The business impact of diversity

In
the first of a three-part series on diversity and inclusion, professor Amin
Rajan, chief executive of CREATE, and Sharon Harris, UK head of diversity at
Deutsche Bank, outline the results of a study of 500 employers’ attitudes to
workforce diversity

This is the first of three articles based on a new study, Harnessing
Workforce Diversity to Raise the Bottom Line carried out by CREATE, an
independent research centre. It is the first of its kind to assess the business
impact of diversity and inclusion.

For the purposes of this research the definition of diversity covers
personal identity defined by gender, ethnicity, age, disability, religion and
sexual orientation. It also covers personal styles and approaches to
work-related issues.

Inclusion is about engaging people to achieve their best. It is influenced
by the way they are managed and by the environment in which they work.

Key drivers

In the past three years, managing diversity has come to the fore in our sample
of organisations as a result of two factors: accelerating competition due to
globalisation and restructuring due to the current recession in the world
economy.

Accordingly, organisations have become increasingly diverse in three major
respects: markets, business and workforce (see diagram right).

More open markets and greater competition have made customers more
segmented, business cultures more hybrid, and operating environments more
varied. The ensuing competition has fragmented the ‘food chain’ of key business
processes, and promoted joint ventures, outsourcing and co-sourcing. And
workforce diversity has ensured a widespread talent famine and favoured
behavioural diversity expressed by work styles and personal aspirations.

Workforce diversity provides the essential underpinning of the other two. It
is also viewed as important in its own right for three reasons:

– Market As one business leader observed, "If someone is doing business
in the Far East but does not understand how their values are different, they’re
operating on a cricket field by football rules." This not only relates to
doing business abroad, but also in the minority areas of the UK.

– Innovation A multi-cultural workforce translates into a richer variety of
approaches to work-related problems and processes. Such approaches, in turn,
are conducive to innovation that raises business performance.

– Moral In a progressive society, all segments of the population should have
a stake in its prosperity and equal access to its benefits, subject to the
meritocratic belief that a job should go to the best qualified candidate,
irrespective of personal identity.

On this argument, diversity is not about equality per se, but it may lead to
equality based on merit.

Equality is about compliance, and diversity is about differentiation.
Equality is about creating a level playing field, diversity is about valuing
individual differences to enhance business results.

Key enablers

Since diversity is about visible and behavioural attributes, its implementation
has relied on a variety of approaches by different organisations (see diagram
bottom right). Around six in 10 companies in our sample have implemented
actions that promote diversity without recourse to formal targets.

At the other extreme, less than 5 per cent of the sampled companies set
quotas for different employee groups and these are either operating in the
public sector or have a strong exposure to public sector clients.

A further 25 per cent have set targets. A major bank, for example, has set
two stretching targets: to double the proportion of women in senior executive
positions by 2005 from a base of 11 per cent in 2001; and to raise the
representation of ethnic minorities in senior executive positions from zero to
3 per cent over the same period.

Leaders in diversity

Organisations setting the targets have a strong culture of leadership
involving their chairmen or chief executives as key champions of diversity (see
right). They have also set up diversity councils, high level bodies that set
targets, select metrics and monitor results.

However, this is not the only approach. Among the rest of the sample, the
diversity agenda is implemented via one or more of three other inter-related
approaches, depending upon the prevailing business culture.

First of these are corporate values that promote inclusion. The values in
question typically include: respect for each individual, the right to be heard
and their need to balance work and personal demands.

The culture of inclusion was especially notable in two sets of
organisations: professional services firms like law, accountancy, software and
business services where the partnership ethos mitigate against the setting of
targets; and large companies which have progressive practices on people management.

The second approach relates to customer primacy. Companies with regular
contact with a large customer base have recognised that nearly 70 per cent of
new entrants to the labour market over the next five years will be women
returners and ethnic minority groups, both of whom are also becoming major
consumer groups in their own right.

Some of these companies are also involved in elaborate supply chains where
business customers are encouraging suppliers to adopt a diversity policy as a criterion
in procurement decisions, following the public sector.

The third approach relates to compliance with legislation on equal
opportunities and workplace discrimination. Some of the companies in our sample
had been exposed to litigation. Their diversity agenda aims to ensure that this
does not happen again.

Irrespective of the approach, a majority of these companies monitor the
outcomes of their actions.

Going beyond HR

An important point to emphasise is that diversity management is not just
about conventional HR issues like recruitment, retention and motivation that
are central to winning the war for talent. It is also about improving
organisational resilience.

According to our sample of companies, many of the programmes on corporate
renewal in the 1990s failed because the lack of people diversity ensured that
the prevailing cultures were more inward than outward looking, and more
backward than forward looking. In the current wave of competition, such
cultures are untenable.

On the other hand, life experiences of women and ethnic minorities, acquired
through discrimination or challenging circumstances, are being viewed
positively, since they enable them to cope with change and, more often than
not, stay ahead of it.

This article is based on Harnessing Workforce Diversity to Raise the Bottom
Line. More details on 01892 526757, fax 01892 542988, or e-mail
jenny@create-research.co.uk

Workforce diversity is the key to exploiting global markets

Globalisation is creating new
customer segments at home and abroad. Tapping into them requires a workforce
with diverse styles, outlooks and approaches.

This is the key message from the study. It shows how companies
in all sectors are orienting their employees towards their markets by
recruiting and developing people in the image of their customers. It also
highlights the resulting business benefits, such as improved productivity,
satisfied customers, increased sales and more innovation.

The study is based on the experiences of a cross section of
around 500 employers of different sizes in manufacturing and services alike.
Although primarily based in the UK, many of them also have operations across
Europe and around the world. The study also looks at the experiences of a small
number of prominent companies in the US. These employers were chosen because
they had formal or informal initiatives on diversity that lend themselves to a
realistic assessment. With due regard to individual merit, these initiatives
have aimed to create a diverse workforce by pursuing one or more of four aims:

– A more even balance between gender, ethnicity, disability and
age

– Greater representation of women and ethnic minority groups in
senior roles

– A more inclusive management style at all levels in their
companies

– A variety of personal styles and approaches to working and
learning.

The study was commissioned by a consortium of four
organisations: London Central Learning and Skills Council, who provided the
majority of funding; London Human Resource Group, comprising 16 leading City
institutions; Allen & Overy, the international law firm; and Deutsche Bank.

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