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Board Report: 2015-MO-B-006 March 31, 2015

The Board Can Enhance Its Diversity and Inclusion Efforts

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Appendix I: Management's Response

March 30, 2015
Mark Bialek
Inspector General
Don Hammond /signed/
Chief Operating Officer
Response to March 19, 2015 Draft - “The Board Can Enhance Its Diversity and Inclusion Efforts”

Board staff has reviewed the above referenced draft report prepared by the Office of Inspector General (“OIG”). We appreciate the amount of work that went into the report and the opportunity to respond to its recommendations.

At the outset we would like to take the opportunity to emphasize that the Board is committed to increasing diversity and enhancing inclusion, and we believe that the evidence in the report shows some successes in that effort. For example, as noted in Figure 4 of the draft report, the representation of minorities in the Board’s mid-level and senior level positions increased in each year under review. We believe this is a clear indication of this commitment.

Upon reviewing the draft report we consider it significant that the independent consultant who analyzed the Board’s performance ratings concluded that there is “not a trend of statistically significant differences” in ratings based on race, gender, or age when the data are evaluated by job level.1 Because performance ratings at the Board are not awarded on an agency-wide basis, agency-wide results do not provide useful information about whether employment discrimination may have occurred,2 although the Board’s agency-wide results are generally positive. The independent consultant concluded that the agency-wide results across years “indicate no pattern of statistically significant differences in average performance ratings between: (a) women and men, (b) Hispanics and Whites, or (c) those age 40 or older and those younger than 40,” and that agency-wide White-African American differences were lower than those typically found in studies of performance appraisal differences.3 With respect to the more relevant job-level analyses, the independent consultant concluded that there is no trend of statistically significant differences between White and African American performance ratings when the data are analyzed at the job level.4 Similarly, all White-Asian differences disappeared when the data were analyzed at the job level.5 It is also important to keep in mind that, as stated in the independent consultant’s analysis, differences in performance ratings could be due to a wide variety of explanations. The independent consultant also suggested a number of measures that could be taken to assess an agency’s performance rating system process and content. Management will keep these in mind as we evaluate our performance appraisal system.

Although the Board’s results are positive, management is fully committed to making further improvements in its diversity and inclusion efforts given the utmost importance of providing a work environment that is free of employment discrimination and that supports the engagement of all employees. In this regard we note that the OIG has recommended several additional improvements to the Board’s diversity and inclusion efforts. Management generally agrees with the OIG’s recommendations and, in a number of instances, has already implemented, or has begun to implement, changes to address them. Each OIG recommendation, and management’s response, is discussed in more detail below.

OIG Recommendations and Management’s Response

Recommendation 1: Develop and implement an alternative method for collecting the demographic data of economic and research assistant applicants to improve the response rate.

Management’s Response: Management agrees with this recommendation and, as the OIG notes, in 2013, management began implementing a new process to automatically request self-disclosure of demographic information within 24 hours of obtaining an economist applicant’s email address. Management will assess whether this change provides a significant improvement in response rates, and if not will consider other changes in order to obtain demographic data for economist and research assistant applicants.

Recommendation 2: Ensure that the demographic data for all internal and external officer applicants are maintained in the Board’s centralized applicant database.

Management’s Response: Management agrees with this recommendation and, as the OIG notes, in 2014, management implemented a process to track all officer positions through a centralized applicant database. This process will allow management to accumulate demographic data and measure trends in diversity at the officer-applicant level. Although this process does not currently fully capture applicant data when an executive search firm is used to recruit officer candidates, management plans to implement a process in the near future to capture this data.

Recommendation 3: Consider conducting annual analyses of the distribution of employee performance ratings to identify whether patterns exist that may indicate unfair or unequal treatment. If the analyses reveal patterns that may indicate unfair or unequal treatment, determine whether any actions are necessary.

Management’s Response: Management agrees that a periodic analysis focused on areas where management has potential concerns may be useful. Management will consider establishing a process for identifying such areas and determining what type of statistical review would be warranted, and if statistically significant discrepancies are found from such analyses, will explore steps that may be appropriate to address those discrepancies. It is unclear whether the costs of paying for an annual statistical analyses on a Board-wide basis or even on the basis of job level provide corresponding value.

Recommendation 4: Ensure that aggregate non-EEO case statistics are provided to all Division Directors and that division-specific statistics are provided to the respective Division Director.

Management’s Response: Management agrees with this recommendation and, as the OIG notes, in 2014 management began providing Division Directors with a non-EEO trend statistics report and we will continue to do so on a quarterly basis.

Recommendation 5: Finalize and implement the Board’s diversity and inclusion strategic plan, and ensure that: (a) the plan incorporates the agency’s overall diversity and inclusion objectives; and (b) key elements of the plan are included in the Board’s 2016-2019 agency strategic plan.

Management’s Response: Management agrees with this recommendation to finalize the diversity and inclusion strategic plan currently being developed, as noted in the OIG report. The OMWI Director is a member of the Board’s 2016-19 strategic plan workgroup, ensuring that the key elements of the diversity and inclusion plan are included.

Recommendation 6: Formalize the standards the OD&I relies on for equal employment opportunity and the racial, ethnic, and gender diversity of the workforce and the senior management of the agency.

Management’s Response: The standards will be formalized and incorporated in the diversity and inclusion strategic plan which is currently under development and scheduled for issuance in 2015.

Recommendation 7: Ensure that No FEAR Act training: (a) is offered on a regular basis; (b) is tailored to the Board and includes EEO and diversity and inclusion topics in accordance with the Board’s No FEAR Act Written Training Plan; (c) is evaluated for effectiveness and that any improvements identified are incorporated into the training as needed; and (d) attendance records are retained.

Management’s Response: Management agrees with this recommendation and notes that the Board has historically offered No FEAR Act training on a regular basis. Management recognizes that there was one instance in which No FEAR training was not offered during the planned year because of a procurement issue; the Board resolved this discrepancy by providing No FEAR Act training in October of 2014. Going forward, management agrees that it continues to be important to provide No FEAR Act training on a regular basis and to evaluate the training for effectiveness. Management also will explore methods of evaluating the effectiveness of training and incorporating improvements. Finally, while management has historically monitored employees to ensure they complete the training, management has not typically retained evidence of completion at the Board. Rather, such records have been held by the vendor that provides the training materials. The Board will consider providing in its contract for these services that the vendor provide the Board with evidence of employees’ completion of training.

Recommendations 8-10: Document the roles and responsibilities of the OD&I and distribute to all Board divisions; Partner with divisions to cooperatively develop strategies and initiatives that will help advance diversity and inclusion throughout the Board; and work with divisions to finalize and implement the quarterly reporting tool and establish a schedule to communicate the results for each division to the respective Division Director. The quarterly reporting tool should include diversity and inclusion activities for each division with clear goals, objectives, and corresponding measures.

Management’s Response: Management agrees with these recommendations; however, it should be noted that the mission and objectives of OD&I are updated annually as part of the Board’s budget process. Management will take steps to increase the divisions’ awareness of OD&I’s role and responsibilities. Also, each division, has a designated EEO Officer as Liaison to OD&I. A new quarterly reporting tool for divisions aimed at establishing specific diversity and inclusion strategies and initiatives will be implemented in the second quarter. The new tool slated for the second quarter will strengthen the strategic direction of diversity and inclusion and provide transparency and accountability for achievement of objectives.

Recommendation 11: Strengthen internal controls for reporting MD-715 data, to include: (a) documenting the methodology for extracting and filtering the appropriate data; and (b) verifying the accuracy and completeness of the data in the MD-715 report prior to submission.

Management’s Response: Although the very low error rate in reporting these data (less than 0.8 percent) suggests that data reporting errors were not a significant problem, management agrees that it is always useful to take steps to ensure that data are reported as completely and accurately as possible. Thus, management agrees to take the steps noted by the OIG to provide an enhanced data reporting process.

  • 1 OIG draft report, dated March 19, 2015, entitled, “The Board Can Enhance Its Diversity and Inclusion Efforts,” p.98 (Appendix E, “An Analysis of Gender, Race, and Age Differences in Performance Ratings of FRB Employees: 2011-2013”). Return to text
  • 2 See Wal-Mart Stores v. Dukes, 131 S. Ct. 2541, 2555 (2011). Return to text
  • 3 Id. Return to text
  • 4 Id. Return to text
  • 5 Id. at 94. Return to text