Why There’s More to Diversity than "Doing the Right Thing”
Two decades into the 21st century, and today the business benefits of diversity are well known, even if there’s still progress to be made in achieving it. Companies of all sizes and in all sectors around the world are embracing the idea — on paper at least, and in practice to a greater or lesser extent — that greater diversity throughout the workforce, and especially at the very top echelons of leadership, is desirable.
More than that, the most forward-thinking businesses are realizing that it is mission critical.
They recognize that a more inclusive culture will feed into (and draw from) a wider talent pool, providing an array of different viewpoints from which to create a fully rounded perspective on which to base well-founded strategic and operational decisions.
They know it pays for corporate composition (at all levels) to reflect the customers and communities they serve. They are well aware that this is far more than simply a PR exercise and they understand its place within a good corporate governance agenda.
Several studies1 have highlighted a link between diversity and commercial success. Though it would be impossible to attribute business performance to any single factor, our research also indicates a strong correlation between the two.
So what can less diverse companies learn from those that are more diverse? How does diversity create smarter working environments and allow for leaders to make smarter decisions? And what are the smart decisions that have led to greater diversity?
To answer those questions and find out how organizations successfully use diversity as a driver of performance, The Art of Smart interviews prominent business leaders, diversity and talent experts, and leading academics. Their insight, coupled with The Crowe 100 Decision-Making Index data, reveals some fascinating, fresh and pragmatic perspectives on an issue that remains important yet challenging for businesses of all types.
Why diverse companies make smarter decision-makers
Cultivating the “I” in “diversity”
It’s often said that “there’s no ‘I’ in team,” but when it comes to diversity, the personal matters. Diversity brings together a range of individuals with original points of view and unique ideas coming at problems and opportunities from disparate angles. In this way, an effective team can be built out of discrete materials.
Herschel Frierson, Managing Director at Crowe LLP and former National Director of the National Association of Black Accountants (NABA) in the United States, makes the point: “Though discussions about diversity tend to focus on the obvious differences such as gender, race, religion, sexual orientation or disability, the spectrum of difference spans many nuances, including cultural identity, background and upbringing, language, education, personal situation (for example, single parents), variety of career history and life experience, age and more. Those differences are assets — and never more so than in today’s globalized world.”
Personal characteristics and attributes are important too. Pavita Cooper, Founder of talent and career insight business More Difference and founding member of the 30% Club, a campaign group promoting gender diversity, argues that “neural diversity” is increasingly on the radar in organizations that want people who “think outside the box” or who could even be described as “quirky.” Kimberly Ellison-Taylor, Global Strategy Leader at Oracle and former Chair of the Association of International Certified Professional Accountants, describes this as “diversity of thought.”
Diversity of behavior is another way to look at it, as people’s actions are based on both the conscious and the unconscious. The role of neuropsychology in corporate decision-making is a major area of focus for Robert Pearl, MD, Professor at the Stanford Graduate Schools of Business and Medicine. He adds risk-takers and people who are more cautious to the list of diversity factors that should be considered when constructing an effective team. Dr. Pearl asserts that it is having the right group dynamics that heightens the prospects of a team making smart decisions — or enabling a CEO to do so, if he or she is surrounded by the right mix of trusted people.
Appropriately managing the contrasts that diversity can bring is an issue that resonates with Bruce Davison, CEO of flexible office design solutions provider GoSpace. As it is developing a new tech platform, the company is addressing how best to foster and develop diverse mindsets toward a common goal — for example, among data scientists (who deal in absolutes) and data analysts (who deal in variables). It knows that getting that balance right is critical to a successful outcome.
Ultimately, firms must think about their motivations. Are they trying to fix social injustice or improve business performance? Chengwei Liu, Associate Professor of Strategy and Behavioral Science at the European School of Management and Technology (ESMT) makes this point clear: Identity diversity and cognitive diversity are not the same thing. Therefore, hiring women with the same education and backgrounds as men will not necessarily drive better decision-making, as they may still approach issues from the same angles and with similar mindsets.
Smart companies will dive deeper into the rationale behind diversity and task themselves with finding ways to measure what it really means and how diverse they really are, on more granular metrics. And because this is so difficult to do, not every company will do it, which will create genuine competitive advantage for those that are pioneers of true diversity.
Some might say that artificial intelligence (AI) will be invaluable in this respect. However, commentators urge caution here. AI may be smart, but it is only as smart as the humans who design it. Unconscious biases can therefore be built in, exacerbating the very barriers to diversity that organizations are seeking to break down, as Amazon recently learned when a machine-learning tool it developed to sift CVs to identify top candidates was found not to be operating in a gender-neutral way2. Plus, as AI seeks to simplify the complex, and because it can predict only what can be quantified, blind spots can occur. Early adopters beware: AI is a tool that needs careful handling.
Encouraging diversity beyond the organization itself — for instance, within the supply chain — is another factor many smart companies are considering, especially in the manufacturing arena. One example is Biogen (ranked 12th overall), which is among those that operate a program that takes supplier diversity into account in its procurement procedures 3
Fresh perspectives on the board
When it comes to smart decision-making, the distinct characteristics each person brings to the (board) table can help avoid “groupthink,” where the risk of confirmation bias is intensified. In this context, individuality should be celebrated and encouraged as a means of opening up debate and providing a hedge against conformity that could stifle innovation or prevent decisions from undergoing thorough sense-testing and robust challenge — vital from a corporate governance standpoint.
The increasing digitization of businesses provides a clear example of why having individuals with backgrounds and mindsets different from that of the stereotypical “older, white and male” board member is important at the top table.
Appointing a digital expert to the board, one who is often 25-30 years younger than most other board members, has become increasingly common, as companies grapple with issues such as how best to capitalize on social media and drive demand from millennials. That’s not to suggest that older people cannot be tech savvy — but this is about having people on the top decision-making team who reflect that demographic, fully understand social trends and are finely attuned to the market, to ensure that companies stay ahead of the curve.
Taking this idea a step further, a relatively new development among some of the world’s most enlightened organizations is the concept of the “shadow board,”4 where a group of more junior employees sit in on board meetings and give feedback.
The process is mutually beneficial: The shadow board members are given access to board discussions at an early stage in their careers, learning about the depth and breadth of the decisions that the board makes. In turn, they can provide refreshing, alternative views on the decisions being made.
Anticipating the future
There’s a sense that diversity is an evolving part of the business journey: What it looks like today may look different tomorrow.
Kimberly Ellison-Taylor puts it like this: “I don’t think anyone can say ‘That’s it, we’ve achieved diversity.’ We should applaud success, but we have to keep going. We can always do better.”
Pavita Cooper shares this long-term perspective. In her view, “The really smart companies are not thinking about this from a diversity lens, they are looking towards the future of work and anticipating the next industrial revolution and asking themselves what shape of workforce will we need 10, 20, 30 years from now?”
With average human life expectancy in the developed world increasing, in the future people’s working lives will be far longer, but careers are likely to become less linear and regular re-skilling will be required, while ways of working will become less rigid. Companies need to think about talent and demographics in tandem, and build jobs around people.
There’s a widespread feeling that businesses that pursue diversity in an active, positive way will reap the benefits of greater productivity and innovation from happy, motivated employees, but that those that do it in a reactive, box-ticking way, in order to mitigate risk of being seen not to be diverse, will not.
That requires buy-in and accountability at all levels. Of course, this needs to be led from the top. But for it to be executed properly, the middle-management strata is just as important, so that entry-level candidates are not just recruited, but encouraged to stay, develop and progress. This is an area that some feel may be being overlooked.
The team dynamics of diversity
Changing the filters and settings
When creating a diverse workforce, the obvious place to start is with recruitment. Much has been made of quotas, especially for senior posts, which may explain why our data found that European corporate board diversity is so high (34% female representation, compared to 23% in North America, 17% in Asia-Pacific and 5% in the Middle East), as countries like France now have mandatory quotas5while others, such as the UK, are working toward recommended targets.
But while that’s one strategy, for many commentators what’s truly important is looking critically at the entire recruitment process and asking if it is really fit for purpose, both in terms of identifying the right candidate pool and creating the right interview panel.
Smart companies are changing the way they recruit for talent by changing the filters in the selection process or engaging in “blind” recruitment and promotion, to ensure they are not sifting out good candidates (or excluding them from applying) simply because they are focusing, for instance, on high school grades or good degrees from top universities. They are recognizing that some minorities may simply not have had comparable opportunities, and are adapting their approach accordingly to re-think what “talent” means and how it is quantified, as well as how important potential is and how it can be identified.
Fostering inclusion
Recruitment is only half of the equation, however. Retention is equally important — especially as competition for talent is fierce, and as globalization widens career opportunities. At a time when moving roles every few years is increasingly seen as a positive rather than a negative, staff loyalty is hard-won, and the factors that encourage people to stay are complex and multifaceted.
Having diversity at the top can not only inspire and motivate people to join the company, but can show them that there is scope for them to flourish because others of the same gender, community, orientation, etc. have already climbed the ladder.
To get there, HR processes and procedures may need to be adapted to recognize and support the various attributes and abilities of a diverse workforce. “If you want to maximize employee performance, you can’t apply the exact same strategies for everyone,” says Kimberly Ellison-Taylor.
Creating an atmosphere where everyone feels comfortable is essential if staff are to stay. Another initiative deployed by many smart companies is the creation of internal social or professional groups that provide a platform for support and inclusion based on shared interests or other commonalities. These can be minority-specific, such as LGBTQ+ or women’s professional networks, or they can foster cohesion and a sense of belonging more broadly.
For example, Regeneron Pharmaceuticals (ranked 3rd overall) has a wide variety of employee interest groups, supported by company-sponsored time and resources. These range from a Chinese culture group and a Women in Science and Engineering group to Veterans at Regeneron, an environmental concern group and even an improv comedy group!5 Smaller businesses may have limited opportunities for these kinds of formal organizations, but they can equally benefit from finding ways to foster inclusivity so that staff feel an important part of a close-knit team.
Small, family-owned businesses can face very specific challenges when it comes to diversity and retention. Where skill sets are lacking among family members, hiring in external talent makes enormous sense, but the value of such a move may be limited if there are no career progression opportunities for non–family members, or if the views of “outsiders” are overlooked or disregarded in boardroom decision-making. Unless those “outsiders” are fully integrated and their opinions welcomed, they will move on and the opportunity for them to effect positive change could be lost.
Key points to consider
Diversity is by no means an exact science, and there are a huge number of variables that each organization will need to consider within the context of their unique corporate culture and market dynamics to foster and promote it.
When it comes to the art of smart decision-making, there are clear commercial imperatives for creating a workforce and a leadership that reflects and understands its audiences, but also one that is prepared to be agile, do things differently and be bold — a topic that we explore elsewhere in this year’s The Art of Smart. A diverse set of opinions and attitudes is essential to creating such a climate, and to making sure that any decisions taken are properly scrutinized and tested.
If diversity is truly to be a driver of business performance, companies could benefit from becoming more analytical about how they define it and more creative about how they approach it, looking beyond the obvious markers and the established ways of recruiting and retaining talent.
Being able to map the workforce against their business needs, not just now but into the future; to be pragmatic and flexible about change; and to seek out diversity of thought as well as of identity: These are all key areas that will differentiate the companies that effectively harness the power of diversity from the rest. Diversity may be important for its own sake — but done well, it’s also innovation in the making.
1 McKinsey & Co. https://www.mckinsey.com/business-functions/organization/our-insights/delivering-through-diversity Peterson Institute for International Economics https://www.piie.com/publications/working-papers/gender-diversity-profitable-evidence-global-survey
2 Reuters https://www.reuters.com/article/us-amazon-com-jobs-automation-insight/amazon-scraps-secret-ai-recruiting-tool-that-showed-bias-against-women-idUSKCN1MK08G
3 https://www.biogen.com/en_us/working-with-us.html
4 Harvard Business Review https://hbr.org/2019/06/why-you-should-create-a-shadow-board-of-younger-employees
5 Fortune https://fortune.com/2018/12/03/board-diversity-france/
6 https://investor.regeneron.com/static-files/7d12ba37-65af-4207-b220-66377ea7df1b