Leadership

Why Diversity Really Matters

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I just read a piece from a top consultancy firm saying we know intuitively that diversity matters and that it’s becoming clearer that it matters from a business perspective. It also says their research shows if you are in the top quartile from a diversity index perspective you are more likely to be in the top half from a financial performance perspective. In my mind, diversity is serious business and not a game of probabilities like Russian roulette – although getting this wrong over the next few years could well be like shooting yourself in the head (corporately).

While it is nice that they are talking about diversity, and I applaud all steps in the right direction, in 2016 this just feels tepid and misses the real underlying business context for diversity – something that today is more important than it has ever been. 

It’s 2016 and competition is fiercer than it has ever been. The speed at which new entrants establish big footholds and displace incumbents is at an all-time peak. The time it takes a company to fall from grace and head to bankruptcy or non-existence continues to shrink. Companies with great strategy but bad leadership, of course, fail. Companies with great strategy and great leadership still fail if they don’t have competitive talent. They lose when plans meet the battlefield where talent really matters. Great leadership and strategy are conceptual … reality is in the execution and talent matters. A bad diversity strategy can kill a company over time. 

Getting, keeping, growing and leveraging your talent pool is therefore a key focus of winning the competitive battle. Leveraging your pool of talent and motivating the individuals in that pool are equally important. Many companies do a poor job of measuring and managing motivation even though it might be their single biggest force multiplier. Most managers cannot tell you how motivation really works. Many companies are not clear on how to leverage their talent as a pool or how to really take advantage of the cumulative IQ inside the firm. 

Suboptimal approach to diversity 

How many companies dilute their chances of success by paying lip service to the talent issue or making it that twice-a-year thing with one board review? How many dollars go into strategy-focused consulting, how many into leadership and how few into optimizing and leveraging the overall talent pool? 

How many companies have environments and approaches that constrict and constrain the talent pool by disenfranchising and diminishing it via suboptimal approaches to diversity? Check this mindset, for example: I care deeply about talent but I am okay with suboptimizing the female, African American, LGBT and Latino segments. Yes, that sounds idiotic, but it happens way more often than you think. Fully 50 percent of firms are in the bottom half of the diversity index hierarchy and therefore dilute their chances of out-competing their enemy’s talent on the battlefield. Yes, I know that’s just arithmetic to make the point. Having said all that, if you have a terrible strategy and poor leadership, no amount of diversity will let you win. 

How to dilute your organization’s performance and potential 

To me it often seems like there are secret agents inside companies funded by their competitors to nudge the company towards failure. This is especially true in the talent area. One firm I know quite well has several of these secret agents, whose job is to dilute the talent pool and continually diminish the average output per human just by creating/perpetuating an environment that negatively impacts aggregate talent. Below are some recent diversity results from an internal survey at that company – and my parenthetical observations. These results are a summary of the women’s feedback, but the “secret agents” have made equally impressive inroads in other areas of diversity in their attempt to undermine performance. 

  • 84% have been told they are “too aggressive.”
  • 47% often do more menial tasks than men. (My favorites are ordering food and taking notes.)
  • 66% are excluded from key networking and social opportunities. (Like golf, poker, drinks/dinners, going to the game.)
  • 90% have been subjected to or have witnessed sexist behavior.
  • 87% have experienced demeaning comments from male colleagues.
  • 75% were asked about family life, marital status and/or children in interviews.
  • 60% reported unwanted sexual advances. (Note the word “reported.”)
  • 66% who reported sexual harassment were dissatisfied with the course of action taken. 

These numbers are not really about a specific company; sadly, not surprisingly, they are real. They were recently published in a great piece called Elephant in the Valley, a diversity study conducted jointly by Trae Vassallo, Ellen Levy, Michele Madansky, Hillary Mickell, Bennett Porter, Monica Leas, Julie Oberweis and Stanford University. 

If you aren’t able to get, keep, grow, motivate and leverage the entire workforce population because of your poor approach to diversity, then you are quite simply diluting your organization’s performance and potential. This requires so much more than having a diversity checklist and checking off the boxes. This requires understanding the causal linkage between smart approaches to diversity and aggregate talent on the competitive battlefield. 

Other diversity issues 

It is simply easier and less costly to get top talent from diversity pools if you have the right environment/focus. That is because there are diverse candidates with huge potential trapped in under-utilized positions at companies that are less than stellar in maintaining diversity-positive environments. From my experience, especially in tech, often there are leadership and output stars trapped a layer or two below where they should be because of this. 

Of course, there is also the diversity-of-thought argument and the idea that leveraging a company’s cumulative IQ matters. Both of these are true and, of course, are reasons for being smart about diversity. 

The largest ethnic segment in the US is the Latino segment. What is less well discussed is that it is the segment with the biggest upshift in average educational base and in discretionary spend increase per capita (the two are related). What happens to companies that are bad at diversity vis-a-vis the extended Latino community? I am not sure at a detailed level except to say that it is nothing good. This one will require an understanding of ambi-culture. 

Whatever business you are in millennials are on their way to being your biggest customer segment. It is just a matter of time before they have an easy, instantly accessible, way to see a diversity ranking and a “green” ranking for your firm. You will simply be diluting your brand without focus and results in these areas, especially for the largest segment, millennials. 

Think of it as a charity navigator for commercial enterprises with diversity stack rankings. It definitely could impact spend choices. Sure, this is not exclusive to millennials; but all indications are they care more about this and are more deeply socially networked and open to using this sort of indexing. There is already a green washing index from the University of Oregon. Gen Z will be even more extreme in this area and will be generally a harder segment in which to develop brand loyalties. 

The leading consultancy piece I kvetched about at the beginning of this article also refers to LGBT (not LGBTQ+) and age as “other” diversity issues. Nope, it’s the same. It’s a ripe pool for getting better talent because it’s an under-subscribed pool. But I don’t want more gay people in the accounting or supply chain areas because it lacks sufficient “gayness.” Nor do I think that that change in those departments will necessarily give me a better broader customer intimacy state. I just think I will have a better average talent level – and that matters in a competitive world. 

There is also a good argument about the under-leveraging, under-involving of the Indian contingent inside companies including those that are there but badged from tech vendors. Just ask yourself how much work went into the effective integration of the Hindu contingent at your firm. (Trick question … 25 percent or so of Indians aren’t Hindus.) Leveraging the cumulative IQ of the firm matters. 

Geeks and diversity 

Stretching the definition a bit and playing on the diversity-of-thought idea, there is one “diversity” segment that also needs some attention … geeks. If I am not one, I certainly have the geek merit badge, having spent 30 years immersed in tech and feeling very comfortable in geek land. I am sure my teenage daughter thinks I am a geek, but that is probably more about fashion choices like tucking in t-shirts than anything else. 

Seriously though, in today’s world there needs to be a concerted effort in companies to sprinkle geeks into at least four areas: 

  • Marketing – Think about online conversion rates or using big data to sense and even shape demand across social networks. Those sound like areas where a little geekiness in the room might help.
  • Value networks / supply chain – In today’s world, there is simply no way to be great at this without real IT savvy/chops.
  • HR – Leveraging talent and moving towards optimizing human capital assets and spend on humans must tie back to tech beyond the HR platform via knowledge management, collaboration/communications platforms, etc. Oh, and maybe even recruiting tech talent.
  • Finance – They should take some IT folks hostage and vice versa. Both groups often need to know a lot more about each other than they do. Many IT shops I have seen do an awful job of financial management yet think they are great at it. Many finance areas think IT is a necessary, perennially underperforming evil and a big cost pit. 

Tech matters more than you think. Here’s a link to an article on that. One of the worst diversity areas I know of is gender diversity in tech, both in tech firms in general and in enterprise IT departments, although frankly it’s still pretty bad across the board beyond gender. 

Make no mistake about it: No amount of diversity solves for bad strategy backed up by bad leadership; but those companies tend to suicide themselves. For the others, diversity is a foundational element and a real opportunity for competitive superiority in the hyper-competitive, high-tech, networked world we are in. 

Bottom line 

The bottom line is there is a three-to-five-year window where a company could win a significant head start in the talent battle; most companies may get this intellectually but won’t move quickly and pragmatically. It is a big change, and most companies can’t even state what change management model they use. Culture change for a company is often a confusing area and requires steadfast focused leadership. 

All this is helped if the right messaging/direction emanates from the board level, of course. Board and senior management diversity is poor at best. Double that if you check boards for geek diversity, which one would think today is strategically important. Many statistical analyses show a factual correlation between diversity at that level and financial performance. I am not sure I want to worry about correlation now; this article is about the casual effect better talent has on the battlefield. It improves your odds of winning, of killing the competition as opposed to them killing you. 

Toby Eduardo Redshaw is CEO of Kevington Advisors and a leading authority on leveraging modern IT for competitive advantage. He has 30 years’ experience leading in change-intensive environments from both business and CIO perspectives at FedEx, Motorola, American Express and Aviva as well as several startups. He has served on several boards, both private and public. Toby was the founding chairman of the Kellogg Innovation Network and was chairman of the RosettaNet Council in Telecomm. Contact him at Toby@kevingtonadvisors.com.

 

 

 

 

 

 

 

 

 

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