Diversity isn’t just a moral imperative, says George Burton – it brings tangible benefits to an organisation
Those who make it to leadership positions at large companies are still primarily white men – 51 of the FTSE 100 companies do not have any directors of colour, and 86% of senior executives in the UK insurance sector are male. In the S&P 500, meanwhile, women make up just 26% of all directors.
Companies that lead on diversity, equality and inclusion are 25-36% more likely to outperform on profitability, and have up to 20% higher rates of innovation and up to 30% greater ability to spot and reduce risks. Bearing this in mind, is it time we made the business case for investment in diversity and inclusion (D&I)?
Inclusion is more than just offering flexibility – after all, COVID-19 has given many the ‘flexibility’ of mandated home working. Inclusion is about how we look, act and communicate. It’s about asking questions such as “If I’m not in a client-facing position, will I perform any better wearing a suit?” Beyond dress codes, industries have implicit customs that form the basis of expected behaviours. From the outside these practices can create an exclusive environment, in which the unwritten ‘rules’ of the club aren’t easily understood. In the new normal of home offices and Zoom fatigue, the sense of safety that comes from understanding tacit cultural norms matters more than ever for employee wellbeing and productivity. For industry-wide approaches to ‘setting the tone at the top’ we can look to initiatives such as Dive-In, the festival for D&I in insurance, which highlights the business case for diverse and inclusive workplaces.Investing in D&I increases the quality of human capital. It cultivates diversity of thought by drawing on the collective experience of a wide range of people to reduce the risk of groupthink and drive innovation. It also helps attract and retain the brightest and the best. For example, actively hiring across the neurodiversity spectrum brings in skills such as lateral thinking and the ability to consider the bigger picture. In an increasingly automated world, cultivating diversity of thought matters more than ever for effective decision making and risk management. Take JPMorgan Chase’s Autism at Work initiative, which employs people mostly in technology functions. Alongside a 99% retention rate, the programme boasts employees who are as much as 92% more productive than their peers.
D&I also extends to products and propositions. In Hong Kong, for example, HSBC Insurance recently expanded its definitions of life insurance beneficiaries to include grandparents, stepchildren and same-sex couples, among others. Previously, Hong Kong’s life insurance industry only allowed individuals related by law or blood to be beneficiaries. It’s not difficult to imagine how those who were previously uninsured and excluded felt. Not only is this move in keeping with modern sociological structures, it also addresses specific customer needs. The advantage of monopolising a specific demographic segment as the first mover speaks for itself.
We can now put our money where our mouth is and invest in D&I through funds that give greater weight to more diverse companies. For example, the L&G Future World Gender in Leadership UK Index invests in companies that score well against four selected gender diversity metrics: a company’s percentages of women at management level, at executive level, on the board and across the workforce. Of course, exercising meaningful financial clout is only possible if there is a high degree of corporate transparency – the likes of which are typically reserved for advanced forms of integrated reporting. What gets measured gets managed – although management alone doesn’t automatically stop certain actions from being merely tokenistic gestures.
Investments in D&I are difficult to quantify through mainstream project management techniques such as rates of return and discounted payback periods. Nevertheless, there appears to be a strong business case for moving beyond the moral imperative and embedding D&I in corporate governance and strategy. Moreover, if we’ve learnt anything from COVID-19 it’s that companies can take decisive action when pushed. Perhaps only time will tell if returns on investment in D&I outperform the industry benchmark.
George Burton is a guest student editor