Are Diversity and Inclusion Programmes working?
Why is diversity still an issue?
In conducting some research this week on something that seems to be the burning topic of the moment – Diversity, a few things struck me.
A study of more than 500 organizations has found that every 1% increase in gender and racial diversity is correlated with a 3% to 9% increase in sales revenue, respectively.
According to a report conducted by McKinsey, firms which were in the top quartile for gender diversity are 35% more likely to enjoy above-average profitability, when compared to industry median, than companies at the bottom quartile.
BCG reported that “…a study of 171 German, Swiss, and Austrian companies shows a clear relationship between the diversity of companies’ management teams and the revenues they get from innovative products and services.“
In the Forbes article entitled A Study Finds that Diverse Companies Produce 19% More Revenue, it was noted that “…increasing the diversity of leadership teams leads to more and better innovation and improved financial performance.”
In a 2017 Deloitte study, 23% of respondents indicated they left their organizations for more inclusive ones.
I tried, in compiling these sound bites, to stick to credible and recognised sources although there are all manner of opinions and surveys present to draw from. Whichever way you look at it, they point to the stark fact that companies should be taking this seriously if they wish to compete effectively in the current or future business world.
The time is now… and it was also ‘now’, 15 years ago
In pulling my thoughts together from the various articles it became very apparent that whilst there was a notable weight of new articles and whitepapers on the subject, the messaging had not changed. The same matters were being presented as business critical initiatives and the statistics were the same imperatives in 2010 as they are now in 2020.
One data point really stayed with me from a study published by the Boston Consulting Group which reported “Only about 11% of senior leaders in S&P 500 companies hail from ethnic and racial minorities, up only 2% from 15 years ago and still quite far from 38%, the share of US adults representing ethnic and racial minorities.”
Just a 2% rise in 15 years and yet all the analysis conducted for a decade indicate this as being an inhibitor to financial growth and innovation.
Additionally only 33 companies on the Fortune 500 are run by women, and just 34% of board seats at those companies are held by women and minorities and yet if you speak to most companies , there are actually very few that haven’t implemented progressive hiring practices or HR policies designed to promote diversity and inclusion.
What is it that is holding companies back? If this has genuinely been on the top table agenda for this length of time then why are we not seeing the needle move?
If you Google, “Why is diversity programs fail”, you will get something north of 150,000,000 hits on the subject, so I am not about to try and digest all the reasons, nor try to outthink far more learned writers, strategists and commentators than myself on the subject; but being in a profession where I get access to some of the brightest leaders in technology industry I see a couple of things playing out that start to give us some perspective.
The theory is sound but requirement for short-term results takes precedence.
No one doubts the long-term gains of a diverse and inclusive organisation, but we live in a world of increased and expected immediate gratification. When hiring managers are faced with hiring they are constantly weighing up the risk of this hire with the pressures to perform. It needs to count and there is often a short runway until returns are expected from the hire This is particularly prevalent in revenue generating positions and can lead to managers look for a version of themselves or an ‘echo chamber’ hire! Safer, less risky, more of a known commodity. This mind-set is unlikely to wilfully create diverse employee communities as the decision making is far more short term in its mechanics
This is not to say that people hiring managers are failing to understand the importance of diversity in the organisation. Many of course do, but there are factors that may stop them acting with intention. We see examples of this paradigm s in everyday life too, both in and outside work. People understand the need to act or change their habits but they don’t really want to, as it is not what they are used to or it knocks them out of their comfort zone or they even see it as an irritant.
Look at the Covid19 situation in the UK, people generally understand there is a problem out there; they have been given an action plan to come together for the common good (Hands, Face, and Space) and yet still, many people fail to adopt the plan; taking a stance, that at best is unconsciously negligent, through to militant disobedience. Why? Its uncomfortable and not what they are used to. People simply don’t like the change if it doesn’t serve their personal need, they don’t like being told what to think or they are not fully on board with the thinking.
Simply telling people to do something isn’t necessarily going to get you a result.
Culture eats strategy for breakfast?
The diversity gap seems to lie, not in the concept, strategy or the rhetoric, but in the cultural shift… the unconscious buy in that a great culture affords you. Getting people to take action because it feeds the direction or shared beliefs of the organisation.
This is hard to achieve as you can’t tell people how they should feel about something. Yes you can coach them, train them and this will certainly win over some, possibly many, but it may lead firms to a harder conclusion where they realise that they haven’t necessarily got the right people, with the right thinking in the right jobs. This obviously has more far reaching implications but there aren’t many companies who can make changes of this magnitude without a serious financial dent in its income and in the main, revenue will always win this battle.
I therefore arrive at the conclusion that it’s not so surprising that firms are still struggling to create truly diverse employee bases. The paradoxes in play are evident and hard to navigate for even the most strategic or influential of leaders. It is truly a noble pursuit, a Holy Grail of a journey and it must be practiced, lived and breathed through every decision you make for your organisation in the knowledge that this will create momentum, and the real impact will be seen further in the future. Leaders must be prepared to see fallout and maybe take some financial hits too, certainly in a short term. But if a company can stride forward and make the pursuit of diversity truly live in its culture, they are sure to be rewarded tenfold. More innovative, more versatile, more relevant and ultimately far more profitable.
Drawing from a line by Microsoft’s CEO Satya Nadella at the World Economic Forum in 2019 “The business case for diversity is as straightforward as it ever was. It’s time now to act.”
…..just don’t expect to see and feel the results overnight!