Anyone not sure of the need for diversity and inclusion in our organisations just needs to walk down the street. The face of the UK is changing, and fast. From rises in ethnic minorities (by 2020, 11% of the UK’s population will be from a minority, according to estimates) to an ageing population (by 2030, half the population will be over 50), and those less obvious characteristics such as sexuality and disability, diversity is inescapable. But are Britain’s organisations ready to deal with it?
The business case for diversity is nothing new. For consumer companies, it’s about serving the needs of an increasingly diverse customer base, as Ann Pickering, HR director at O2, explains: “It’s business-critical that our workforce reflects our customer base.”
Then there is research that shows having a diverse workforce leads to more innovative, productive and profitable companies. So it’s no wonder diversity continues to be a hot topic. According to 2012 research by the CIPD and Bernard Hodes Group, 83% of organisations have an articulated diversity strategy in place. But managing a diverse workforce effectively enough to reap these business benefits requires some delicate balancing. If you fail to do so, diversity could end up being more trouble than it’s worth.
The trouble with diversity
The view that just bringing together diverse groups of people is enough to improve business performance is something London Business School professor Lynda Gratton has been exploring with her research consortium the Future of Work (FoW). “The pendulum has swung towards diverse teams being great, and they are, but they are very hard to manage,” she says. “This idea that you have a diverse team and it will automatically happen for you is not correct.”
In fact, research has found that although a team’s diversity can lead to innovation, it can also lead to “detrimental team dynamics” if not carefully managed. Diversity in teams is best thought of as a “double-edged sword for innovation”, according to the article, ‘Capitalising on thought diversity for innovation’ (published in Research-Technology Management). “Diverse teams can work well when there are complex problems to solve,” says Gratton. “But if you are not careful, they fracture. You need sophisticated management systems.”
Then there’s the impact diversity can have on decision-making. “Conflict is part of diversity, it’s about different perspectives after all,” says Gratton. Homogeneous teams naturally come to faster decisions. “There’s an argument that if you want quick decision-making, get a group of similar people,” says Patrick Voss, management consultant and co-founder of LGBT business networking group Radius Business. “If you have a diverse group, it takes longer to come to a decision, which can be frustrating.”
However, according to a sample survey of FoW consortium members (mainly blue-chip organisations), not many people accept that diversity needs a particular ecosystem to flourish. When faced with the statement “we understand that diversity only works in certain circumstances”, only 18% of respondents agreed. This suggests only a small proportion of professionals realise diversity needs to be backed up with rigorous processes to leverage the best outcomes.
Hazel Keating, head of HR EMEA at financial services group State Street, is mindful of this. After putting in the work to create a more diverse workforce – something she likens to “hand-to-hand combat” – she now faces the challenge of making it work day-to-day. “I’m seeing the different dynamics and type of management we need,” she says. “Diversity requires a different kind of conductor to allow the whole symphony to play together. You need to change gears to make sure the value of diversity is coming through.”
The ‘I’ in D&I
Two things, working seamlessly together, are needed for diversity to translate into innovation and productivity: excellent leadership and management; and an inclusive culture. “Diversity is not enough,” says Gratton. “It’s about inclusion. Once we have built these diverse companies, how do we get them to work together? In a way, getting the diverse people is easy; the process afterwards is more challenging.” Keating agrees, adding: “There is a gap between getting diverse people through the door and being an inclusive organisation.”
It’s about the ‘I’ in D&I, which is in danger of being overlooked as organisations focus their energies on building a diverse pipeline. “The real frontier is inclusion,” says Jean Martin, executive director of the HR practice at the Corporate Executive Board (CEB). “Boards can focus on the ‘D’ but not the ‘I’.”
These boards are missing a trick. CEB research finds organisations get more than double the positive impact of diversity if they promote inclusion too. Compared with just focusing on diversity, building an inclusive workplace increases discretionary effort from 6% to 12%, and increases intent to stay from 7% to 19%. “If your agenda is just on the ‘D’, you’ll be in trouble,” says Martin. “But inclusion is much harder to manage.”
“Inclusion doesn’t just happen,” says Nicky Moffat, a leadership and diversity consultant, who was once the highest-ranked woman in the British Army. “It’s about embedded behaviour and it’s not a natural state.”
And the challenges, explains Martin, come down to evolution. “Inclusion starts with a natural barrier,” she says. “When we were hunter-gatherers, anyone different was a threat. We are hardwired for un-inclusive behaviours, so we need to recognise that and overcome it.”
The management issue
In practice, fostering inclusive behaviour means investing in activities such as unconscious bias training, which helps in recruiting and managing equal career progression. “The most important thing you can teach any manager is self-awareness,” says Angela O’Connor, CEO of consultancy The HR Lounge. “Managers need to understand why they make the decisions they do.”
Denise Keating, chief executive at the Employers Network for Equality and Inclusion (ENEI), says managers must be made aware of ‘affinity biases’. “If someone is like you, you feel you have a connection,” she explains. “It’s easy to discount people you don’t have an affinity with, which can cause issues with recruitment and performance management.”
Moffat says leadership needs to “look in on itself”. “The business case [for D&I] has been made. Now leadership needs to challenge itself.”
Good leadership and inclusive leadership should be interchangeable. State Street’s Keating says this ‘back to basics’ leadership training can be difficult. “Senior managers don’t believe they need it, but they do,” she says. “It takes a courageous manager to accept that.”
At professional services firm PwC, all staff are coached to recognise their unconscious biases in ‘open-mindedness training’. “No one likes to think they’re biased,” says the firm’s head of diversity, Sarah Churchman. “It’s about unpicking behaviour. Often we focus on the top level, but this is about the capability in the middle.”
Don’t mention the D-word
Judy Greevy, deputy director of engagement and diversity at HMRC, says getting middle management right is vital. “There’s no point having a diverse pipeline if the culture isn’t inclusive,” she says. “It’s not about special groups of people, it’s about helping managers to support difference.” At HMRC, that means complementing diversity-friendly policies around, say, flexible working with a wider cultural change programme.
“It’s not just about acknowledging we are all different, it’s thinking what we can do to make everyone feel accepted and able to contribute,” says Greevy. D&I is laced into all leadership and management programmes in an almost “subliminal” way. “I’d never say ‘let’s talk about diversity’,” says Greevy. “Get diversity into broader issues so it becomes part of being a good leader.”
Similarly, at PwC diversity has been embedded into all HR processes. And Churchman agrees that the D-word can make people switch off. “Talking about diversity is the wrong place to start,” she says. “People think they’ve heard it all before, or think you’re only talking about women.”
According to the CIPD and Bernard Hodes Group’s research, organisations’ strategies for inclusion tend to focus on the obvious, such as bullying and harassment, and on recruitment. Far less common are the strategies that truly embed D&I at all stages of the career path. And the FoW research finds only 26% of respondents have added diversity-related goals into managers’ performance appraisals.
Martin advises organisations to reward and recognise inclusive behaviours. “You could give bonuses linked to inclusion, with managers only getting their full bonus if their team says they manage for inclusion,” she says. At Government agency Land Registry, career development is closely monitored. If a certain group is seen to not be progressing, positive action is taken and managers can be held accountable.
The importance of inclusive process cannot be overlooked, says Raphael Mokades, founder of Rare, an agency that specialises in diverse graduate recruitment. “If you are making redundancies, how will that affect diversity?” he says. “If certain groups aren’t performing, why?” But Moffat warns it’s not just a numbers game. “It’s about embedding it into your organisational DNA,” she says. “If your policies and practices don’t reflect it, you risk ending up with a disaffected workforce.”
Compared with diversity, inclusion is far from a numbers game, which makes it difficult for organisations to assess. It is also why diversity has tended to hog the headlines. “The focus on diversity [over inclusion] has occurred for two reasons,” believes Voss. “You can’t boil the ocean, so true inclusion is daunting, and diversity is more measurable.” Pickering agrees that, although “business and Government are getting better at recognising that inclusion makes for a better economy, people are hung up on how to achieve it”.
In a business environment where metrics are king and everything needs to be backed up with ROI, inclusion becomes even more of a challenge. “Metrics are crucial,” says Martin, “You need milestones, not abstract goals. Metrics need strategic composition that go beyond race and gender.” However, as Greevy acknowledges: “Measuring inclusion is difficult as it’s about how people feel.” At HMRC, the best route into feelings is the staff survey. “Break down responses into groups,” Greevy advises. “Have questions that allow you to index D&I, such as how people feel about their opportunities for development. Build a richer picture.”
Voss advises putting together a balanced scorecard for inclusion. “With a diversity quota, you could get there and be happy, but life isn’t black and white,” he says. “Work with what you have: turnover, absenteeism and engagement.” Voss also advises implementing ‘softer’ measures such as how much time the board spends talking about D&I and doing spot checks by asking managers to define D&I or asking them how often they are discussing inclusion with their team.
Sophisticated measurements are for organisations that are mature in their approach to D&I. As ENEI’s Keating explains: “Some organisations are still at equality and managing risk. Others are on the journey from diversity to inclusion.” Greevy says HMRC started with equality: “That was about groups of people getting special treatment. Diversity looked at difference and what it meant. Now we are moving to inclusion, which is cultural change.”
Talk about culture
Focusing on the cultural change element and linking it to hot issues such as engagement and trust could be a smart way to overcome what PwC’s Churchman calls “diversity fatigue”. “We need to remind people there’s a commercial case, that it’s not just a ‘nice to have’,” she says. O’Connor agrees, and is researching organisational engagement in D&I post-recession. “People have forgotten about D&I,” she says. “It’s fallen off the agenda.”
Perhaps, suggests Churchman, one way to overcome this is to focus on inclusion, authenticity and enabling people. “Leaders want to create an environment where everyone is at their best,” she says. “Inclusion is a huge opportunity as it takes diversity into realms like OD and culture change. Whenever there is a major change programme, it’s a big diversity opportunity.” O’Connor adds that any diversity initiative has to be rooted in cultural change. “Otherwise,” she says, “it’s like sticking a plaster on an amputation.”
That cultural change will soon no longer be optional. As our country becomes ever more diverse, so does the workforce and customer base of tomorrow. “It’s unbelievable who the workforce is going to be made up of in future,” says State Street’s Keating. “The face of business is changing right now, so we better get equipped in how we manage that.” The time to choose whether to embrace inclusion is running out. Organisations had better learn how to manage D&I effectively or risk becoming irrelevant.