I am delighted to have been asked by my colleagues at the ABI to participate in a panel discussion on ethnic diversity at our upcoming Diversity Summit on 12 October. Whether concerning the barbaric treatment of women in Afghanistan following the Taliban’s return to power or the racist chanting suffered by black English footballers during the recent World Cup Qualifier with Hungary, racial inequality and gender inequity remain big issues for our society. Our Industry recognises this, a necessary first step, and is taking action to address these issues albeit we are a long way away from utopia. Regulatory expectations are also being formalised in the PRA and FCA’s discussion paper DP2/21 “Diversity and inclusion in the financial sector – working together to drive change” and this will fuel change and considerably shape what good looks like. However, this feels like an area where exceeding prescribed regulatory minima is fully justifiable and change should be driven by our vision for our industry and what we want to be and not what we are compelled to do to achieve regulatory compliance. In this call to actions for the Insurance and long-term savings industry I give my views on important areas that must be considered and addressed as we attempt to tackle these issues.
Have we focused too much on Diversity?
So, we look different, now what? I refer here to excessive focus on diversity at the expense of the more difficult to measure and achieve topics of inclusion, equity and ultimately equality. Recruitment practices focused on attracting talent from diverse backgrounds certainly create the human capital required to bring different perspectives to a business. But a business that lacks an inclusive culture and focuses solely on looking different is missing the point. Furthermore, organisations gauging success through diversity metrics focused on gender representation and ethnic minority quotas appear fixated on low hanging fruit compared to the more difficult task of creating a business where hired individuals are able to realise their full potential and feel accepted. A diverse workforce is of no value if the organisation is not set up to harness the power of diversity and this is where inclusion, equity and an appropriate corporate culture come in. Businesses should remember that an inclusive culture will foster greater diversity but greater diversity in no way fosters more inclusiveness. A shift in focus is required whilst maintaining the drive for a more diverse industry. Conversely, recruitment teams must ensure that in attempting to recruit individuals who “fit” the corporate culture and values that they do not inadvertently stifle diversity. The whole point of diversity is to have individuals who look, think and act different while challenging the status quo and established order all for the benefit of the business.
Where has the “E” gone?
Diversity (D), inclusion (I), and equity (E) must be considered in tandem. Policies should be referred to as DEI policies and professionals hired to tackle these issues should have roles with a DEI designation. Unfortunately, it is a lot more common these days to find the “E” missing. This subtle but necessary shift is crucial in ensuring equity is focused on and explicitly referenced because without equity true diversity and inclusion will remain elusive. Equity is all about ensuring that there is a level playing field regardless of age, gender, race or other protected characteristics. It seeks to balance the power dynamics in an organisation all in the pursuit of fairness. Considering equity alongside diversity and inclusion results in a workforce that looks different and has a clear path to inclusion. This is because barriers to achieving true inclusion are broken down and everyone is treated the same and has equal access to opportunities for advancement. Without considering DEI together a workforce would never feel empowered to bring their best to work or indeed have an environment conducive to the pursuit or achievement of excellence. I would urge our industry to consider renaming their policies, job titles and other supporting aspects of their frameworks DEI to include the E for “equity” and not just D&I.
Oops, there goes the business case.
I’m a fan of business cases. The business case for greater diversity and inclusion is often supported with numbers from research studies which show that companies with greater racial, ethnic, and gender diversity in their leadership tend to perform better financially. In some of these studies, statistically significant correlations were identified between improved financial performance, greater innovation and increased diversity. Other research, however, is less clear on the relationship between diverse leadership and profitability. In one such paper posted on research platform SSRN, authors did not find a link between racial and ethnic diversity and financial performance. Even studies that have attempted to find a causal link note that “greater gender and ethnic diversity in corporate leadership doesn’t automatically translate into more profit”. Furthermore, the FCA in its review of literature providing evidence of the impact of workplace diversity and inclusion states that the “empirical evidence for the impact of diverse workforces and boards on business performance is inconclusive”. This is largely as a result of methodological challenges and because these studies explore a range of sectors and geographies making comparison and generalisation difficult. The intention here is not to disprove the link between greater diversity and financial performance as a few of the studies referenced earlier attempting to demonstrate causality require further investigation and peer review. However, all the above raise the question - what do you do when the financial business case for diversity, equity and inclusion comes into question? The answer is a simple one – do it anyway because equality is a valid business goal and because it is the right thing to do. The societal and moral imperatives far outweigh any financial benefits and companies who are in this solely for financial gain would rapidly find themselves terminating their DEI initiatives if the numbers realised don’t match those promised. As a result, perhaps some caution is required when attempting to create a causal link between financial performance and greater diversity. Furthermore, any requirement for a business case implicitly suggests an already established order or hierarchy that needs to be convinced of the reasons why diversity and equity are important, which would suggest much larger and pervasive issues linked to company culture.
Do not forget psychological safety and cognitive diversity.
The disproportionate focus on diversity, in particular physical diversity at the expense of inclusion and equity could be because physical diversity targets are much easier to achieve and measure. It is easy to look around a Board room or entire business, count the number of female or Black, Asian and Minority Ethnic individuals and with glee tick a box that satisfies internal diversity targets. More difficult to achieve and measure is whether those individuals feel safe and free to speak up and be themselves without fear of negative consequences on their self-image, status, or career. This is the concept of psychological safety and a business lacking this key element of culture would never reap the benefits of diversity. Furthermore, individuals who feel free and empowered to truly be themselves are more likely to think outside the box unstifled by the status quo and approach problem solving and decision making with added creativity and flair, this is cognitive diversity. However, both cognitive diversity and psychological safety are a lot more difficult to measure than physical diversity so often take a back seat. Perhaps the human aversion to ambiguity and uncertainty which would doubtless arise while tackling issues of psychological safety and cognition create an aversion to addressing these much bigger cultural issues. Whatever the reason, Industry has come a long way, but a lot more needs to be done before we can claim success.
The Importance of Culture.
Throughout this piece I have used the word culture and its importance in achieving a truly diverse, inclusive, and equitable business cannot be overstated. Achieving culture change is never easy or quick because where deeply rooted it takes time to change individuals’ values, feelings and perceptions. It is therefore important to create the right business climate that signals the importance of diversity, inclusion, and equity. Creating the right operating conditions can act as a constant prompt for people to do the right thing and like a muscle constant use breeds development. The tone from the top is crucial in creating the right climate and leadership have to role model the right behaviour and be seen to lead by example. Leadership and others in the business must clearly distinguish between diversity and inclusion. They must also have a mindset that views everyone as equal now. From this perspective, DEI initiatives identify inequality as the problem and are designed to redress the balance that should exist, breaking down barriers to true inclusion and diversity. A mindset that does not begin from this perspective of “equality now” runs the risk of making underrepresented groups feel like the problem that needs to be addressed to achieve equality. Employees in the business should also have appropriate channels to call out bad behaviour not in line with organisational goals. The starting point for all of this is the need for the business to define its target state and what it wants to be, that is, the business needs to take a strategic approach. Subsequently, the culture required to achieve this target can be defined and implemented over time.
Groups or Individuals.
In a recent conversation, a colleague remarked on how great it was to have Teddy Nyahasha as OneFamily CEO. Yes, I accepted but highlighted that there are currently no black CEOs in the FTSE 100. Aside from Teddy, we had Tidjane Thiam in the past but that’s been about it, I responded. My colleague asked why I thought this was the case and part of my answer shocked her. I explained that the answer to this question was at the very heart of the DEI debate but perhaps something she was not expecting was when I said, “furthermore not every black man or woman wants to be a CEO”. Her shock got me thinking about the fact that in trying to address issues of inequality amongst ethnic minorities and gender, assumptions are often made about what success or good would look like for these groups. The viewpoints and preferences of the individual have in some cases been lost or at worst are now considered secondary to the perceived needs of the “group”. I don’t want to be a CEO (hopefully this statement ages well) so any initiatives aimed at making me a CEO would be pointless and indeed counterproductive. What I want and need (and I suspect individuals in other underrepresented groups feel the same) is the opportunity to become a CEO if I wanted to. What I want is equal opportunity and not to be constrained by others definitions of what equality or equity would look like for me. It is an important nuance and one that we need to be mindful of as we tackle DEI issues.
The great work towards diversity, equity and inclusion has begun and moves apace but we are far from the end. At the ABI’s Diversity summit issues like those described above will doubtless be discussed, including actions that work and how employers can create more inclusive workplace cultures in the context of the Covid-19 pandemic and the new world of work that is emerging. The event will be Chaired by Maxine Goddard, Senior Vice President Strategic Distribution and Development at Sompo International. There will also be keynote addresses from a number of speakers including Sarah Atkinson, Chief Executive Social Mobility Foundation, Chika Aghadiuno, Group Enterprise Risk Director Aviva, and our very own Yvonne Braun, Director of Long-Term Savings and Protection and ABI Executive sponsor for Diversity and Inclusion. Whilst we have reached maximum capacity for in person attendees virtual spaces are still available and you can register here.