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Diversity and Inclusion

Diversity and Inclusion #GameChangers

Perspectives on an inclusive culture and its importance in transformation



Introduction

Inclusive cultures create more open and agile environments where diversity in its broadest definition—gender, ethnicity, sexual orientation, age, skill set, mindset and approach—is welcomed and is able to thrive. Today, diversity, with a clear emphasis on gender and ethnicity, is a critical and measurable agenda item in human capital practices globally; however, many organisations have yet to realise the significance of inclusion and treat it in the same dedicated and systematic way. ​

"We need to elevate this discussion beyond gender. Gender itself does not determine how people think. Simply having more female execs will not make the difference.”— Karen Witts

Businesses that have open, inclusive and nimble cultures, which embrace and enable diversity in all its forms, achieve improved commercial performance and are better at transforming themselves in highly disruptive environments. This is now more important than ever.

Academic and professional research, including our own, shows the positive results of executive diversity and the transformative commercial impact of inclusive organisational cultures. An analysis of RRA’s proprietary culture data from 61 public organisations has revealed significant correlations between inclusive cultures and financial performance (based on annual return on assets). McKinsey’s 2015 study “Diversity Matters” showed that gender and ethnically diverse companies were 15% and 35%, respectively, more likely to outperform the national industry median.

We interviewed a number of women sitting on executive committees and non-executive boards to understand their experience of inclusive cultures. We explored how inclusion contributed to both their personal success and the commercial success of the organisations. All of our interviewees stressed that the pace of change is higher and the predictability of the “shocks” lower than ever before. Given this background, having an inclusive and agile culture, which enables transformation at the speed needed, will allow organisations to survive and, in many cases, to thrive.

"Embracing diversity leads to unconstrained thinking, breaking down traditional ways of doing things and creating the ability to see problems and resolve them quickly.” —Cindy Rose

With thanks to our contributors:

Karen Witts
Group CFO, Kingfisher plc & NED, Imperial Brands plc
Annet Aris
Adjunct Professor, INSEAD & NED, ASR Nederland NV/ASML Holding NV/Thomas Cook Group plc/ProSiebenSat.1Media SE/Jungheinrich AG
Cindy Rose
CEO, Microsoft UK & NED, Informa plc
Rachel Empey
Chief Financial & Strategy Officer, Telefonica Deutschland & NED, Inchcape plc
Rima Qureshi
President, North America, Ericsson AB & NED, MasterCard Inc./Great-West Lifeco Inc.
Martina Merz
NED, Imerys SA/Deutsche Lufthansa AG/Bekaert SA/Volvo AB/SAF-HOLLAND SA
Heather Allen
Former Executive Vice President Category Development, Reckitt Benckiser Group plc
Mary Chan
Former President Global Connected Consumer and OnStar Service, General Motors Co. & NED, Dialog Semiconductor plc/SBA Communications Corp/Microelectronics Technology Inc.

The elements for success

 

Through these discussions, four clear areas of focus for the leadership of the organisation became clear. First was the importance of both top-down and bottom-up commitment as a way of driving sustainable cultural change. Next was the need to ensure that there is genuine aspiration to leadership roles and simultaneously clear and accessible paths to success. Third was that it is imperative to maintain an approach of merit over mandate when it comes to hiring and developing talent within an organisation. And finally was the need for equal participation of both the organisation in creating pathways to success and of the individuals within it to seize those opportunities.

Top Down & Bottom Up

Ownership from the top

Our research shows that inclusion and diversity initiatives need to be led from the top in order to succeed. Strong and genuine sponsorship from the board and the executive committee is essential to enable real change, as the way in which senior leaders engage on the topic of inclusion sets the tone for the organisation. The executives we spoke with consistently emphasised how important it is for leadership on the topic of inclusivity and diversity to be authentic and visible if it is to be effective.

“Any diverse group must remain true to themselves in order to be truly successful and happy. Their greatest asset is their point of differentiation.” —Martina Merz

Tone and measurement

Transforming successful businesses takes time and buy-in, particularly when the change required is “cultural” and is not being driven as a result of poor performance. When people do not see a problem, they are reluctant to exert themselves to try to fix it. If diversity and inclusion are aligned to the future success of the business and measured in a way that makes this link apparent, then it will be more difficult for this organisation to ignore the relevance. According to our panel, it is important that the “why” is articulated in a comprehensive way and that the answer is tied to commercial outcomes. It has to be about more than just the mandate, which is why the “business case for inclusion” is critical. The leadership of the organisation must clearly articulate the benefits of the change, but must also make sure that the success or failure of that change is measurable and tied to business performance.

“Role modelling work/life balance in a transparent and honest way is essential. When this is seen as possible, it also creates aspiration.” —Cindy Rose

A pervasive approach

CEOs and the wider leadership team have the influence and the mandate to set the agenda and to champion inclusion. However, inclusive behaviours need to be role modelled consistently throughout the organisation if they are to really take hold. A pervasive vision requires sponsorship and evangelism by leaders and individuals at all levels and across all demographics. Success relies on an organisation buying in and executing the vision from top to bottom.

“Do not underestimate how critical a positive sense of belonging is in driving long-term success."—Karen Witts

Key Questions for Leadership

  • Can the board articulate the value of inclusivity as both a business and a moral imperative?
  • Is the commitment visible across levels of management?
  • How does the board and executive team hold others accountable for proactive leadership, communication and evangelism on the topic of Diversity and Inclusion?

Aspirational Pathways

The aspiration gap

At the highest level, the pipeline of diverse executives coming through the ranks to be the next generation of CEOs and chairs is still limited. For example, women are present at executive board level in only 35 out of the US S&P 500 and in only 47 of the FTSE 350.

Progressing through the senior levels within organisations, the funnel of “diverse” talent clearly narrows and is under-represented in leadership teams today. Even in environments where there is diverse representation at the top table, cultures are not always inclusive. Those we interviewed referred to numerous examples where even diverse executives do not act as role models for the next generation or advocate for diverse perspectives. Instead, their behaviour conforms to the established leadership.

This combination of under-representation and conformity has negatively impacted aspiration to leadership roles and the pathways to reach them in their current form. They are frequently seen as unattractive and in some cases unattainable, as there is a perceived need to conform in order to succeed rather than to be authentic.

“The culture and the tone of an organisation are set by maybe 5–10 people right at the top. This small group has a huge impact."—Rachel Empey

Reversing the trend

Those we spoke with highlighted two key factors in reversing this trend: inspirational and accessible role models and the creation of clear, unbiased paths to success. While a CEO articulates a vision and sets the tone on inclusion, the most impactful role models are most often those within an individual’s reach. A pervasive vision requires sponsorship and evangelism by leaders and individuals throughout the organisation. It is important to ensure that progression does not depend on conformity or personal compromise and that leaders from all backgrounds feel comfortable enough to be authentic. This is critical to simultaneously creating aspirational and clear paths to success.

“The bearing of the chairman is very important in setting the tone for how diverse perspectives are acknowledged and respected. This attitude cascades down.” —Annette Aris

Bringing belonging into the discussion

Inclusion ensures that every person is able to participate and bring their “whole self” to work, to realise the potential of their personal contribution to an organization. Belonging is a powerful driver, it is a measure of the extent to which employees feel that they can be their true selves at work. Particularly within diverse groups it is critical to sustainable progression.

“The culture in our organisation was inclusive because the CEO was genuine in his desire to promote and empower diverse leaders."—Rima Qureshi

The focus should be on an individual’s delivering and being great at what they do, which in turn provides the confidence for authenticity. In inclusive environments, standing out in a positive way can be far more powerful than fitting in. Particularly in scenarios where change is required, differentiating factors positively helps create opportunity and demonstrate value.

“A combination of authentic leadership, evangelism and grassroots programs is essential."—Cindy Rose

Key Questions for Leadership
  • Can the board articulate the value of inclusivity as both a business and a moral imperative?
  • Is the commitment visible across levels of management?
  • How does the board and executive team hold others accountable for proactive leadership, communication and evangelism on the topic of Diversity and Inclusion?

Merit, not Mandate

A vote against the mandate

The leaders we spoke with actively avoid environments where inclusion and diversity are engaged exclusively to address mandated targets. Hiring and promoting diverse executives, when driven solely by meeting a quota, has the potential to alienate groups of people, exacerbate existing issues and cement prejudices rather than creating more diverse and inclusive environments.

It is much more effective in the long run to appoint an inclusive executive to a leadership role than to appoint or promote an executive with the sole motivation of being “inclusive”. While inclusion enables diversity, diversity alone does not necessarily create an inclusive culture. Organisations must simultaneously have an equal focus on creating a more diverse organisation and enabling diverse employees to succeed by way of an inclusive culture. According to the executives we spoke with, diversity and inclusion are most effective when they are seen as being interdependent and when both are valued for their commercial impact.

“First and foremost, people want and need to be valued based on their contribution.” —Rachel Empey

The business case for diversity and inclustion

According to our panel, businesses need to clearly articulate why inclusivity is important in terms of the positive impact it has on commercial outcomes. People are reluctant to exert themselves to try to fix a problem they don’t recognize or believe has a commercial impact on their own business. Aligning inclusion and diversity to the future success of the business and measuring it in a way that clearly demonstrates this link makes it hard for the organisation to ignore its importance.

Organisations that recognise the transformative impact of an inclusive culture, and the diversity this enables, derive commercial benefits rather than simply being “politically correct”. However, in our own Diversity Pulse Study, we found that 67% of all organisations do not have a formal definition of inclusion. It is hard to argue against a business case for diversity that is commercially driven and based on performance, yet some organisations have not started this discussion within their own business.

“The leaders of the organisation need to appreciate and encourage diverse perspectives, ideas and ways of thinking. If diverse talent is not included in these debates, and the behaviour is not rewarded, they may not see their future path.”—Heather Allen

“When diverse perspectives are respected, they are very additive; however, a greater number of women does not necessarily mean their voices can be heard.”—Annet Aris

“Political correctness should not be confused with inclusivity.”—Martina Merz

Key Questions for Leadership

  • How is the business case for diversity & inclusion communicated and accepted beyond the executive committee?
  • Is there equal emphasis/focus placed on inputs when it comes to diverse leadership pipelines, as there is on monitoring diversity numbers?
  • What efforts are made to develop and recognize the accomplishments of diverse talent?

The Organization and the Individual

Shared responsibility

Having an inclusive culture is one of the critical enabling factors in successful business transformation. Achieving this is not straightforward and success clearly relies on an acknowledgment that it is a shared responsibility at all levels of the business and across all demographics. There is often great emphasis and effort put into the organisation to promote diversity and build a culture of inclusion through structured programmes, owned and led by the talent organisation. Sponsorship from a senior level backs up the importance of these programmes and links them closely to the success of the firm.

“Practical solutions make a big difference when it comes to diversity and inclusion efforts. Initiatives like remote working, corporate university, talent development and culture workshops are all important and can be useful, but only if they are culturally valued and accepted in the organisation.”—Rachel Empey

Beyond the actions taken by an organisation, it is equally the responsibility of individuals to help create and take advantage of inclusive environments. There is an equal onus on the individual to take advantage of the programmes that are in place, and to put themselves into a strong position, through great performance to capitalize on these initiatives in order to progress and have impact. Key to this is fairness over positive discrimination. Building skills and a talent pipeline gives the organisation a rich and diverse talent pool to choose from rather than just being an approach to appeasement and compliance.

“Any environment where there is a problem to solve or a challenge to overcome is a better place for diversity to flourish. There, different people can work towards a shared goal with a common sense of purpose.”—Mary Chan

Let transformation launch diversity

CEOs need to take advantage of transformation agendas to provide opportunities for a different type of leadership to step up. In transformation scenarios where the appetite for risk and new approaches is higher, the value of diverse perspectives and approaches can be more obviously demonstrated.

Transformational environments create a sense of purpose beyond the day-to-day running of the business. According to our interviewees, the shared purpose created through transformation is highly conducive to developing a more inclusive culture. Transformation often requires talent with different skillsets, approaches and experiences than currently exists within the organisation (particularly next-generation capabilities such as digital & data analytics). Attracting and hiring these individuals is one part of the solution. The inclusive culture of the organisation is the critical enabling factor in ensuring they succeed.

However, this should be “and”, not “or”. To develop talent for the CEO and ExCo levels, leaders need to ensure that future talent gets the right range of experiences for their future success, which should include leading transformation and change initiatives. Although a risky step may help an individual make a leap, it is not a solution to a broader systemic change.

“Transformation provides opportunity. It is sometimes the least attractive opportunities that provide a platform to prove oneself. This is why transformation roles are disproportionately occupied by women.”—Martina Merz

Key Questions for Leadership

  • Are the dialogues the business engages in relative to diversity and inclusion focused on commercial outcomes?
  • What steps is the organization taking to promote and embed inclusive culture?
  • Does the organization look for individuals with different skills and behavioural styles in times of transformation or rely more on ‘tried and true’ leaders?

The Critical Link

Creating and sustaining an agile and inclusive culture relies on four interdependent attributes of any organisation: commitment from the existing leadership from the board and CEO down; creating clear and accessible pathways through the business to which all executives can aspire; setting the tone of the organisation on the importance of inclusion beyond the mandate; and developing a culture that encourages the individual to bring their whole self to the organisation.

 

The contributors, all of whom are themselves senior leaders of large organisations and board members, were clear on one critical link between the challenges of growth and transformation today and the culture that can meet that.

“In an ideal world, it will move beyond the point where gender or race or sexuality is not a consideration. The sole focus will be on capability and results.”—Rima Quershi

That critical link is that the openness and inclusivity of an organisations culture will be one of the differentiators between organisations that merely survive and those that thrive. The ability of the organisation to harness the diversity of its people through an inclusive culture creates a platform for long-term commercial success in a highly disruptive and unpredictable environment.

Authors 

David Mills
Almack House
28 King Street
London SW1Y 6QW
United Kingdom
+44-20-7830-8005

 

Sam Horton
Almack House
28 King Street
London SW1Y 6QW
United Kingdom
+44-20-7198-1866

 

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Diversity and Inclusion #GameChangers