Embedding Diversity and inclusion in Organisations

“Inclusive decision-making activates diversity to improve innovation, engagement, and performance across the enterprise. It gives outstanding companies the opportunity to make quantum leaps ahead of their competition”.

Defining Diversity.

Diversity is simply about the range of individual and group differences that occupy organisational cultures.

While many in the corporate world often reduce debates and actions on diversity to gender or ethnicity, our view is that while gender and ethnic diversity are indeed significant and pressing priorities for many business sectors, they are by no means the only factors that should be considered within the current debate.

In order to create high performing teams and to reap the benefits of diverse teams, organisations should adopt a holistic perspective.

Here we adopt the principle of “two-dimensional diversity”, as identified by the Center for Talent Innovation. Two-dimensional diversity includes:

Inherent diversity – Includes factors such as gender, ethnicity, culture, sexual orientation and age.
Acquired diversity – Includes factors such as political beliefs, education, global experience and language skills.

Other factors that should be considered within the mix of both inherent diversity and acquired diversity include disability, someone’s gender identity – including trans-gender- as well as social background and work experience.

It’s also important to broaden out the definition to include ‘diversity of thinking’, as championed by Scott E. Page. Page argues that diversity of thinking is a key ingredient of business creativity, problem-solving and innovation.

Within this definition we can include an individual’s work preferences and the extent to which teams comprise of a mix of introverts and extroverts who influence decision-making. In a global market place, decoding how people think when operating across cultures is critical, as explored by Erin Meyer in her influential book The Culture Map.

Defining Inclusion

Two-dimensional diversity is required to produce innovation and creativity. However, two-dimensional diversity alone will not produce business creativity, innovation and financial reward.

It is only when businesses align organisational diversity with cultures of inclusion that we see business outcomes. We can define inclusion as the extent to which organisations respect, value and leverage the ideas and insights from diverse team members.

Deloitte identifies inclusion as four related yet distinctive elements of a work place culture:

Fairness and respect: Diverse employees work in a non-discriminatory work culture
Valued and belonging: Diverse employees feel valued and a sense of connection to the whole group
Safe and open: Diverse employees are able to speak up without fear of retaliation
Empowering and growing: Enabling diverse employees to do ones best at work

Work by VERCIDA Consulting has highlighted the importance of leadership in creating inclusive work cultures. They have identified six key traits of inclusive leaders:

Inspire: leaders who take every opportunity to articulate the business performance benefits of diverse and inclusive teams
Integrity: leaders who are open about their weaknesses as well as strengths and build team trust by speaking up when things are not fair
Insight: leaders who are keen to understand their own biases and to learn about the experiences of diverse team members
Inquisitive: leaders who pay attention to the unwritten rule and patterns of behaviours within their teams
Individuate: leaders who encourage connectivity and belonging by championing team events that bring people together
Invest: leaders who use KPIs to measure progress on diversity and who invest in team members through sponsorship and fair work allocation.

Diversity, Inclusive decision-making and business rewards

Understanding the key challenges your business is facing in relation to inclusion is a useful starting point. But businesses can be complex organisms, particularly at the senior level. Therefore, if you have decided that improving inclusion is a priority, it’s important to know how to build the commercial case for doing so, to ensure it is appropriately resourced and is given prominence on the business agenda.

In recent years, a growing body of research has emerged which stresses the business case for diverse and inclusive teams. Research point to five inter-related elements:

Team composition
Diversity of thought
Driving innovation through diversity and inclusion
Diversity, inclusion and high performing teams
Diversity and business profit

Team Composition

When teams are populated by - or dominated by - individuals who look, sound and think the same they are more likely to suffer from Groupthink, which narrows a decision-makers’ field of vision and reduces an organisation’s ability to tap into the constantly changing needs and wants of their diverse customers and clients.

Groupthink restricts cross-cultural insights that are essential when developing products and services within a global market-place.

In a 2017 paper by the global consulting firm McKinsey and Co, they identified team composition as the starting point for creating high performing teams, of which diversity is a central element.

The paper suggests that small teams of senior people – few than six people – may be particularly vulnerable to poorer decision-making, because a lack of diversity leads to the team suffering from a lack of bandwidth in thinking.

This research is supported by work from the cloud-based decision-making platform Cloverpop, which has shown how diversity in teams, together with inclusive decision-making, significantly increases business performance.

There are a number of principles which underline their research. Firstly, they have shown how teams of individual decision-makers make better business decisions than individuals about 66% of the time.

This is perhaps not surprising and aligns to research carried out by James Surowieck and shared within his influential work on the Wisdom of Crowds, in which he argues that groups of individuals make smarter decisions than individuals and that diversity of opinion amongst groups of individuals results in better decision-making.

According to Cloverpop, teams of people are better at:

Identifying new and better choices that were not previously considered, resulting in a better decision.
Bringing more perspectives, experience, and information, which helps to reduce cognitive biases and improves accountability.
Making smarter decisions as the diversity of the team increases

Whilst many research studies focus solely on the relationship between gender diversity and business outcomes, Cloverpop were able to measure decision-making outcomes using a wider range of diversity characteristics, including age and geographical location.

Diversity of thought

Further research by Deloitte University Press stresses three key benefits to organizational performance of diversity of thought:

It helps guard against groupthink and expert overconfidence: Diversity of thought can help organisations make better decisions and complete tasks more successfully because it triggers more careful and creative information processing than typically occurs in homogeneous groups.
It helps increase the scale of new insights: Generating a great idea quickly often requires connecting multiple tasks and ideas together in a new way. Technological advances are enabling new ways, such as crowdsourcing and gamification, to bring the diversity of human thinking to bear on challenging problems.
It helps organisations identify the right employees who can best tackle their most pressing problems: Advances in neuroscience mean that matching people to specific jobs based on more rigorous cognitive analysis is within reach. Organisations that can operationalise faster ideation can begin to purposely align individuals to certain teams and jobs simply because of the way they think.

Driving innovation through diversity and inclusion

A 2017 study by Boston Consulting Group (BCG) – The Mix that Matters: Innovation Through Diversity - found a positive relationship between diversity and business innovation.

Measuring outcomes from 171 companies, the study found a statistically significant relationship between management diversity and business innovation, meaning that companies with higher levels of diversity get more revenue from new products and services.

Specifically, the research found:

The innovation boost isn’t limited to a single type of diversity. The presence of managers who are female or from other countries, industries, or companies can cause an increase in innovation.
Management diversity seems to have a particularly positive effect on innovation at complex companies—those that have multiple product lines or that operate in multiple industry segments. Diversity’s impact also increases with company size.
At companies with diverse management teams, openness to contributions from lower-level workers and an environment in which employees feel free to speak their minds are crucial in fostering innovation.

Diversity, inclusion and high performing teams

Following the success of Google’s Project Oxygen, where its People Analytics team studied the key dynamics of ‘what makes a great manager’, Google launched Project Aristotle, a two-year study on team performance. Google wanted to research the key factors which create and sustain high performing teams.

The overarching factor of a high performing team is the level of ‘psychological safety’ that exists between team members. Psychological safety is defined as the extent to which colleagues feel able to take risks in the interest of the business without fear of judgement from teammates.

Psychological safety, and the positive impact on team performance, is closely aligned to a sense of belonging from diverse individuals within teams. As stressed by Alex Pentand from MIT, the number one predictor of team performance – more than skills and intelligence – is what he calls ‘belonging cues’; equal air time in team meetings, eye contact between colleagues and non-hierarchal communication.

Diversity and business profit

A study by the global not-for-profit Catalyst found that companies with the most women board directors outperformed those with the least on return on sales (ROS) by 16% and return on invested capital (ROIC) by 26%.

Researchers at Pepperdine University found that organisations on Fortune’s list of ‘the 100 Most Desirable MBA Employers for Women’ outperformed the industry medians on numerous financial measures, including:

Profits as a percentage of revenue: 55% of the companies were higher than the median, 36% were lower, and 11% were tied.
Profits as a percentage of assets: 50% were higher than the median, 28% were lower, and 23% were tied

The Center for Talent Innovation examined 40 business case studies and found that publicly traded companies with two-dimensional diversity were:

45 per cent more likely than those without to have expanded market share in the past year
70 per cent more likely to have captured a new market
When teams had one or more members who represented a target end-user, the entire team was as much as 158 per cent more likely to understand that target end-user and innovate accordingly

Finally, research from McKinsey and Co in 2018 found that companies in the top-quartile for gender diversity on executive teams are:

21% more likely to outperform their national industry median on EBIT margin and 27% more likely to outperform on EP margin
In relation to culturally diverse executive teams, these were 33% more likely to outperform their peers on profitability.

"The unconscious brain uses social categories to make implicit, or unconscious judgements about people who are similar to us and people who are different from us."

Avoiding unconscious bias in organisational decision-making

Work by behavioural psychologists such as Daniel Kahneman has re-shaped our understanding of human behaviour and decision-making. Rather than being rational and objective, human behaviour and decision-making is hampered by a set of cognitive biases.

For Kahneman, human thinking depend on a dual processing system for thinking and decision-making, which he describes as System 1 and System 2 thinking.

System 1 (fast thinking) – is governed by emotion, intuition and impulse.
System 2 (slow thinking) – is partly designed to regulate the impulsive nature of System 1 and is governed by logic and deliberation.

Kahneman describes how human decision-making is governed by a complex process of pattern recognition, or what he calls ‘heuristics’. Harvard psychologists Mahzarin R. Banaji and Anthony G. Greenwald. have shown how these heuristics or, what they term ‘mind-bugs’, are formed through a natural tendency to place individuals into social categories.

These categories are often based on visual cues such as gender, cultural background, age, height or body size. We also categorise based on social background, job roles, religious identity or political affiliation. Once formed, social categories can influence our perceptions, attitudes, judgements, behaviours and decisions.

Implicit associations and bias decision-making

The unconscious brain uses social categories to make implicit, or unconscious judgements about people who are similar to us and people who are different from us. Critically, we are more likely to form positive associations towards people who look, sound and think like us. Unconscious bias plays out in five key areas at work:

Recruitment: We are simply more likely to hire people who are ‘like us’. This likeability factor changes from culture and culture.
Who we listen too: We are more likely to listen too, and value contributions from team members with whom we have some affinity
Work allocation: Managers are more likely to assign key projects to individuals within their teams who they have an unconscious affinity with.
Performance management: Managers are more likely to spend time informally discussing contributions to the team and will focus on development and future work plans. For these where there is little affinity, managers are more likely to question past performance.
Informal sponsorship: Managers are more like to informally coach, mentor and sponsor colleagues who think and work like them over colleagues who do not.

Types of biases

There are many types of cognitive and social biases which impact hiring and in work decision-making. The key ones include:

Affinity Bias: The tendency to hire people who are like us. Often called the ‘mini-me’ effect, affinity bias plays out when people are similar to us – culture, background, personality – or reminds us of someone we like. For example, hiring managers are more likely to hire a candidate who graduated from the same university as they did or a candidate who has worked in a sector they are familiar with, and have positive associations of.
Representative heuristic: A classic cognitive bias, this occurs when an individual is representative of (looks like, sounds like) the population they are being recruited or promoted into into. For example, if an organisation is promoting an individual into a senior manager role in a global manufacturing company that is dominated by white, tall, and middle-class men, the individual (if they are male, white, tall and middle-class) are likely to benefit from this particular bias. Those who are different – e.g., women, people of different cultural groups - will not have the same advantages.
Attribution error: The tendency to relate behaviours to personality rather than the situation the person might be in. For example, if a person is nervous in an interview, the interviewer may assume that the person is of a nervous disposition. The interviewer is more likely to do this if the candidate is unlike them, and less likely to do this if the person is similar to them. Hence attribution error is more likely to impact candidates who are different from us.
Double binds: The gender bias influences perceptions of gender roles and leadership. The types of attributes we ascribe to the ideal leader in most organisations are closely linked to perceivably positive male characteristics: decisive, assertive and independent. A number of research studies have shown that women who excel in traditional male domains may be viewed as competent, but when they demonstrate similar leadership traits, they are seen as less likeable to their male colleagues. In short, the types of behaviors that we often value in men such as self-confidence appears as arrogance in women.
Halo effect: This occurs when we find one attribute really attractive in a job candidate or in an employee, which then colours our view of the individual’s total skills and competencies. For example, if an employee has high analytic skills (if we value this) we may assume that they will put together a slick client presentation, when in fact, these are two separate skill sets.
Selective Perception: Often informed by in-group bias and affinity bias, this is a process whereby managers pay more attention to information from employees that fit their existing world views, whilst ignoring or disregarding information that challenges existing thoughts, values and beliefs. The outcome is that selective perception positively impacts employees who are similar to the manager, whilst negatively impacting an organisation’s stated ambition of creating inclusive work cultures.

Strategies for creating diversity and inclusion organisations

Attracting diverse candidates

Reviews job descriptions and person specs for bias language
Introduce neutral observers at the recruitment stage – their role is to call out bias in the process
Challenge recruitment companies - insist on a target at short-listing stage
Get the message out to the market - Develop a positive action campaign to hire more women – commit to x diverse hires per year (graduates, apprenticeships etc).
Set a target for diverse candidates at first stage interviews
Whenever possible ban all male interview panels
Review case studies and other material to ensure these are gender neutral
Use a standard scoring system and do aggregate scores before the de-briefing – mitigates conversations about ‘fit’

Retaining and engaging diverse employees

Ensure that work is allocated fairly between diverse groups – pay attention to the contract value and types of work
Flexible working – is this encouraged and applied consistently?
Consciously work toward balance in team meetings, project teams etc. Adopt the principle of Amplification
Gain insight into diverse thoughts through an anonymous D&I survey that is sharp and succinct
Build in some career fluidility – some groups may need to slow down or pause their careers at certain points, and then jump back into the fast track at a later stage
Review social activities to ensure that these appeal to diverse groups equality
Celebrate difference and start a dialogue on D&I – for example host a lunch and learn events and invite senior leaders from client organisations
Embed inclusion within management KPIs and include with 360 appraisals

Growing diverse talent

Building a succession plan with diversity diversity mind – talent spot and focus on early development
Review end of project and end of year evaluation scores. Look for possible bias within appraisals, performance management processes, and in talent review meetings
Review leadership assessment criteria to ensure it does not unwitting put women at a disadvantage – challenge established notions of what talent / partners looks / think / act like
Role models matter: Use role models to challenge traditional viewpoints E.g. those working flexible hours are less ambitious or motivated.
Building a strong bench / talent pipeline - Implement a sponsorship programme for early career and mid-level talent
Increase transparency in decision-making: Sharing information on inclusion at work increases accountability and is likely to affect behaviours
Looking for Executive members to capture more detailed D&I attributes of individual teams
What gets measured gets done – set ‘public targets’ for diverse groups progressing to leaderships

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VERCIDA Consulting

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