DIVERSITYA ten minute guide for the busy executive

T H E L I T T L E G R E E N B O O K S E R I E S

Foreword

If you’re not already thinking about how to increase diversity in your top team, you should be. Some of the world’s most successful organisations know that teams from different backgrounds and perspectives are sharper and more innovative, and perform better for their clients than teams who look, think and feel the same. And rather than producing flash-in-the-pan success, this type of mix is a recipe for sustainable improvements over the long term.

But if you, like us, spend most of your life running a business or heading up a large department, you probably don’t have much spare time to think about diversity. So we’ve produced this guide purely for busy executives who want to decipher why this matters to their organisation’s ability to grow and evolve, and who need to talk to other people about it, but perhaps aren’t sure how.

we wanted to do it in a way that doesn’t turn it into a chore. The book unfolds in ten simple chapters, each of which shouldn’t take much more than a minute to read – but behind each chapter there’s a wealth of information, with Green Park’s suggestions for further reading at the end.

Failure to capture talent from the widest possible pool could cost you dearly. There is a myth of lack of talent; nothing could be further from the truth. There’s no shortage of high-calibre candidates from under-represented groups, but sourcing them often requires the focus, market intelligence and reach that only an expert executive search firm can provide.

With this is mind, we’ve created Green Park Diversity Analytics, chaired by Trevor Phillips, a research and advisory body, which uses unique quantitative modelling to analyse the executive labour market by specific dimensions of diversity. Our methodology can help us to identify gaps and source the best candidates for your team, bringing results that are quicker, less intrusive and more accurate than anything currently in the diversity field.

We hope you find this guide helpful.

Raj Tulsiani Trevor Phillips OBE

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ONE cOmPElliNG rEASON TO AcT NOW

While every organisation’s route to excellence is unique, there is one universal reason why a more diverse mix of equally capable senior managers matters to every business and organisation right now:

1 Diverse executive teams deliver a competitive edge

McKinsey found, in a survey of listed UK, European and US companies, that firms with diverse executive boards delivered 53 per cent higher returns on equity during the volatile period of 2008 to 2010, with earnings before interest and tax on average 14 per cent higher than those of the least diverse.1

Even the UK government and Parliament agree. The much misquoted 2011 Lord Davies review of women in boardrooms2 presents a wealth of research showing that gender-balanced boards perform better on a range of outcomes, whether managing risk more effectively3 or achieving more robust stock market growth.4

Following Lord Davies’s recommendations, UK company law now requires listed firms to publish their diversity figures regularly, to set out their diversity policies and to measure their progress in reaching those objectives.

We’d like to tell you why we think there’s a striking link between greater diversity and strong performance.

But first, let us explain what we mean by ‘diverse’.

1 ‘Is There a Pay Off from Top Team Diversity?’ by T Barta, M Kleiner and T Neuman, McKinsey Quarterly, April 2012.

2 Women on Boards. Lord Davies’s independent review. Department for Business, Innovation and Skills, February 2011

3 ‘Companies with a better track record of promoting women deliver superior investment performance,’ by M Bhogita, New Model Advisor, 2011

4 �Director�Characteristics,�Gender�Balance�and�Insolvency�Risk:�An�Empirical�Study, by N Wilson and A Altanler, University of Leeds, May 2009.

“ Firms with diverse executive boards delivered 53 per cent higher returns on equity during the volatile period of 2008 to 2010”

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Two dImensIons oF dIversITy

’Diversity’ in any organisation means hiring, promoting and valuing people from different backgrounds and with a wide range of experiences. Organisations are smartest when they incorporate fresh perspectives and different ways of thinking. At Green Park, we call this ‘cognitive diversity’, and it has two dimensions: inherent and acquired:

1 Inherent diversity

This is aligned with the traditional meaning of ‘diversity’ in the workplace: the range of differences that people are born with, or are associated with, such as gender, ethno-cultural origin or age, or one of the protected characteristics under UK equality law, as shown in the table below.

2 Acquired diversity.5

This means differences in how people think and behave as a result of life-changing experiences, knowledge and skills. Acquired diversity enhances the quality of collective decision-making.

InherenT dIversITy AcquirED DivErSiTy

Age Education

disability Foreign languages

Gender living or working abroad

race Experience of business failure

religion or belief cross-functional leadership

Sexual orientation Start-up expertise

Transgender status Socio-economic background

Often the best business opportunity arises when these two dimensions of cognitive diversity work and are managed together. This is when organisations can really start to outwit their competitors.

5 The term ‘acquired diversity’ was coined by the Center for Talent Innovation

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Three STrEAmS Of TAlENT

As organisations increasingly understand the benefits of being more diverse, the competition to find the right people – who, in some sectors, are like gold dust – is becoming more intense.

So we’re introducing a new idea.

Green Park Diversity Analytics

Through Green Park Diversity Analytics, we’re building a precise quantitative picture of the executive labour market by ethno-cultural background and gender. Over time we’ll be adding new elements of diversity to this analysis for particular clients.

With our methodology we can locate the industrial sectors and functions where there are diversity-rich clusters of talent; and we can use the information to provide you with smart, evidence-based and benchmarked recruitment solutions.

Our first analysis looks at the FTSE 100. The top-line results reveal astonishingly low levels of boardroom diversity. Across the top three roles in each firm – Chairman, CEO and CFO – there is a mean of just 5 per cent women and 3.5 per cent ethno-cultural minorities. Looking at the Global and Operating Boards – what we might call the top 20 in each organisation – women comprise just 19.8 per cent and ethno-cultural minorities a mere 5.1 per cent.

Just over half of all FTSE 100 Global and Operating Boards are entirely White, and three are currently all male. Our data also shows that there is greater gender and origin diversity among non-executive directors than among executive directors. Indeed, when you take out the NEDs the percentage of all-White Boards rises to 63 per cent.

We’ve drilled down into the data by sector. We know, for example, that Utilities is the most gender-diverse sector, but the least ethnically diverse. Meanwhile, sectors that score highly on ethno-cultural diversity, such as Banking and Finance and Telecoms, perform less well on gender diversity. The complex picture offered

“ We’re building a precise quantitative picture of the executive labour market by ethno-cultural background and gender”

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x-axis

G-axis

y-axis

by this sector-specific analysis offers great opportunities for us to identify where, across all sectors, we can find strong leaders who can add greater diversity to your organisation and who fit exactly with your business needs.

Three streams of talent

Traditionally, there are two talent pipelines, which for the sake of argument we call the y and x axes.

1 The y axis: people moving up inside your organisation.

2 The x axis: people coming from an external organisation operating in your sector.

To these two streams, we, Green Park, add a third:

3 The G-axis: the stream of talent from outside your sector.

Some of the best hires are those that use the perspectives from other sectors to invigorate company strategy. Take a look at the Angela Ahrendts, Chief Executive of

Burberry, who will soon be taking her fashion retail expertise to Apple. Or Tidjane Thiam, who after a career in politics in Côte d’Ivoire joined the insurance world, and in 2009 became Chief Executive of Prudential – the first black person to lead a FTSE 100 company.

“ Some of the best hires are those that use perspectives from other sectors to invigorate company strategy”

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fOur cASE STuDiES WE ADmirE

1 B&Q

When B&Q conducted consumer research in the 1980s, the results revealed that their customers wanted to be served by someone older than themselves who could offer advice based on a lifetime of personal DIY experience. So B&Q imple-mented a radical decision to use a store in Macclesfield as a test site employing only people over the age of 50.

The results were staggering. In under a year6, Macclesfield was 18 per cent more profitable than the average of five comparison stores, and significantly outperformed these stores on sales, customer satisfaction, loyalty and staff turnover. Today, over a quarter of B&Q employees are over 50. The company operates without a default retirement age, and has led the way in mentoring and training.

2 Standard Chartered India

In 2007, Standard Chartered India’s head of branch banking, Rajashree Nambiar, discovered through customer surveys that the bank’s female clients were unhappy with the service they were receiving in what they perceived to be a very male-oriented bank. So she made a business case for a dramatic change to two branches in Kolkata and New Delhi.

Nambiar put in place an entirely female workforce. She tailored the form and content of banking advice to women’s needs as entrepreneurs, employees, family supporters and consumers. It led to impressive returns. In 2009–10, the Kolkata and New Delhi all-women’s branches drove net sales up by 127 per cent and 75 per cent respectively, compared with an average of just 48 per cent among its 90-plus Indian branches.7 The Financial Times recently reported that India is the best place to be a female banker.8

6 ‘Cost and Benefits of Hiring Older Workers: A Case Study of B&Q’,�International�Journal�of�Manpower, Vol. 12 No. 8, 1991, pp. 5–17

7 Looking�for�Innovation�in�All�the�Wrong�Places:�Who�Consistently�Drives�Innovation�in�Corporate�America?, by S Hewlett, M Marshall, L Sherbin with T Gonsalves, Center for Talent Innovation, September 2013

8 ‘Indian Banks lead the world on gender equality’, Financial Times, 2 January 2014.

“ The diversity of older workers brought a depth of experience that delivered tangible business results.”

– Kay Allen, independent consultant and former Head of Diversity at B&Q BSkyB and Royal Mail Group

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3 Morrisons

Morrisons was one of the first major businesses to respond to the 2011 Lord Davies review into women on boards, which set a 25 per cent target of women on FTSE 100 boards by 2015.

This is particularly relevant to the food retail sector: 70 per cent of supermarket customers are women, and female shoppers led con-sumer issues like healthier ready-meals and fair trade; but supermarkets are a notoriously male-dominated industry. Morrisons has com-mitted to more than double the number of women in senior positions and has asked its big suppliers to pledge to employ more women in senior roles.

4 Cisco

In 2007, Cisco decided to harness the power of cognitive diversity by launching its internal talent incubator, the Action Learning Forum, which brings 60 rising stars within the company – from all functions of its business, and with a good blend of age, gender and geography – to a rigorous 16-week programme.

The Forum has generated some heavyweight ideas, including SmartGrid, which streamlines energy grids and is projected to bring in $10 billion of revenue over the next five years. It has become a hotbed of bankable innovation and cost-saving initi-atives, as well as an effective training vehicle for talented, inclusive leaders.9 10

9 Looking�for�Innovation�in�All�the�Wrong�Places:�Who�Consistently�Drives�Innovation�in�Corporate�America? by S Hewlett et al., Center for Talent Innovation, September 2013

10 How�Cisco�Created�Their�Own�Talent�Incubator, by Sylvia Ann Hewlett, Harvard Business Review blog, 20 October 2009

“ Its simple when you think about it – a diverse leadership team produces better answers to complex issues, and that’s what business today is all about.”

– Norman Pickavance, former Group HR Director and Director of Communications, Morrisons plc.

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FIve BENEfiTS Of A DivErSE EXEcuTivE TEAm

In chapter one, we said that we’d like to tell you why we think diverse executive boards deliver a competitive edge.

1 Broader perspective

Strategic oversight is better when there are more angles of vision. Evidence shows that female executives tend to sit on monitoring committees and diverse boards have a greater propensity to hold chief executives to account for poor stock price performance.11 People with experience of business in another country are more likely to understand the nuances and risks attached to particular international markets.

The key to this broad perspective is the right mix of talent at the top table – the mix that meets the unique demands on your firm or organisation. These diverse teams can be more difficult to compose and manage, but they can also drive significant returns in an increasingly competitive environment.

2 Serial Innovation

The more varied the thinkers, the more connections are made, fuelling innovation. According to the Center for Talent Innovation, individuals in diversity-rich organisations are 75 % more likely to have a marketable idea implemented than those in homogeneous firms.12 As Steve Jobs said:

A�lot�of�people�in�our�industry�haven’t�had�very�diverse�experiences�…�The�broader�one’s�understanding�of�the�human�experience,�the�better�design�we�will�have.�

Dr Scott E Page demonstrated that when it comes to group problem-solving, diversity actually trumps ability. Teams that embody a wide range of techniques, perspectives and training can see ‘further’ and light upon more effective solutions than homogeneous groups - even when those more uniform groups are made up of the brightest and the best.13

11 ‘Women in the boardroom and their impact on governance and performance’, by R Adams and D Ferreira, Journal�of�Financial�Economics 94, 2009

12 �Looking�for�Innovation�in�All�the�Wrong�Places:�Who�Consistently�Drives�Innovation�in�Corporate�America?, by S Hewlett et al., Center for Talent Innovation, September 2013

13 �The�Difference:�How�the�Power�of�Diversity�Creates�Better�Groups,�Firms,�Schools�and�Societies, by Scott E Page, Princeton University Press, 2007

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3 Better client understanding

Leaders who bring greater cognitive diversity to your team tend to ‘embrace disruption’14 and may be more tempted to ask the difficult questions that get to the heart of the customer’s experience. And in today’s era of rapid change, people who represent your broad client base can help to furnish a deeper insight into customer behaviour. A team where one member matches the ethnicity of the client is more than twice as likely to understand that client as a team lacking such input.15

4 Reach

Employees in companies with a good blend of inherent and ‘acquired’ diversity are 70 per cent more likely to see their organisation capture a new market than those in homogeneous firms.16 As globalisation continues apace, we must value and use the management talent to which we have global access, and quickly.

5 Magnet for talent

Time and again, companies that show they value all paths to excellence, foster an inclusive culture and reward on merit come out in surveys as the most desirable employers both for talented new recruits and senior executives at the top of their game. This type of environment exerts a magnetic pull on talent.

Research shows that leaders who themselves know what it is like to be different from the norm tend to elicit people’s unique contributions, share credit for success and back novel ideas through to implementation – delivering the most benefit to customers and shareholders.17

14 Looking�for�Innovation�in�All�the�Wrong�Places:�Who�Consistently�Drives�Innovation�in�Corporate�America?, by S Hewlett et al., Center for Talent Innovation, September 2013

15 Ibid16 Ibid.17 Ibid.

“ A team where one member matches the ethnicity of the client is more than twice as likely to understand that client as a team lacking such input”

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sIX SiGNS Of SuccESS

1 Clear vision Do you have an executive talent plan that makes diversity a strategic priority, linked to performance targets and business goals? Has it been articulated within the boardroom, to shareholders and staff? If so, you’ve designed the first building block of success. When people three levels down from the board can articulate the strategy, you can achieve the vision.

2 Clear visibility Is there a C-suite executive leading on diversity? Is this a core part of your brand? If you are making progress, it will be clear both to staff and clients that collective difference is integral to who you are and what you do.

3 Good representation, hired on merit Ask yourself: who was in the room at your last major strategic decision? If the group included more than a third of people who weren’t either white, male or university-educated, then you’re probably further along the right road than your competitors.

4 Smart data If you know the demographic make-up of your workforce – if you have some data on employees’ ages, gender, ethno-cultural background, disability, and sexual orientation – then you’re already ahead of the game. If it is measured, it can be improved. The smartest data will assess a company’s return on investment in diversity, and it will crunch the numbers in terms of diversity’s impact on sales, profitability and staff turnover.

5 Deep insight Big Data dominates analytics, but informal networks of people can give you a better qualitative view of your customer. While data provides the facts, people provide the empathy.

6 Innovation If the broad mix of perspectives, skills and talents in your team is working together successfully, there should be a noticeable increase in the number of new viable and marketable ideas coming through.

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seven cHEcKS, WHicH miGHT rEvEAl A PrOBlEm

1 Check your diary for the past week If you’re a busy executive, your most precious commodity is your time. Consider your substantive meetings over the past week (and a chat in the lift doesn’t count; nor does your PA). How many have been with people who aren’t the same gender, race or faith as you? And have any of them been disabled? If the answer is ‘hardly any’ it’s worth asking yourself why. Is it just me? Or is it where I work?

2 Look at the face your company shows the world Your website is what people who don’t know you will judge you by. What do the pictures in the ‘Our People’ section say? If there’s nobody who is not white, and all the women are in HR, then it won’t be hard to guess what people are thinking. Now take a look at the websites of your closest competitors. If they are all the same, you guys need to talk. If they’re more diverse than you, it’s time to catch up.

3 Imagine that Michelle Obama wants to visit your company Think of the PR coup and the sales opportunities! But what do you say when her aides mention that the President’s wife has a particular desire to promote the virtues of the diverse workplace? Do you have any data on the company’s diversity? If not, expect a phone call tomorrow saying that Mrs Obama has found another photo-opportunity – with your biggest rivals.

4 Think of the shareholders As of 2014, listed companies are expected to report their diversity numbers regularly and in public.18 Some shareholders are identifying diversity performance as an area of risk. Are you ready to answer their questions at the AGM? If you lack employee data on age, gender, ethno-cultural background, disability, and sexual orientation, you lack the evidence to identify demographic gaps within teams. You are also unable to quantify your return on investment in diversity.

18 2006 Companies Act: (Strategic Report and Directors’ Report) Regulations 2013

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5 Check the C-suite to see if anybody is accountable for diversity If not, you’re probably failing without knowing it. Don’t underestimate the impact a visible leader can have on your organisation. When this agenda lies solely in the hands of a Diversity Manager you give a very clear message that diversity is less important, say, than an IT placement. Managers who see that the board has made a serious commitment to diversity are more likely to disseminate that focus throughout the organisation. 19

6 Look at your sales and marketing strategy document What matters most to your company is serving your customers and clients. If your sales and marketing strategy doesn’t say much about diversity, and you don’t have a plan for winning over people who aren’t your traditional markets, get ready for a slow and lingering corporate decline.

7 Watch out for tokenism So you now have an Asian woman on your board, which was previously all White and male? A step in the right direction, perhaps, but not far enough. Tokenism may not amount to complete exclusion but neither will it lead to substantive, sustained change. It takes 30 per cent or more women at a senior level to make a real difference, as they will no longer be perceived as female directors, but simply as directors, and so will have to fight less to be heard.20 Research shows that a critical mass of around a fifth of leaders from ethno-cultural minorities is necessary for new ideas to surface.21

19 Diversity Briefing, Questions for Directors to Ask,’ by F Macfarlane, D Sinhuber and T Khan, The Canadian Institute of Chartered Accountants, 2010.

20 Women�Matter:�Gender�diversity,�a�corporate�performance�driver, McKinsey & Company, October 2007.21 Examining�the�Link�Between�Diversity�and�Firm�Performance:�The�Effects�of�Diversity�Reputation�and�

Leader�Racial�Diversity, by Q Roberson and H J Pack, Cornell University Center for Advanced Human Resource Studies, Working Paper Series, April 2006.

“ Don’t underestimate the impact a visible leader can have on your organisation”

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EiGHT WAyS TO KicK-STArT yOur DivErSiTy PlAN

1 Sack your head of diversity if they can’t give your shareholders clear answers to the following three questions:

• Why does diversity matter to our firm?

• Where should we be in three years’ time, how much of the diverse talent we need can we grow ourselves, and how much do we need to buy in?

• What in our organisation needs to change in order to support our diversity plan?

2 Make your CEO or CFO accountable for diversity This kind of visibility and leadership shows diversity is a business priority and not just an HR priority. This person is who your Diversity Manager should report to. It means they’ll be heard, and it means they’ll have to justify numbers – such as degrees of inherent and acquired diversity at the top three levels of the workforce – as well as provide details on promotions, mentoring and exit interviews.

3 Show through remuneration how important this is to you If your Head of Diversity is paid less than a Head of HR or Financial Controller, then it isn’t strategically important to you.

4 Link diversity goals to performance metrics for all senior executives. This will add urgency to your diversity strategy, increase motivation towards meeting specific goals, and encourage a cascade effect to employees at other levels within your organisation.

5 Realign your recruitment procedures A traditional focus on CV, prestigious education and branded job history can incur an unconscious bias that locks out great candidates. Anything that stops the best people from getting the best opportunity effectively harms your organisation. Focus on personal capability and real evidence of delivery. Demand that your executive search firm does the same.

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6 Don’t just focus on women As Sir Roger Carr, Chairman designate of BAE Systems, said in 2013, ‘Women on boards is not the only issue, we have to be broader.’22 Achieving a better gender balance matters, especially in executive roles, but there are other untapped streams of diversity that are relevant to your business.

7 Attend networking events Sending a junior is worse for your brand than not going at all.

8 Don’t think this is going to be easy. Get some help This isn’t going to be a walk in the park. A deep strategic commitment to diversity involves organisational change that can take years to achieve. But the way is paved in small, incremental steps, and developing an effective blend of backgrounds, talents and perspectives in your executive team will add significant value to your organisation.

 

22 ‘Carr widens boards diversity debate,’ The�Telegraph, 5 October 2013

“ Anything that stops the best people from getting the best opportunity effectively harms your organisation”

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nIne fiGurES THAT Will STArTlE yOu

1 65 companies in the FTSE 100 – in effect, two out of every three companies – have an all-White executive leadership. (Green Park Diversity Analytics)

2 Fewer than half of all Londoners now describe themselves as White British. The same is true of Leicester, Luton and Slough. (Office for National Statistics)

3 The United States is also reaching a demographic tipping point. Black, Hispanic, Asian and mixed-race births comprised over half of new arrivals in 2011. (US Census Bureau)

4 Nigeria is projected to become the world’s fourth most populous country by 2050. (Population Reference Bureau)

5 8 per cent of Black students are at Russell Group universities, compared with just under a quarter of White students. (Equality and Human Rights Commission)

6 Only 17 per cent of disabled people were born with disabilities. The majority acquire their disability in the course of their working lives. (Papworth Trust)

7 Women represent a growth market more than twice as big as China and India combined. (Harvard Business Review)

8 Across the UK in 2012, the full-time gender pay gap in annual earnings was just under 20 per cent. The gap was widest in the financial and insurance sectors. Across all sectors, pay discrepancies were most pronounced among managers, directors and senior officials. (Equality and Human Rights Commission)

9 Britons think that youth ends at the age of 35; for Greeks, the age is 52. (European Social Survey)

“ Two out of every three FTSE 100 companies have an all-White executive leadership”

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Ten SuGGESTiONS fOr furTHEr rEADiNG

1 Green Park’s Diversity�Analytics Newsletters, 2014

2 Innovation,�Diversity�and�Market�Growth, Center for Talent Innovation, 2013

3 Special Report on Executive Diversity,�Financial�Times,�2013

4 ‘Women Matter: Making the breakthrough’, McKinsey Quarterly, 2012

5 ‘Is There a Pay Off from Top Team Diversity?’ McKinsey Quarterly, 2012

6 Women on Boards, Lord Davies’ independent review. Department for Business, Innovation and Skills, 2011

7 Beyond�Performance:�How�Great�Organizations�Build�Ultimate�Competitive�Advantage, by Scott Keller and Colin Price, John Wiley & Sons, 2011

8 The�War�for�Diverse�Talent, Green Park Diverse Leaders, 2010

9 How Fair is Britain? Equality and Human Rights Commission, 2010

10 The�Difference:�How�the�Power�of�Diversity�Creates�Better�Groups,�Firms,�Schools�and�Societies, by Scott E Page, Princeton University Press, 2007

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Green Park is a multi-award winning supplier of executive search, interim manage-ment and business advisory solutions, operating from the UK across 52 countries. Green Park has consistently featured in the top four of the HOT 100 industry league tables, and in 2013 was rated in 4th place for interim management, and 11th for executive search, in the report on the top 250 major recruitment companies by Recruitment International. The accolade we take the most pride in is that, during our seven years of continuous growth, the customer satisfaction rate among our top 300 clients has never fallen below 97 per cent.

At Green Park we are all passionate advocates of the power of cognitive diversity as a source of competitive advantage. We are setting a standard for innovation and commitment to consistently attract diverse groups of appointable candidates benchmarked against the usual suspects. Green Park has proactively established Diverse leaders, a global diversity network offering strategic diversity services to a broad range of blue chip and SME organisations across the private and public sectors. Diverse Leaders helps our clients to increase representation across the diversity strands at senior level, providing long-term ‘build’ and ‘buy’ diversity strategies, and solutions that take advantage of the power of collective difference in building sustainable and attractive employer brands.

In 2012 Green Park became founding a member of the National Equality Standard – the only recruitment firm on the founding board.

Green Park has recently founded Green Park Diversity Analytics, a research and advisory body, chaired by Trevor Phillips, that uses unique quantitative modelling to analyse the executive labour market by specific dimensions of diversity. It is the latest addition to Green Park’s range of resources and services, designed in partnership with our valued customers.

About Green Park

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