The street protests that began after George Floyd’s murder may have largely subsided, but it’s clear that many in society won’t be turning a blind eye to perceived corporate racism or racial insensitivity any time soon. In July alone, three big boards—Oracle, Facebook and Qualcomm—were hit with shareholder lawsuits alleging breach of fiduciary duty because their companies failed to take action on diversity and inclusion issues or tolerated racially discriminatory practices.
Add to that the heightened focus on ESG—with an emphasis on the S—and you have boards across the country trying to figure out how best to help address their companies’ lack of diversity. Tiffany Jana, author of Erasing Institutional Bias: How to Create Systemic Change for Organizational Inclusion and CEO of TMI Consulting, which counsels companies on diversity, equity and inclusion, gets many of her clients just after they’ve lost a multimillion-dollar discrimination suit. “Because they ignored it,” she says. “We’re now at a critical inflection point where people are recognizing that ignoring the elephant in the room is not going to work.”
If your company has actually tried to move the needle on diversity and is still finding it won’t budge, you’re in good company. “Diversity’s really hard—and inclusion is harder,” says Johnny Taylor, CEO of the Society for Human Resource Management. “It’s not for the faint of heart.” The following are some of the reasons your company’s D&I efforts may be failing and how to fix them.
1. You’re missing the “why.”
Avoiding a lawsuit is a legitimate goal, but it won’t be enough to energize a companywide diversity initiative and make it successful. Nor will it be enough to say, “It’s the right thing to do.”
“That is just not motivating language that’s going to get your average CEO out of bed in the morning,” says Michael Bach, founder and CEO of the Canadian Centre for Diversity and Inclusion. “The right thing to do is to make money. And if you can make money while doing something like supplier diversity, then it sticks.”
Kristin Groos Richmond, CEO and co-founder of Revolution Foods, which provides access to healthy, affordable meals to students and families, did that analysis and came up with some clear reasons. “All of the communities we serve are highly diverse across a broad range of ethnic, racial, socioeconomic backgrounds, so we recognized pretty quickly that the only way to connect with them and create a respectful product is to… recruit a team that would really reflect the communities we serve nationwide,” she says, noting that diverse employees make up around 66 percent of the company’s nearly 1,500 total, 40 percent of management and 30 percent of executive leadership. “It’s so important to have that diversity at every level of the company,” she says. “I’ve always been a firm believer that the more diverse perspectives you can get around the table, the smarter you’re going to be.”
There is plenty of data now supporting that, including the 2018 McKinsey study of 1,000 companies, which found those in the top quartile in ethnic and racial diversity in management were 33 percent more likely to have above-average financial returns, and those in top quartile for gender diversity were 21 percent more likely. But it wasn’t statistical evidence that convinced CEO Tom Shorma that WCCO Belting needed to be able to recruit from every possible demographic group; it was the manufacturing skills shortage in his small town of Wahpeton, North Dakota. In particular, he needed to appeal to women and to a growing population of new Americans. “We’ve done some unique things that have allowed us to first find great people—whether male, female, whatever race, creed, color—and then to give them all top-to-bottom opportunities for advancement.”
For example, instead of conference room interviews—or as Shorma calls them, “interrogations”—every candidate is taken on an extensive tour of the facilities, given a history of the family-owned company and shown how they might fit in there. “When they walk the floor, they can see that half the workforce is women,” says Shorma.
The company offers financial rewards to employees who recruit people they trust, which has had the intended effect of increasing the number of diverse candidates, says Shorma. It also instituted flexible scheduling, which has helped attract and retain women, who now account for half of all employees and two-thirds of supervisors.
Creating an inclusive culture is critical to the overall success of the effort, says Tony Bates, CEO of Genesys and a director with eBay and VMware. “You could add X percent of folks, but if it’s not a trusted, safe place that recognizes those communities, you’re ultimately gonna spit those folks out.” He adds that it’s critical part of board oversight, “but you have to understand it first from a strategic point of view vs. just an operational point of view.”
2. You’re not measuring it.
This is where things get touchy for some—because measuring an increase in diversity raises the specter of quotas and culture wars over affirmative action. “Quotas are damaging because then people think there isn’t equality on the other side,” says Alessandro DiNello, CEO of Flagstar Bank. “But there’s almost nothing you can do successfully without measuring what you’re doing.”
Measuring progress on diversity goals is a clear way to show leadership is taking it seriously—and it helps boards hold management accountable for stated diversity goals.
One of the things DiNello made a requirement at Flagstar is having a diverse slate of candidates “for every position and especially management-level positions,” he says. “I guarantee that if I don’t say that and my CFO leaves, the list I get will be all White guys—maybe with one White female—because finding a minority can-didate, whether Black, Hispanic or other minorities, you just have to work harder to find that person.”
In July, DiNello hired a new HR chief, David Hollis. “I didn’t hire him because he was Black, but in terms of me being sure that my head of HR is going to do everything in his power to facilitate the choices that our hiring managers have—I feel good about that. I feel like maybe we’ll make a little bit more progress more quickly. We’ll see.”
Taylor says that having the right person overseeing the company’s diversity strategy is critical. “You have to apply the same level of scrutiny and rigor to the [D&O role] that you would apply to any other C-level role. If you haven’t done that, then no wonder you’ve failed.”
Dr. Paul Eccher, executive coach and CEO of talent management firm Vaya Group, cautions CEOs and boards to involve general counsel in creating any diversity-based scorecards because if a group is left out, they may have a basis to sue or otherwise create PR headaches. “I’ve talked to some GCs who are skittish about that,” he says. “It can cause trouble.”
Bates says that while executing a diversity strategy is clearly a management role, boards have to get more involved in strategy around culture and not just get lost in numbers. “So, really understanding culture, values, mission, strategy, and not just classical kind of succession planning and numbers around diversity metrics or churn, but really, what it is they’re trying to do so you can help where it makes sense without being overbearing,” he says.
Directors often get “a very thin preview” on cultural transformation efforts, he adds. “So, it’s worth saying that, as management presents to the board, you also need to be talking about aspects of diversity, the cultural tone, the things that are really going to matter for long-term sustainability.”
That means boards should be asking not only about numbers but the strategy for building a diverse talent pipeline that is primed for advancement. If you’re not seeing diversity in the C-Suite or in senior management, you may have a leaky pipe that is preventing diverse talent from making it to the top. And if you don’t have minorities represented in the leadership ranks, you will have a harder time appealing to minority talent.
3. You’re afraid to talk about it.
One thing Jana wants to make clear at the outset: “Across the entire spectrum [of leadership], fear is normal,” says Jana. “Nobody goes into this without being a little bit scared because we’ve politicized the conversation around racial inclusion and LGBT inclusion, a lot of the protected categories, so it’s scary to embark on that conversation.”
But boards and CEOs—who are statistically majority White and male—can’t wait to start talking about race and gender until they feel comfortable—because they likely won’t. In his CEO coaching, especially following George Floyd’s murder, Eccher found a lot of this uncertainty, which board members may be feeling as well. “I hear, ‘I don’t want to look foolish,’ ‘I don’t want to say something inappropriate,’ ‘I feel awkward’ or ‘I’m not the right person,’” he says. Those are normal feelings, he adds, particularly for leaders who are “self-aware enough to know they’ve lived a different life experience, a lot of this doesn’t even make sense to them, and they grew up in a time when it wasn’t talked about.”
You may not feel entitled to make big bold statements about race, he adds, but “you’ve got two ears, one mouth, so set up the venues to listen within your organization.”
That’s what Bates did at Genesys, where he leads 5,500 employees across 70 locations around the world. “After the terrible atrocity that happened to George Floyd, it was difficult to know what to say—so there was a level of anxiety for me, even to pick the right words. Am I going to offend someone? Am I pushing my agenda? I realized, this is a moment to listen.” So, he set up an employee town hall and invited four people of color to share their stories of how they’ve dealt with racial injustice and why equity, and not just inclusion, are so important.
“It was a watershed moment for the company,” says Bates. It also led to him naming one of the speakers, Eric Thomas, as the company’s first global diversity, equity and inclusion officer.
He adds that at both the boards he sits on, an increase in diversity is helping to drive strategy back to the companies. “Everyone is on a journey in this,” he says. “It’s been a strong, strong focus for us, but it really does take time.”