When the comfort zone gets uncomfortable
In my first D&I article, “Inclusion or Exclusion: Know yourself; know your neighbour“, we sought to understand the nature of exclusion, and the importance of inclusion, as a moral and strategic imperative. We looked at the role of fear and distrust on both sides of the discrimination barrier in the creation of divides along racial, religious, gender or sexual lines. We argued that for society, businesses or individuals to thrive and fulfil their potential, there could be no “going back to the way things were”; nostalgia for the “good old days” is a misnomer that disregards the imperfections of yesteryear. The only correct path is to move forward in the light of new understanding, driven on by curiosity and the courage to face our limitations and embrace new perspectives. We concluded that unconscious bias is both ever-present and surreptitious with three outcomes:
- A suppression of talent and potential born of a lack of awareness of individual uniqueness and social norms that seek to control and suppress individuality.
- The mismanagement of diversified talent and the erosion of corporate culture in terms of collegial trust and organisational justice.
- The altered behaviour and suppression of self-expression enacted by minorities in response to the perceived threat of discrimination, and the damage to the self-confidence and self-esteem of minorities who experience negative bias in any situation.
In this second of four articles, I want to explore the struggle executives and organisations experience when confronting and embracing their bias towards minority groups and why it is so difficult to overcome their overconfidence bias and superior self-image. Why is it so difficult to break free of our prejudice? How do organisations and their members need to change their approach to be successful in the implementation of diversity and inclusion policies? How significant is the required change, and on whose shoulders is this burden to be placed?
First, tentative steps
Early in June 2020, Jamie Dimon was pictured “taking the knee” in symbolic support of #BlackLivesMatter. He also stated, “we are committed to fighting against racism and discrimination wherever and however it exists”. These are bold words from the CEO and Chairperson of JPMorgan who also led the charge for the change in the definition of purpose for the Business Round Table in the USA; discarding predominantly shareholder capitalism for broader stakeholder capitalism[ii]. Yet we still look for significant signs of progress beyond the quick promise to target more Black and coloured recruitment. Indications of remorse or open discussion of past marketing and lending policies that work against racial minorities have still to appear.[iii]
The CEO of Morgan Stanley, James Gorman, felt moved to declare that this period “will not be easily forgotten in history, and it shouldn’t be. God willing, it will be seen as a turning point in race relations.” Yet, his audience may be excused for folding their arms in anticipation. Like so many of his contemporaries, his bank has a deplorably low presence of Black executives in its ranks despite the, seemingly symbolic, immediate promotion of two Black women to seats on the bank’s operating and management committees. [iv]
Another day; another demographic
It’s not only in finance. After tweeting “Speaking out is worth it”, L’Oreal was accused of hypocrisy given their firing of a model in 2017 due to her statements against racism. They have now rehired her to serve on its newly established UK Diversity and Inclusion Advisory Board, but it seems a very recent change of heart. Organisations can no longer get away with not facing up to years of institutionalised prejudice and White blindness through clever public relation campaigns, photo opportunities, statements and hurried appointments. That time is past. The positive bias of the baby-boomer generation towards institutions and authority is rapidly giving way to the far more demanding, sceptical and negatively biased Millennials and Generation Z.[v] The facts speak for themselves, there is something in the make-up of society, from education and opportunity, through to recruitment and promotions that disadvantages large sections of society, be they Black, female or LGBT+ oriented.[vi]
Culture Change and putting the “S” in ESG
So, the question is a glaring one. Why does society, and more specifically, company boards and executives find it so difficult to drive cultural change on a subject that, in and of itself, is so obviously in need of correction? It is a question that goes to the heart of the challenge of modern governance. If boards are incapable of instilling cultural change in their organisations, then how on earth can they expect to enjoy any success in addressing the “Social” of ESG demands. If their actions do no more than try to erase the worst of social policy mishaps, how can the power of purpose, culture and values be accessed?[vii] Token gestures might quiet the waters in any given press conference, but they will not subdue the risk of scandals and mishaps. To address the “S” in ESG, there has to be cultural change; a change in organisational behaviour and mindset.
Adidas employees criticised their employer that it was dismissive of their concerns of racial equity. In response, Adidas announced a policy for at least 30% of all open positions in the USA must be filled by candidates of Black or Latino origin;iv in effect a quota system that reveals that the current recruitment mechanism at Adidas USA finds this “unnatural”. We have to ask ourselves why.
Recruitment: Risk, reward, and making waves
The answer lies in the cultural “thumbprint” of bias impacting attitudes towards potential recruits within the organisation and the psychological stress involved in swimming against the stream; in other words, making those hires that go against traditional profiles and will raise eyebrows and curiosity amongst colleagues and management. Recruitment is never easy, and “what” you hire is rarely exactly what you predicted based on the hiring interview. The recruit may be far more productive and creative than you expected, or perhaps less flexible or willing to go the extra mile than you hoped. Most of the time, we quietly accommodate these differences and life goes on. However, sometimes we make hires that make waves. Perhaps you recruit a top salesperson from a competitor involving both expensive compensation packages and high expectations. You know your hire attracts the attention of people around you, and that of the executive. A good result might bestow more star status on the incoming employee than the person who recruited her; a disappointing result will reflect more on the hiring manager than the failed recruit. A high-profile recruitment comes with high risk and little reward for the recruiter. If then, you have a choice between two equal candidates, one who fits the standard profile of other employees and another who breaks the mould and attracts more attention than the other, which would you choose? It would be normal risk aversion behaviour to hire the more “typical” profile of recruit. If we add to this an unconscious prejudice that impacts the evaluation of the credentials and competence of the “different” profile of recruit, then it raises the bar that the unusual recruitment profile must meet to be considered an equal.[viii] As has been asserted by many a successful female executive through these many years of pursuing gender equality, the perception is that to gain promotion, women have to be far better than their male contemporaries. Imagine, then what this means for a woman of colour. Statistics show that Black women hold only 5% of entry-level professional recruits. McKinsey & company compares this to White women who make up 31% of the same category. When I observe that the majority of my university management students are women, I immediately sense a problem. There is every reason to expect equal representation of men and women recruited to entry-level professional roles instead of the 36% their study shows. But the picture worsens as we proceed through the corporate pipeline to Vice-President level where Black women already only hold 1% of posts (White women 24% and White men 59%). For comparison, we might note that Black representation amongst Vice-Presidents in the McKinsey study amounts to 2% only (and “Men of Colour”, just 12%).[ix]
Charting a new course
The reality of statistics and observed outcomes amply demonstrate the presence of bias, unconscious or not. If we are prepared to accept that such results are detrimental to our organisations, society and community wellbeing, or merely immoral and fundamentally in contravention of our human values, any leadership would be compelled to take action to correct the situation. Often, the default reaction is to establish a working group, devise a plan and a programme to be rolled out into the organisation.
Traditionally then, boards and their executives would devise and approve Diversity and Inclusion (D&I) programmes to face a problem of racial or other bias. Often, an individual with a profile reflective of the mission would be appointed to lead the initiative, such as a member of Human Resources representing the target social group; be this a woman, a member of the LGBT+ community, or a “person of colour”. The decision taken, the budget allocated, and the task delegated, the executive focus can return to the matter of financial performance.
And companies are getting on with it. Following the resurgence of #BLM in the aftermath of the George Floyd killing in the USA, Satya Nadella, CEO of Microsoft, announced plans to double the number of Black managers and senior leaders over the next five years. The target would form part of the key objectives of senior management, influencing their pay and promotion prospects.[x] Also, Microsoft intends to double the number of Black-owned approved suppliers over the next three years and to ask existing suppliers to disclose their diversity status and goals. Finally, the firm announced a $50 million investment fund to support small businesses owned by the Black community. Microsoft is not alone in making promises. In the current #BLM America, many other companies like Google and Facebook are pledging to improve the diversity mix in their leadership ranks. Estée Lauder has committed $10 million to racial justice organisations over the next three years.[xi] The question remains; will these D&I measures prove sustainable? As mentioned previously, Morgan Stanley, JPMorgan, Walmart, Wells Fargo and Slack all stand accused of proffering inauthentic words and promises.iv
Leadership, ownership and accountability
Ethics and Compliance Officers (such as the author), and certainly a host of HR officers charged with culture change, will have noted the tendency of the board and executive, once the “programme” budget is approved, to disappear from the scene; the “no longer my problem” syndrome. On one level, it is reasonable for the leadership to assign responsibility for a task to an individual, and then to turn to the next issue awaiting a decision or allocation of resources. What such leaders do not understand is that culture is not a task to be delegated and executed. Culture represents the entire value system of the company, and that cannot be left to others. To dictate a particular cultural mindset means it has to be personified by the company leadership; to change it requires the board and executive to, not only, be painfully accountable for its success but also to lead that change by example.
In the absence of leadership by example and conviction, the D&I objectives will remain noble words in a policy document. It may be that (e.g.) recruiting managers feel their female or Black recruitment is now less risky, but it will not change the environment and prejudice encountered by these new or promoted employees. Indeed, the environment can quickly turn more hostile as “quota” recruits or promotions are viewed as having obtained “special treatment” – oblivious to the fact that it was the previously negatively charged special treatment of minorities that is being addressed. An organisation where it is viewed as politically, rather than morally, correct to appear positive towards minorities will lead to attitudes of conflict-avoiding, aversive racism or strategic colour blindness. As a result, constructive feedback and serious development discussions with the disadvantaged will be withheld.[xii] The appearance of equality hides a more significant problem of distrust and envy. To be successful, employees must believe
- that the need for change is real,
- that change is beneficial and
- that the intention of effective change is real.
In the absence of this evidenced conviction, the problem of “snowflake behaviour” by those presumed to be otherwise privileged, but who fear being regarded as hostile to anti-racist initiatives will persist. Those perceived to be benefitting from “positive discrimination” initiatives will continue to suffer embarrassment perpetuating issues of low esteem. The underlying problems of racism or minority discrimination will remain uncorrected, irrespective of any changes in KPIs.
The question, therefore, stands: how do we devise and implement a D&I culture change that is effective and enduring? How do we win the hearts and minds of the members of the group?
Beyond performance indicators
As Mr Nadella of Microsoft is no doubt aware, setting KPI objectives and throwing money at a cultural issue is no longer tenable. We know from painful experience that, just as we cannot have an ethics and compliance strategy separate from business strategies, we cannot divorce culture change initiatives from the conduct of business either. We know that if there is a conflict of strategies, where one is rewarded by business KPIs and the other is not, then it is the business targets that prevail – even if in breach of advertised ethical rules. The 21st century corporate has to focus on three levels of inclusion if they are to be effective and convincing.
- The culture and behavioural norms on show within the company itself
- The example the company plays as a business leader within its stakeholder grouping
- The company as a sincere and authentic voice for change in broader society.
In the next and third article of four in this series, we shall look at what the critical ingredients for successful culture change and inclusion measures are. We will consider what real and practical steps an organisation can take to have the best chance of implementing real and sustainable culture change. The one takeaway from this second article, however, remains primordial – No culture change is possible without the full, authentic and passionate involvement of its board and its executive. In culture, there is no quick fix, only rapid failure.
By: Anthony Smith-Meyer, Founder Director of thegovernanceproject.org
[ii] ”Business Roundtable redefines the purpose of a corporation to promote ‘an economy that serves all Americans’”, 19 August, 2019, www.businessroundtable.org
[iii] “This is what racism sounds like in the banking industry” by Emily Flitter, 14 December, 2019, The New York Times
[iv] “As big corporations say ‘black lives matter,’ their track records raise skepticism” by Jan, McGregor, Merle and Tiku, Washington Post, 13 June 2020.
[v] “The Post-Truth Business” by Sean Pillot de Chenecey (2019), Kogan Page Publishers
[vi] “The economic impact of closing the racial wealth gap” by Noel, Pinder, Stewart and Wright, 19 August 2019, McKinsey
[vii] “Surviving Organisational Behaviour” by Anthony Smith-Meyer (2018), Kindle Publications
[viii] “Dear White Boss » by Caver & Livers, November 2002, Harvard Business Review
[ix] “The economic impact of closing the racial wealth gap” by Noel, Pinder, Stewart and Wright, 13 August 2019, McKinsey & Company
[x] “Microsoft CEO pledges to back racial-justice efforts through promotion, investment initiatives” by Maria Armental, 23 June 2020, Wall Street Journal
[xi] ”Workers press Adidas, Estée Lauder, others to act on racism, diversity” by Gallagher, Safdar & Terlep, 8 June, 2020, Wall Street Journal.
[xii] ”Advancing black leaders” by Roberts and Mayo, November 2019, Harvard Business Review