherwise (Richard, 2000). For

meaningful change to occur in an organization, employees must understand and embrace the

business case for change. To this note, McDonald's Corporation incorporated "I'm loving it"
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as their strategically aligned branding that was woven through the entire goal setting,

performance management system, evaluation processes, and social responsibility within the

local communities. Kochen et al., 2003 in The effects of diversity on business performance:

Report of the diversity research network further speaks to this notion when stating, "success

if facilitated by the perspective that considers diversity to be an opportunity for everyone in

an organization to learn from each other how better to accomplish their work and on the

occasion that requires a supportive and cooperative organizational culture as well as group

leadership and possess skills that can facilitate effective group functioning" (Kochen et al.,

2003).

In particular, emphasizing fairness of performance management systems intersected with

diversity training with evaluation processes was also imperative for success. Employees

having an input or voice in the design and evaluation of the pilot programs and the

distribution of outcomes related to the program furtherment have been substantiated as a

means to increase fairness and engagement (Jayne & Dipboye, 2004). To manage diversity

effectively as it intersects with performance management systems, organizations must

establish meaningful metrics tying the business strategy's effectiveness to the organization's

diversity initiative for growth.

Kochen et al., in their 2003 study, reported that systematically examining the effects of

diversity initiatives increases success (Kochen et al., 2003), which supports the effectiveness

of the McDonald's Corporation qualitative feedback conducted mid-way through the LAMP

pilot program and at the end of the program. Both participants and immediate supervisors

were given the survey and gave high ratings. More importantly, they reported seeing

evidence of significant personal development and its effects on culture and engagement. The

most highly evaluated elements of LAMP detailed in the Intagliata, Kluick & Crosby 2006

report were; (1) opportunity to interact with senior managers during executive dialogues, (2)
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participant development processes integrated with their current job and taking place over a 9-

12 month process, (3) the experience of going to Thunderbird International University

receiving exposure to thinking outside McDonald's and to the leaders from other companies

(Intagliata, Kluick & Crosby, 2006). In addition to qualitative measurements, a quantitative

impact is also an imperative form of the evaluation process. McDonald's Corporation also

used several quantitative metrics that assess the impact of LAMP. For example, when

reviewing the promotions performance management processes, critical data was observed

such as; by the end of the six-year training and development programs, 35% of 104 graduates

of the LAMP program had been promoted, only 4% of the individuals in the highly select and

talented group have left the company for other opportunities, which speaks to the high level

of retention the program has created, and finally, early returns indicated that development is

taking place as a result of LAMP experiences and being demonstrated in practice on the job.

Perhaps more notable is that the LAMP program has been widely accepted and received since

its inception in 2004 globally (Intagliata, Kluick & Crosby, 2006).

Conclusion

In conclusion, organizations who construct a workforce strategically, with diverse skills

and talents, and a performance management system intersected with diversity and inclusion

practices increase competitive financial returns globally, but it also increases social

responsibility. Based on the data presented and the positive effects reported by the

McDonald's Corporation and the U.S. Healthcare Delivery System, when five aspects of

performance management; (1)needs analysis, (2) talent diversity pipeline, (3) training design,

(4) effectiveness of training, (5) leadership development and support) are intersected with

diversity and inclusion practices, increased social responsibility can be actualized.

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