This is the moment
There has been a lot of talk about the importance of diversity, equity and inclusion. It has finally risen to the top of the corporate agenda. But while talk ignites passion, it's action that drives change.
In 2017, Sir John Parker issued a report (the Parker Review) with a mandate to lead UK businesses to have more diverse boards: add at least one person of color to your board by 2021. That year, more than half of the top 100 companies on the Financial Times Stock Exchange (FTSE) did not have minority representation on its board. Seven of those companies accounted for more than 40% of the directors of color. Of 1,050 director positions, there were 85 individual directors of color, some holding multiple positions. That means people of color represented about 8% of the total director population — a number that plummeted to 2% if you considered only UK citizen directors of color. The board diversity numbers were even more dire when looking at the leadership of these companies: only six people of color were board chairs or CEOs.
Thus, the report set forth its less than lofty goal of adding “one by 2021” to every FTSE 100 board and to every FTSE 250 board by 2024. But in a recent update from March 2021, almost a fifth of FTSE 100 boards still have no minority members. And board diversity still hovered at around 12% in November 2020. While that does reflect modest progress, there is much room for improvement.
As the UK economy begins to reopen after a year of turmoil caused by the coronavirus pandemic, social unrest stemming from concerns over the lack of racial equality and equity and the country’s exit from the European Union, now is the time for organizations to ensure its boardrooms and C-suites reflect the customers and communities they serve.
In March 2021, with an eye to measuring progress against the Parker Review and the Hampton-Alexander Review, which set a diverse board goal of 33% female representation on FTSE 350 company boards and senior leadership teams by 2020, we evaluated the UK consumer sector’s diversity. Specifically, we examined the top 144 consumer companies from the FTSE 100, FTSE 250, and Alternative Investment Market (AIM) All-Share index, a group of smaller companies within the London Stock Exchange. We studied the diversity of 1,103 individuals who sit on these boards, gathering data from company websites, annual reports and BoardEx.
Here are our findings on company leadership and board diversity.
While this leadership and board diversity data reflects some progress, it also reveals a need for greater emphasis on minority representation and gender diversity across the consumer industry, both at the company and board levels. As companies emerge from the crises of the last year and begin to reimagine its future, now is the perfect time for them to launch initiatives to improve the diversity and inclusion of boards and leaders.
Many studies have analyzed the relationship between diversity and inclusion and company performance. Nearly all have reached the same conclusion: diversity and inclusion are good for business.
The data backs up this conclusion. Truly diverse and inclusive organizations perform better than their peers in a number of ways. They are 70% more likely to capture new markets, 75% more likely to see their ideas become productized and 19% more likely to see higher innovation revenue.
Consumer companies with more diverse boards and leaders are able to reap a variety of benefits. Chief among them is setting the tone from the top that their company is committed to diversity and reflecting the communities that it serves. The more diverse a company’s leaders and board, the better it can engage with a variety of stakeholders. And organizations are better able to avoid groupthink, because they draw on leaders’ wide-ranging backgrounds, experience and expertise.
Furthermore, the more committed organizations are to identifying diverse boards and the best talent, regardless of race, ethnicity, gender or other personal characteristics, the wider its talent pool, and the better chance they’ll have of finding the strongest candidates for positions. As organizations grow diverse talent, it will strengthen its leadership pipeline and ensure that it is developing the talent necessary to guide them into the future.
Never before have the issues of diversity and inclusion offered as much opportunity for business leaders, ensuring that they have the leadership and talent to support the company, provide role models for the next generation and drive competitive advantage. The organizations best able to embrace and sustain diversity and inclusion will unlock the potential of all its talent and create greater value for its employees and clients.
There’s an obvious starting place for organizations that want to increase diversity at the top: recruitment. But that’s really just the spark for what must be an ongoing cycle of efforts to improve inclusivity. Once you widen your talent pool, expanding your search beyond your usual networks and eliminating bias in your recruitment processes, you can’t stop there. For underrepresented talent to reach its potential, you have to ensure that the environment you’ve created supports their retention, engagement and development. That means your organization and its board need a holistic approach to talent that helps you build a pipeline.
Here are five steps you can take to start on your journey to a more inclusive, diverse board and organization.
Before you can improve your minority and female representation, you have to understand where you are right now. Start by learning about the barriers to development and recruitment. Then look for structural and behavioral biases, both conscious and unconscious. Don’t make any assumptions about the root cause—look at the numbers, but also gather qualitative data from your underrepresented talent. A diversity and inclusion diagnostic can help you pinpoint roadblocks and friction that you might not otherwise uncover.
It’s critical to develop inclusive leaders at every level, from the board and executives to line managers. Inclusive leaders are those who unleash the power and potential of their talent. They encourage and empower their team members to take risks, take charge of their own development and to bring their most authentic selves to the workplace. At the top of the organization, inclusive leaders embed diversity and inclusion goals and strategies into the organization’s culture. At lower levels, they work to improve diversity and inclusion through their day-to-day interactions with their teams, ensuring their employees feel supported, respected and valued.
Structural inclusion requires you to take steps to level the playing field, ensuring everyone has a true opportunity to move up in your organization. It takes a close look at the most basic elements of your organization, including your policies, processes and systems. Study your talent policies and processes. Are they fair and equitable? Are any hidden biases or other barriers holding back your talent? Do any policies favor or disadvantage talent based on who they are? Audit your talent acquisition, onboarding, development, advancement, succession and pay and rewards policies for disparities and inequities. Then check the design of your talent systems, making sure they are tailored to the needs, wants and goals of your most excluded employee.
Behavioral inclusion goes beyond mere biases; it goes to the mindset, skills and relationships needed to counteract those biases and to enable your people to make more inclusive decisions. To improve behavioral inclusion, you could hold workshops that help your people learn about and address their unconscious biases. You might also teach managers about strategies for leading their teams more inclusively. Another option is to ensure your career advancement programs target the issues and roadblocks that underrepresented individuals commonly face.
There’s a reason we call it a journey to greater diversity and inclusion; there are no quick fixes. To increase your chances of success, you need to take a long-term approach to managing change. Components of your change management plan should include prioritizing what you need to do to facilitate change, including leading dialogue around difficult conversations and establishing key metrics for measuring the outcomes of your diversity and inclusion efforts. You’ll also need to work to establish a culture of trust and belonging, with a critical part of trust requiring a communications strategy that includes feedback loops.
As the data show, you have a tremendous opportunity to embrace real change that will make a difference for your talent — and your bottom line — as you recover from the last year.
To see more results from our 2021 UK Consumer Diversity Index, download the full report. And get in touch to discuss how we can help you unlock the potential of your business by fostering diverse representation from minority and female talent throughout your organization and its board.