Inequality In The Workplace The Conversation That Won’t End

It’s 2020 and we’re still talking about diversity.

Twelve years after the U.S. elected its first African-American president, more than 40 years after the U.N.’s first World Conference on Women and more than 50 years after the Civil Rights Act banned discrimination based on race, color, religion, sex or national origin, we remain deeply rooted in decades-old stereotypes when it comes to leadership and workplace inequality.

This is especially true in corporate corner offices and boardrooms. Although women have made great strides, they are woefully underrepresented in the top echelon of Corporate America. Just 30 of the S&P 500 companies, or about 6 percent, have female CEOs. Women hold about 27 percent of the executive and senior-level positions at these firms, despite the fact that they hold almost 44 percent of all the jobs. At this rate, it will be well into the second half of the 21st Century before women reach parity with men in leadership roles.

Minorities fare even worse. African-Americans, for example, hold just four CEO posts among the S&P 500 companies; none are women.

“It’s absolutely stunning,” said Rita McGrath, a professor of management at Columbia Business School. “The CEO and senior management selection process at most organizations has not caught up with the times.”

Why is progress so painstakingly slow, and what can be done about it?

Every corporate leader should be looking for answers to this question because a growing body of research makes clear that diversity is good for business. A diverse workforce and leadership team and an inclusive corporate culture are critical to winning and retaining top talent, unlocking innovation and capturing new markets.

Women-led companies, in particular, have been shown to outperform the competition at all levels. For example, average returns from companies with female CEOs were 103 percent during their leadership tenure, compared to the overall S&P average of 69 percent over the same time periods, according to Fortune.

Another study, from Catalyst Inc., revealed that companies with the most female board directors outperformed those with the least by 66 percent in terms of return on invested capital, by 53 percent in terms of return on equity and 42 percent in terms of return on sales. Female entrepreneurs, meanwhile, bring in 20 percent more revenue with 50 percent less money invested, according to the Kauffman Foundation.

Similarly, a broader embrace of diversity has been shown to boost performance. A recent McKinsey study of 366 public companies found that those in the top quartile for racial and ethnic diversity were 35 percent more likely to have financial returns above national industry medians. In fact, among U.S. companies, there was a linear correlation between diversity and earnings: For every 10 percent increase in racial and ethnic diversity on the senior executive team, companies saw a 0.8 percent rise in earnings.

And in a global quest for innovation, diverse organizations are more likely to foster creative and supportive environments conducive to new ideas. “Companies understand that we’re in a long era of slow global growth,” said David Dotlich, president of Pivot Leadership, a Korn Ferry company. “They’ve reduced debt, downsized and refocused their businesses. They’ve done everything that’s easy to do. Now they are in the search for growth. And they know that it’s going to come from innovation, creativity, change and finding new ways to do things.”

The Center for Talent Innovation (CTI), a New York-based think tank, has documented the link between innovation and diversity. Employees at companies with diversity-steeped leadership reported in a study that their ideas were more likely to win endorsement from decision-makers, and get developed and deployed into the marketplace. These employees were also more likely than employees at non-diverse companies to take risks and challenge the status quo.

McGrath puts it bluntly: “The research shows diversity is essential for competitive advantage.”

The Leadership Gap

The best leaders know this. Hay Group’s top 20 Best Companies for Leadership, identified through a survey the firm has conducted for nine years, are proactive in developing future leaders with the kind of skills their organizations will need to succeed in a more global, interconnected and volatile world: a strong customer focus; global expertise; the ability to drive innovation and identify new markets; and a collaborative approach. For these best in class companies—including Procter & Gamble, GE and Coca-Cola—that means developing a diverse pool of potential leaders.

Among Hay Group’s Top 20 companies in 2014, half offer leadership development programs tailored for women, compared with only 13 percent of all other companies, and 40 percent have programs aimed at diverse groups of employees, compared with 11 percent of all others. These trailblazers also tend to make leadership development programs available at multiple levels (83 percent compared with 57 percent).

Sadly, much of the rest of the corporate world seems stuck in a Mad Men-era time warp when it comes to leadership diversity. The reasons for the lack of progress are complex and varied, and have been widely discussed. Some are cultural: Women and minorities often tend to hold back or feel they are unqualified for a position compared with white men. They may also have trouble negotiating if they do not feel they are in a position of power. Work-life balance issues also weigh heavily on women, who bear a disproportionate load of caregiving responsibilities, both for children and elderly parents. Those duties can conflict with a demanding career, and once women exit the workforce to have children, it can be hard for them to return.

According to a Korn Ferry survey of global executives, women and minorities also tend to lack mentors and sponsors to help them navigate their career paths in white male-dominated firms. In general, a lack of executive sponsorship is the biggest barrier to successful leadership development.

Mentors and sponsors—leaders who take an active interest in an individual’s career—are particularly important given the unconscious bias that pervades many workplaces, experts say. Ingrained perceptions of what leadership looks like can stymie high-potential candidates who don’t fit that mold. Leaders tend to groom and promote others who look, sound and act like they do. “It’s much more comfortable to pick someone who is just like you,” said Columbia’s McGrath. Unconscious bias weeds out diverse talent at early stages, stunting the professional growth of many talented individuals. “We don’t have effective interventions at those early stages,” she added.

One high-profile study, by Harvard Business School, MIT Sloan School and the Wharton School of Business, illustrates how unconscious bias works. Participants were asked to listen to pitches presented by entrepreneurs. The pitches and the credentials of the entrepreneurs were exactly the same, but the voice and sex of the presenter varied. The “investors” in the study chose the male entrepreneurs 68 percent of the time, which helps explain why female entrepreneurs raise so much less than their male counterparts.

“It’s pattern matching,” said Jackie VanderBrug, a senior vice president at U.S. Trust who heads up the firm’s gender-lens investing unit. “People tend to reflexively resort to what they’ve seen before.”

Hidden Bias

Indeed, there is a fundamental disconnect between generally accepted notions of leadership and femininity that puts women in a double bind: Female executives who are assertive and authoritative—traditional male leadership traits—are viewed as competent but pushy and not well liked. Women who exhibit more feminine leadership styles, marked by a more caring, collaborative approach, are well liked but seen as incompetent or not up to the job.

Adding to the barriers for women is a perception gap: Not all men recognize the challenges that women face. McKinsey asked more than 1,400 executives whether women with equal skills and qualifications had more difficulty reaching top management positions. Among female respondents, 93 percent agreed compared with just 58 percent of men.

A more stark reminder of what women face comes from a PwC survey of 783 corporate directors. When asked about gender diversity, just 39 percent described it as a “very important” attribute for their company boards. Even fewer—30 percent—thought racial diversity was “very important.”

Dig deeper and interesting patterns emerge. Female corporate directors surveyed were nearly twice as likely as their male counterparts to call gender diversity very important (63 percent of women vs. 35 percent of men). The results were similar for racial diversity, with 46 of female directors saying it is “very important” vs. 27 percent of men. Nearly three-quarters (74 percent) of women believed that general board diversity improved performance, compared with only 31 percent of men.

There’s been plenty written about what women and minorities can do: Speak up, try harder, lean in. But what about organizations? The evidence suggests that much more work needs to be done to raise awareness about diversity and unconscious bias.

In too many companies, diversity is confined to HR, but it does not rise to the level of strategic imperative for top leadership. A true commitment to diversity requires buy-in and leadership at the highest levels of an organization.

Likewise, simply boosting the number of women and minorities in the workforce is not enough. These individuals must feel comfortable and empowered to voice their opinions and bring their full experience and knowledge to bear. Too often, workplace cultures pressure employees to fit in with the norm—and that is true at the highest reaches of the organization.

Struggling to Fit In

During the 1970’s, the first wave of female executives was advised to “dress for success” and donned their shoulder pads and bow ties. Many of these same women emulated male leadership styles as well, rather than embracing their own style. But according to Hay Group research, that doesn’t work. The study has shown that women who emulate traditionally male leadership styles were seen less favorably by their organizations. Instead, women who rose to the top and were viewed as successful leaders by their peers, blended masculine and feminine leadership styles.

This is a broader challenge. Professor Kenji Yoshino, of New York University, has explored the struggles of professionals outside the mainstream to assimilate and thrive in homogenous corporate cultures. As a gay, Asian man, Yoshino was pressured to fit in at his first job and to tone down his LGBT advocacy. That experience inspired him to embark upon research into what he calls “covering”—the tendency of minority groups to hide elements of their authentic selves to fit in with the dominant workforce culture.

Not surprisingly, Yoshino found in his study that women in general as well as blacks, women of color and LGBT employees engaged the most in covering. More startling, his study “Uncovering Talent: A New Model for Inclusion,” illustrated the extent that straight, white males covered as well: Almost half of them covered up something about themselves, such as age, religion or veteran status.

Silicon Valley, that bastion of innovation and success, is steeped in covering behavior. While the region’s lack of gender diversity has been the source of public criticism, less discussed is the ageism at play. According to data from PayScale, an online salary and compensation information firm, the median age for a Facebook employee is 28, 29 at LinkedIn, 30 at Google, and 31 at Apple. And founders under 35 receive almost double the venture capital funding of older entrepreneurs. That youth-worshiping culture is driving men considered young for most industries to cosmetic surgeons for discreet Botox injections and other treatments.

By not bringing their full selves and experiences to the job, individuals feel less satisfied and are less productive, and their employers lose out on their potential contributions. Companies also miss out on hiring top talent.

Yoshino’s research dovetails with work done by Hay Group and others. In a 2014 study by CTI on executive presence, for example, African-American, Asian and Hispanic professionals overwhelmingly reported that executive presence at their firms is based on white male standards. Conforming to those standards led to feelings of resentment or disengagement.

The Diversity Imperative

Clearly, corporations need to expand their notion of leadership to one that is more diverse and inclusive. And organizations must create a culture where employees feel free to authentically contribute—what CTI calls a “speak up” culture. And that, as always, comes down to leadership.

“We need inclusive leaders,” said Andrés T. Tapia, global diversity and inclusion strategist at Korn Ferry. That means leaders who not only recognize the need for diversity, but that are skilled in managing it. “Many organizations are ready for people who look different, but they’re not ready for people who think and behave different,” he added.

More role models at the top can begin to shift perceptions and implicit bias, whether those role models are women, African-Americans, or a twenty-something in a hoodie instead of a suit. And diversity begets diversity. Venture-capital firms with female partners are more likely to fund female entrepreneurs, just as boards with female and minority members are likely to hire more diverse leaders.

In the end, companies have little choice. Investors and business partners are beginning to demand diversity as part of an overall good-governance strategy. A multitrillion-dollar industry has sprung up around gender lens- and ESG- (environmental, social, governance) investing, as more investors see the link between deliberate, inclusive management and performance. “Gender matters to investors,” said U.S. Trust’s VanderBrug. “It’s a factor that can inform and enlighten the opportunities and risks a company faces.”

In an increasingly multicultural world marked by a high rate of disruption and fleeting competitive advantage, it may be diversify or die. That’s especially true as a wave of millennials—the most racially and ethnically diverse generation in American history—becomes a cultural and economic force.

“The opportunity for companies around access to talent and understanding of markets is huge,” said VanderBrug. Those that fail to diversify risk losing out in the war on talent and failing to spot emerging markets and product opportunities. “Companies that are inclusive are going to have greater advantages,” she said.