Double Down on Diversity
December 10, 2013
Financial Decision Making
For our group project, we chose a diversity initiative called Double Down on Diversity, which is currently going on in Johnson and Johnson. The initiative was created because Johnson and Johnson recognizes how impactful having a diverse workforce can be on financial success. To support their claim, we looked to several articles describing how diverse workforces lead to more financial success. One example came from a study published by Deloitte, a widely successful consulting/accounting firm. They write, “In essence, demographics act as a lead indicator as to whether organizations are drawing from the full knowledge bank and making merit-based, rational decisions” (Deloitte, 6). Below is a chart featuring how more demographic diversity and diversity of thought (which stems from demographic diversity) leads to higher potential business outcomes.
The same article talks about how not just ethnic diversity is important, but also gender diversity. Deloitte writes, “…companies with the highest share of women in their senior management teams outperformed those with no women from 2007-2009 by 41% in terms of return on investment” (Deloitte, 9). This just solidifies Johnson and Johnson’s rationale for a diversity project team. The project team will consist of three pillars: driving accountability, university recruiting, and a global roadmap. The final pillar, the global roadmap, is more long-term; however, the first two will require immediate costs and planning. We are proposing that the project team feature 17 members, one Vice President level, eight Director level, and eight analyst level employees. The projected costs of the new program are listed in detail as below (Table 1.1). Direct Costs
1 VP Salary = $200,000
8 Director Level Salaries = $150,000 * 8= $1,200,000
8 Analyst salary = $75,000 * 8= $600,000
Total salary costs= $2 million/year
Consulting services from Deloitte (includes group flight, stay, and return) = $130,000 Benchmark consulting services = $400,000
Consulting service Total = $0.53 million
Various other supplies(build a new office, new office supplies), services = $1.70 million Indirect Costs
Diversity/campus recruiting = $2.37 million
Opportunity cost of time to work on project from other individuals = $0.50 million Therefore, the projected total cost in year 2013 is $5.10 million and annual salary cost is $2 million. Supplies, including office furniture and equipment, will be depreciated on a straight-line basis to a salvage value of $100,000 over five years. Unless fixed assets are included in Supplies, you don’t need to depreciate them. Table 1.1 Costs of Double Down on Diversity
Your charts are helpful in summarizing the costs and conceptualizing the project scope. As discussed in class, you may need to reclassify a few of them.
Based on the projected costs and benefit analysis, we finally got the complete financial analysis of this new program, as shown in Table 1.2. Table 1.2 Financial Analysis of Double Down on Diversity ($ millions) Year
You build a strong business case for the new initiative and clearly cite the benefits and related research. Your financial analysis is sound and well explained. In class, you explained the project clearly and thoroughly handled questions. Your charts are helpful, too.
You should try to distinguish your financial results “with and without” the initiative, so you can clearly see the proposed project benefits. With some of the costs, you may need to more accurately name them, such as “opportunity costs” that are included in discount rate.
Thank you for your hard work.
Project Grade – 90%
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