The lack of diversity in leadership teams is well reported - but understanding the scale of the problem, and why organisations really need greater representation and diversity at the leadership level, is crucial.
The disproportionate gender split of leadership teams
In Europe, Women make up about half of all those employed but were just 18% of senior executives in 2019. Among the largest publicly listed companies in the European Union (EU-28) in 2020, only 19.3% of executives and 7.9% of CEOs were women.
When we look across the Atlantic, unfortunately the results are not much better. In the USA, women were 47% of the workforce but only 38% of managers. And as we go higher up the ladder, the results get worse with women in only 21% of C-Suite roles.
The lack of ethnic minority representation in leadership teams
When we extend this to ethnic minority representation, we see much of the same. Whilst progress has been made, there is evidence that there is still a long way to go - and that minority representation has either been ignored, or become a tickbox activity for a number of organisations.
In 2019, research found that the FTSE 100 had more CEOs named Steve than those from ethnic minorities, with ethnic minority representation being identified as a problem not just for the largest firms, but for the FTSE 250 and across the wider UK economy, approximately costing the UK economy upto £2.6bn a year.
Looking stateside, we see the election of Barack Obama to President and more recently Kamala Harris to Vice President as huge positives in ethnic minority representation. However, when we dig into the statistics of corporate America, the reality is disappointing.
In 2019, we find that while black people make up approximately 13% of the American population, black professionals held just 3.2% of all executive or senior leadership roles and only 0.8% of all Fortune 500 CEO positions. With Jide Zeitlin stepping down, that figure goes down to 0.6% with only 3 black Fortune 500 CEOs all of which are men.
When we extend this to women of colour, the findings are eye opening: women of colour were represented in just 4% of C-suite roles. A stark difference from the 39.2% of the current American female population that women of colour represent, with projections of that figure rising to 53.1% in 2060 according to US Census predictions. This shows the growing importance of the representation of women, and particularly women of colour, in all levels of the workforce.
Why and how you should promote diversity in your leadership teams
We can see a problem of under-representation of women and ethnic minorities at leadership levels, but why is this important? And how can we solve this?
Why diverse leadership teams matter
1. It’s important to the workforce that leadership teams are representative of society
Today more than ever, there is a significant amount of importance placed on working for companies that put diversity and inclusion at the heart of their culture - and for good reason:
- The millennial and Gen Z generations are the most diverse in history: only 56% of the 87 million millennials in the USA are white, as compared to 72% of the 76 million members of the baby boomer generation. The U.S. population, and therefore the workforce, is becoming increasingly diverse.
- In the 40 years between 1980 and 2020, the white working-age population will have declined from 83% of the USA’s total to 63% ,while the number of minority workers will have doubled.
In 2018, there was almost the same number of Fortune 500 CEOs named John (23) as there were women CEOs (25) - despite women making up over 50% of the US population. This in turn can prove to be a barrier to attracting and retaining the top talent for a number of companies and industries.
Last year we did some interesting work with Ennis & Co around diversity and inclusion in the automotive industry and the results were revealing. Looking specifically at the automotive industry we found there to be a lack of diversity at the leadership level, with some companies being completely homogenous at board and leadership level.
This not only creates and promotes the ‘old boys culture’ which is prominent in the automotive industry but we found this also deters a wide range of talent from considering such companies as a place of work. A lack of role models in leadership positions was one of the reasons as to why the automotive industry is currently unable to attract and retain top talent. Seeing someone like you in a senior position creates for many the belief that you can also reach that position in the future. With that lacking, many potential employees turn to other industries where there is greater workforce diversity.2. Diversity at leadership level can bring tangible business advantages
Research by Catalyst found that companies with greater female representation at the C-Suite level outperformed those that don’t with 34% greater return to its shareholders. It also found that while 5% of Fortune 100 companies have a female CEO, those companies generate 7% of the Fortune 100’s total revenue and have outperformed the S&P 500 index during their tenures.
Our own research at Qlearsite finds that the most profitable organisations are 4.4x more inclusive than the bottom third of companies if listed by profitability. In addition, we’ve also found that the fastest growing companies are 1.4x more inclusive and those with the highest customer service levels are 3x more inclusive than those with the lowest levels of growth and customer service.
A study in 2018 by Harvard Business Review found that the most diverse companies were also the most innovative, allowing them to understand and market products and services to a wider range of consumers. They found that Nation of origin, industry and gender had the biggest impact and that organisations displaying multidimensional or two-dimensional diversity are 45% more likely to report they had captured a larger share of the market, and 70% more likely to have entered into a new market in 2017.
According to McKinsey’s ‘Diversity Matters’ report, companies in the top 25% for racial and ethnic diversity are 35% more likely to have financial returns above their respective national industry medians. Furthermore, teams with a diverse gender profile are 15% more likely to outperform the median. The combined result of improving both racial and gender diversity is a net increase of 25% in performance.
Gallup’s 2016 findings also highlight the potential of engagement intertwined with diversity. One of the studies found that organisations with a higher than average gender diversity and employee engagement had 46%-58% better financial performance than companies that were below the median on diversity and engagement.
How you can create diverse leadership teams
Tackling diversity and inclusion efforts cannot be just given to an ERG or Head of D&I to roll out unconscious bias training. It must be led and owned by Senior Leadership with the senior leadership team showing real commitment to making a change.
Here are some things you can do to improve representation at senior leadership level:
- No tick box exercises: allocate resources and budget
Though this is not a new topic, recent world events have again brought the daily struggles of minorities to the forefront - including in the workplace. With the killing of George Floyd, there has been a spike in diversity and inclusion roles within organisations who have found budget to navigate sudden diversity and inclusion concerns.
However, as Forbes reported in the summer of 2020, it had become “glaringly evident that not enough was being done to ensure companies were tackling systemic inequities and racism”. One highlight of this was the calling out of a number of corporations for the lack of harmony between words and actions, many of whom failed to make an appropriate acknowledgement of the Black Lives Matter movement until public outcry and shaming.
Much of the criticism for large firms during this time was around the nature of their statements, often seen as PR stunts, with people all over the world asking how genuine their desire for change is - especially if some of these businesses have more posts about people of colour than the number that they employ.
- Consider the makeup of boards, senior teams, and organisations as a whole
People are now looking at the workforce makeup before engaging with an organisation. It’s a known fact that whilst many businesses were fast to adopt the #BLM hashtag, they fail to show the same enthusiasm in their boardrooms and senior positions. The lesson here is, if you want to attract a more diverse pipeline of talent, whether that be at the top level or at entry level, own up to the diversity within your own organisations and show commitment through your internal actions as this will play a part in attracting a wider range of talent. As Sharon Chuter says, #PullUpOrShutup.
- Think about what you’re actively doing to help the cause
Are you an organisation that’s happy with just posting about these issues, or are you actively donating to causes that are pushing for change? Consumers and the public are increasingly watching for those organisations who ‘rise to the occasion’ by donating large amounts of money, uplifting anti-racist resources, or amplifying calls to action. You are more likely to attract a wider range of talent if you are actively fighting for causes they believe in.
- Understand what your company is investing in
A Korn Ferry report on B-Corporations (businesses who mix purpose and profit, investing in initiatives with positive social, environmental and community outcomes) showed that companies who adopt this philosophy saw their sales increase at a rate 4x higher than that of competitors between 2011 and 2015.
- Look at your general track record in the area of diversity and inclusion
As L’Oreal found out the hard way that people are not naive, after receiving criticism for an anti-racism post on Instagram - due to their decision to fire transgender and black model Munroe Bergdorf in 2017 after her criticism of the white nationalist protests in Charlottesville.
People are now taking into account more of what you do and less of what you say. If the two do not match up they will punish you by boycotting products and services - as Uber found out in 2017, when 200,000 accounts were deleted and rival Lyft surpassed app downloads in a matter of days, after the revelation Uber had profited from a protest against President Donald Trump’s then-ban on entry from citizens from a number of Muslim majority countries.
- Look for ways to remove systemic bias
It’s important to recognise that systemic bias is present in most of the systems around us, which are designed to promote certain people and hold back others. However, it becomes increasingly difficult to remove if the people in power typically represent one demographic. These are the people who are responsible for designing systems, making top level decisions and driving workplace culture. The main way to remove this is to actively train and promote a wide range of talent within the organisation as a message to those in the talent pipeline.
The problem is greater than the removal of systemic bias, and ultimately comes down to education and our attitudes towards people that do not possess the same characteristics as us. However, by the time people have reached the workplace, it’s too late to act on much of that - but the removal of systemic bias through greater representation and diversity at the leadership level is a step in the right direction.
The actions and considerations listed above all work towards a more representative and diverse workforce where we are able to consider the needs, requirements and perspectives of all in our society, not just a majority group.