A growing number of organizations have experienced pressure (often from corporate and activist shareholders) to conduct racial equity audits of their employment practices. Even though racial equity audits, also known as civil rights audits, have been around for years — in 2016 Airbnb released one of the first published audits — many organizations remain unfamiliar with these tools.
Now is the perfect time to learn about these audits, while you can do so on your own timetable. That is far better than waiting until internal and external pressures prompt you to investigate these options on a timetable not of your choosing.
The pressure to conduct an audit, which often is brought by shareholders, can be very persuasive. For example, a 2022 report by The Conference Board found that shareholders have a relatively high likelihood of convincing boards to approve racial equity audits.
What Is a Racial Equity Audit?
Racial equity audits collect and analyze qualitative and quantitative data to see if an organization’s policies, practices or procedures unintentionally contribute to diversity, equity, inclusion or accessibility concerns or biases. To ensure these audits are objective and holistic, they typically are managed by independent third parties.
Some employers are reluctant to conduct these audits, citing a number of reasons and concerns. These may include hesitancy to open their records to third parties or to publicly reveal the results of their audits.
While each racial equity audit is unique and tailored to a specific organization, these studies do have something in common: They typically involve processing a great deal of information. Some of the qualitative data elements covered in an audit may include a review of policies and procedures, standard organizational communications, and complaints and grievances. Quantitative data may include exit interview results, workforce demographic data, historical employment transaction data, compensation data, and employee engagement survey results, among others.
Because audits involve gathering and analyzing so much information, they can take several months or even a year to fully complete. What’s more, as complex long-term projects, these audits require detailed project management and a set of evaluation components designed to align to the research questions being addressed.
To complete an audit, organizations mainly engage legal counsel and external audit teams that possess the expertise needed to evaluate the necessary qualitative and quantitative employment related information. Employers grant these external teams’ broad access to employment information and records. Employers also grant access to individual employees, including those making human capital decisions.
Acting on the Conclusions
The conclusions drawn from a racial equity audit will be unique to the organization and its specific policies, practices and procedures. Typically, data driven findings of the audit will be covered under attorney-client privilege, even though the overall recommendations from the audit are made public.
Recommendations could range from actions related to improving and eliminating bias in the hiring process with a selection system redesign, conducting detailed pay equity analyses or revisiting a job-leveling process to ensure equity when promoting individuals. Often the recommendations will focus on the goal of the audit and the dimensions assessed by the independent third-party auditors.
After receiving the recommendations, organizations should implement them using change management best practices. These include monitoring results, ensuring accountability, and implementing communication for implementation.
To prioritize which recommendations to act on first, organizations should immediately identify those that are high risk and high priority, then develop a project plan and budget to address each one. Upon implementation, the organization should establish follow-up monitoring milestones and an accountability framework to designate who is responsible for monitoring and communicating progress.
For example, say an organization received a recommendation to redesign its hiring and selection process to help mitigate unstructured practices. In this case, talent acquisition leaders might be tasked with monitoring the new system to look for disparities; the leaders also might be asked to provide clear and transparent updates on how the new system is contributing to the company’s diversity, equity, inclusion and accessibility (DEIA) mission.
Another example could be related to pay equity, in which the organization’s HR/compensation leaders might be tasked with ongoing pay equity assessments and reporting key pay equity movements that occur each year.
Overall, the organization should track the outcomes of each recommendation and think strategically about how to report the progress to internal stakeholders as well as publicly. (Companies that have publicly released the results of their audits include such well-known organizations as Facebook, Starbucks, Citigroup and JPMorgan Chase.)
When it comes to publishing, one option is to include the actions springing from the audit — and the results — in the organization’s annual environmental, social and governance (ESG) report, per shareholder request. Organizations should, however, consider the implications and risks associated with publicly reporting racial equity audit information and how doing so might highlight opportunities for plaintiffs.
Finally, organizations should consider the consequences of waiving attorney-client privilege if a decision is made to publish the audit results.
What Racial Equity Audits Mean
Committing the investment of resources for an independent third-party racial equity audit typically involves scrutiny of a company by external stakeholders eager to see results. By making aspects of the racial equity audit report public, organizations open themselves up to accountability from external and internal stakeholders. In this way, the organization is being transparent about its DEIA commitments and upcoming actions to overcome equity barriers.
Organizations may consider racial equity audits proactively or as a response to shareholder proposals. The audit is an opportunity to identify holistic barriers that may exist in an organization’s human capital policies, procedures and practices, and is a good opportunity to demonstrate an organization’s commitment to DEIA.
For organizations that are slow to critically evaluate their DEIA commitments, policies and practices, external and internal pressures could increase for them in the future. These pressures might include shareholder demands, employee demands and an impact on employee morale, as well as negative implications for the overall brand.
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