by employees after receiving the approval by the company to establish an employee resource group.
ERGs are quite prevalent in organizations, with approximately 90 percent of the Fortune 500 companies having employee resource groups. Organizations usually have between six to eight employee resource groups with the occasional company having a dozen or more separate ERGs globally. For example, AT&T, the global media, and communications company, has 37 separate employee groups and networks across their enterprise.
When companies do have ERGs, the minimum penetration rate any organization ought to achieve is 10 percent. This means that at least 10 percent of the organization's employees are members of at least one of their employee resource groups. ERGs can exist with a penetration rate less than 10 percent, but it is difficult for these ERGs to thrive in such situations because they lack the sufficient critical mass of the employee population. A gold standard would be a penetration rate of approximately 20 percent. Best in class numbers that I have seen are a penetration rate of about 40 percent. Just imagine, almost half of an organization's employees identifying as a member of an employee resource group.
The obvious question then becomes, what constitutes being an ERG “member”? Sadly, that is a question that does not have a universally accepted answer. Some companies simply count the number of employees who wish to be placed on an ERG email distribution list as members. Other organizations require employees to formally acknowledge and disclose their membership in an employee resource group through self‐identification. And yet some organizations require a certain level of participation in ERG initiatives before they are counted as a member. This leads to the question of who is considered to be an “active” member. Penetration rates simply use the membership definition chosen by each organization.
My diversity consulting firm, DRR Advisors, conducted a study in 2020 on the average annual investment allocated by companies towards employee resource groups. The study included an analysis of 175 organizations with ERGs and found that the average annual investment allocated to each employee resource group was approximately $8,800 per year for every 100 members. This means that if an employee resource group has 100 members, on average it received an annual budget of $8,800 per year from the company. If an ERG has 200 members, on average it receives an annual budget of $17,600 per year and so on. This represents a 22 percent increase in ERGs budgets since 2011, when ERGs received on average $7,200 per every 100 members, according to a study by the global equality, diversity, and inclusion practice at Mercer. This equates to an average budget increase for employee resource groups of approximately 2.44 percent per year from 2011 to 2020. Personally, I'm aware of one company where the annual budget allocated to just one of their employee resource groups (their women's ERG) is over $1 million per year. A significant investment indeed.
But before we celebrate ERG budget investments, interestingly enough, however, the average annual inflation rate in the United States, according to the US Federal Reserve Bank from 2011 to 2020, is approximately 2.4–2.6 percent. This means that while ERG budgets have increased, these budgets are simply helping ERGs keep up with the inflation rate and thus do not demonstrate any significant progress. So, while organizations have been lauding the importance of their employee resource groups, they have not increased their investment in them over the last decade. ERG excellence hopes to change that.
The allocation of budgets varies from organization to organization. Some companies allocate ERG budgets based on membership, with ERGs that have larger membership receiving more funds than ERGs with fewer members. Other organizations allocate funds based on a business plan. An ERG puts together a business plan for the year indicating its planned initiatives, including an estimation of how much they will need to successfully execute these initiatives. The company then determines how much of their requested budget outlined in their plan they can give an employee resource group. Some companies provide every ERG the same budget amount, regardless of the size of the group. And some companies, albeit only a few, charge employees a fee to become a member of an ERG, and these fees help to fund the employee resource group. I am aware of several organizations where employees pay an annual fee of $25 to be a member of an employee resource group. Interesting approach indeed.
Once launched, employee resource groups tend to go through a natural evolution over time. Initially, the ERG tends to focus on the more social aspects of the group with a concentration on building community via events promoting networking and establishing connections with people of similar background or interest. Over time, ERGs expand their focus to include career development initiatives for their members and an increased emphasis on external community outreach. Eventually, they launch initiatives aimed at having a greater alignment with business priorities and organizational goals.
And yet, despite this increased impact, many ERGs are in the midst of a major inflection point fraught with uncertainty about what direction to take to remain relevant. We have to ask ourselves why some employee resource groups have prospered, while others have floundered. How do external trends impact this internal groups? What unexpected challenges await today's ERGs? And what principles must ERGs live by in order to effectively deal with the changing landscape of contemporary global business?
While some managers marginalize and trivialize ERG contributions, other leaders fully appreciate the value ERGs can provide as they feel a sense of responsibility to addressing pressing societal and business issues if they are to build a global inclusive and respectful workplace and develop a global workforce competent to work effectively with an even more diverse set of colleagues and clients.
Seeing Global ERGs as Simply Overseas Extensions of US Groups
Some organizations are worried that a typical response to diversity and inclusion will make them fall short of their goals. That is, seeing global ERGs as simply overseas extensions of US diversity initiatives. As ERGs have gone global, companies have found the most success with groups dedicated to women, LGBT employees, and those with disabilities. Young professionals have also lent themselves to a global ERG approach as they face some shared challenges within organizations around the world. These kinds of networks continue to proliferate quite naturally.
Some efforts flow from a master global strategy while others surface quite organically in the absence of a global strategy, in response to the universal experience of societal pressures, taboos, and even legal restrictions that force people to hide who they truly are in order to have a chance at success.
Going global opens up additional unexpected dimensions that have universal appeal. For instance, one professional services firm has a Global Athlete's Network, which aims to connect people “who are involved in and passionate about the top echelons of sport,” including high‐level coaches, elite athletes, and those involved in organizing major sporting events or training camps.
The objectives of this group are instructive in the unique take they have on the role of sports in networking within the organization. The following goal and objectives are listed on the company's intranet:
The goal of the network is to gather insights and ideas so that we can offer a unique perspective to clients. To realize this goal, we have established a set of objectives that address the firm's client and talent agendas:
Establish a global network of people with a common interest in elite sport, who can share knowledge and experience ranging from training tips to managing a balanced lifestyle.
Provide a real example of where our talent is “Always one step ahead” that illustrates our company's commitment to high performance, flexibility, and choice.
Apply high performance and coaching expertise to our business.
Support the development of a center of excellence in delivering major sporting events that can be leveraged throughout the global organization through sporting event knowledge.
So
