The business benefits of and practical challenges involved in the promotion of workforce diversity

Citation

(2004), "The business benefits of and practical challenges involved in the promotion of workforce diversity", International Journal of Retail & Distribution Management, Vol. 32 No. 9. https://doi.org/10.1108/ijrdm.2004.08932iab.001

The business benefits of and practical challenges involved in the promotion of workforce diversity

An interview with Professor Amin Rajan by Sarah Powell, Editor of the “Spotlight” column in Emerald Now (www.emeraldinsight.com/now).

Amin Rajan is the Chief Executive of the Centre for Research in Employment and Technology in Europe (CREATE) – a pan-European network of prominent researchers undertaking high-level advisory assignments for the UK Government, city institutions, multinational companies and international bodies such as the EU, OECD and ILO. He is a visiting professor at the Cass Business School, London Guildhall University and at the Centre for Leadership Studies at Exeter University, and also President of the Scientific Committee at Audencia-Nantes, Ecole de Management. In 1998 he was awarded the Aspen Institute’s Prize in leadership.

Professor Rajan has acted as a senior consultant to companies including ABN-AMRO, British Telecom, Ford, GSK, HSBC, IBM, ICI, ICL, Lloyds TSB, Merrill Lynch Investment Management, Microsoft, Morgan Stanley, Motorola, Rolls Royce, Shell and UBS. He is the author of numerous books and articles and, most recently, a major report co-authored with Barbara Martin and Jenny Latham and entitled Harnessing Workforce Diversity to Raise the Bottom Line.

Spotlight: Your report Harnessing Workforce Diversity to Raise the Bottom Line emphasizes the impact of globalization and corporate restructuring in promoting market, business and workforce diversity. How widespread is recognition of the business argument for workforce diversity?Amin Rajan: Two main factors have led to growing recognition of and interest in diversity. First, globalization is bringing different categories of customers to the market place, prompting organizations to question whether they have the appropriate workforce to meet the needs of such customers. The second main factor is corporate restructuring which has led companies to focus on the creation of more vibrant cultures. In the past companies have had very little success in this area and many have recognized that this was very much the result of what one could describe as a predominantly “male, stale and pale” workforce.

While the moral dimension of diversity and inclusion is important, it is very much in the background. Diversity initiatives are market-driven, promoted by the need to have an innovative workforce. In addition, large global companies such as Procter & Gamble or Shell understand the need for a “licence to operate” in different countries, which requires good equality policies. In companies such as these diversity is often equated with equality.Spotlight: How can the business impact of diversity and inclusion be quantified?Amin Rajan: It is possible to quantify the business impact in specific situations. For example, in the case of retail banks we surveyed, specific recruitment initiatives have been introduced to attract minority groups to bank branches. The banks were then able to compare the volume of business conducted prior to these initiatives with that after, revealing an increase of some 30 percent.

In addition to such “before and after” comparisons, which are particularly applicable to the retail sector, other organizations have sought qualitative indicators, conducting customer perception and/or staff perception surveys to explore whether a diverse workforce contributes to productivity, morale, customer service and so on. In addition to such quantitative and qualitative assessments, it has to be said that in a majority of organizations it is very much taken as an article of faith that such initiatives bring benefits.Spotlight: Does size of company affect the challenge of embracing workplace diversity?Amin Rajan: Paradoxically, there are far fewer challenges in smaller companies than in larger organizations and it is a fact that small and medium-sized enterprises employ proportionately more members of ethnic minority groups, for example, than do large companies. The cultures of these smaller companies are very inclusive, people work more closely together and there is no need for overt policies or formal procedures.

Meanwhile, there are substantial challenges for large organizations. The first is management style, which can have a very negative impact if inappropriate. For example, many managers have no idea how to deal with senior women, tending to treat them like secretaries. Second, managers are often very autocratic which can crush innovation. Third, few managers really do “walk the talk”; because of time pressures, they fail to listen to the workforce. So in large companies the major challenge is not so much that of attracting women or minority groups or disabled people; it is getting the best out of them. The problem is not so much one of diversity as one of inclusion, and this can be exacerbated by the existence of frequently exclusive sub-cultures within the organization.Spotlight: You have stressed your belief in a meritocracy, i.e. that a job should go to the best qualified candidate, irrespective of personal identity. How can an organization promoting the merits of a diverse workforce create a “pipeline” of strong candidates to fulfil both imperatives?Amin Rajan: There are two ways of doing this. One is to “plug into” local community groups or local networks of minority groups, disabled people or women to emphasize job opportunities and encourage applications. Electronic Data Systems (EDS) is one company that is already doing this with notable success. The second way to encourage a diverse pool of applicants is through attention to the recruitment process. This is already happening. Barclays, for example, recruits a substantial number of women candidates to junior management roles. Legal & General is promoting a similar trend. Both examples are evidence of pipelines that have been deliberately created. The process of encouraging diversity is at an early stage but a seedbed of potential leaders has been planted.

Global companies are also introducing diversity through recruitment from other countries. Not many organizations can do this because it is an expensive option and recruitment is mostly at a top management level. While at middle management level it is less frequent, some companies such as Fujitsu do pursue this route. In the UK, for example, Fujitsu takes on some 100 graduates each year, 40 of whom come from the Continent, which is quite a high figure. IBM and Microsoft have similar programs to tap into overseas sources of talent. But there is a substantial cost involved in such initiatives and it is preferable to create our own pipeline here rather than disturb that elsewhere.Spotlight: You have observed that a culture of inclusion was especially notable in two types of organizations: professional services firms and large companies. Can you elaborate on the reasons for this distinction?Amin Rajan: Professional services firms tend to have a culture of inclusion and regard women and minority groups as income earners. They want to ensure that their income earners really perform to their best level of ability. Large companies, such as Prudential Insurance and Legal & General, meanwhile, often have very progressive human resource policies and practices, with the result that diversity takes place automatically as a result of this overt action.Spotlight: What is your view of the use of quotas to promote diversity?Amin Rajan: Some organizations have introduced quotas because they think that is the best thing to do, but they are in a minority. Only 4 percent of the companies that I surveyed had introduced quotas. My personal view is that the government should not get involved in quota-setting. Both at UK and EU level there is legislation on equality and diversity. But this legislation is cast in such cumbersome language that it is almost impossible to operationalize it in the workplace.

I would prefer companies to become aware of the business case for diversity and to implement a diversity and inclusion agenda on this basis rather than in response to any legislative pressures. Legislation just does not work very effectively in this area. We do of course need minimum legislation in the area of equality and we already have this, while the activities of the Commission for Equal Opportunities and the Commission for Racial Equality in the UK are very valuable. As a result we now have sufficient structure and legislative mechanisms in this area and the key should be to encourage progress on the business benefits aspect.Spotlight: Is the business benefit argument for diversity a new one?Amin Rajan: It is a new way of looking at the benefits of diversity, and the diversity initiatives we have written about have all come about in the past three years. As said, market-driven diversity initiatives are linked to globalization and social changes in our society. Seven out of ten newcomers to the UK labor market today are either members of minority groups and/or women. These groups also constitute very important elements of businesses’ customer bases. This development has only really been recognized over the past five years.Spotlight: You have written that workforce diversity has “ensured a widespread talent famine”? I had imagined the promotion of diversity would widen the available talent pool.Amin Rajan: Our two interpretations reflect the difference between a demand-led and a supply-led market. The talent famine interpretation derives from the impact of demand for good female or minority group candidates which has actually already caused a talent famine. Many of the problems of recruitment of women, for example, to senior positions in the UK are related to increasing demands for excellent women managers. So this is not a supply-led issue.

Your interpretation considers the issue fromthe supply side. While a contraction in population of certain age groups might suggest that encouraging diversity could help bridge the gap, this has proved insufficient because alongside that contraction there has been a huge surge in demand. Competition in products andservices has accelerated the need for talented people as never before. The situation is exacerbated by a fundamental feature of thelabor market in the UK, as noted by employers, which is that the difference between theaverage and the best employee has widened considerably. Excellent candidates are very few and far between.Spotlight: How can corporate leaders instil a culture of diversity?Amin Rajan: First, they need to have a diversity agenda. Second, they need to create instruments such as diversity councils to monitor and implement the agenda. Third, they need to ensure that all managers have an inclusive management style – and this is crucial: the first two initiatives will be ineffective without this because it will not be possible to get the best out of people. The fourth and final imperative is to ensure that diversity features on the performance matrix of all managers so that they are measured on what they do or don’t do.Spotlight: In your recent lecture at the Royal Society of Arts you reiterated the importance of line managers in the successful promotion of diversity policies. What sort of training prepares them for this role?Amin Rajan: The content of training is crucial. Instilling a willingness and ability to listen are important components. Another part of training is to discourage stereotyping, helping managers to understand that this is dysfunctional behavior that can result in missed opportunities. A third element is to drive home the message that in real life each individual is different. Managers should see the world not in their own image, but as it is.

The formal, tailored programmes CREATE devises with its clients are designed to get across these fundamental ideas, and companies which have pioneered such training include Shell, Barclays, Lloyds TSB and IBM.Spotlight: You have noted that the “life experiences of women, ethnic minority groups and the disabled – acquired through discrimination or challenging circumstances – are believed to equip them better to cope with change …” Surely, there are also cases in which negative experiences have eroded self-confidence or inspired cynicism, making some potentially talented individuals less likely to follow up good jobs? How would you reach out to these people?Amin Rajan: The normal distribution curve applies to everything in life and, yes, people whose adverse life experiences have left a negative effect are certainly at a disadvantage in the job market. But it is also true that some people are remarkably resilient, learn positive lessons from negative experiences and emerge better able cope with adversity in later life. Such people are likely to make valuable contributions to an organization.

On the question of who should help those who have not fared so well, I am not sure that it is the responsibility of employers, but feel that it is more that of the community through government initiatives. This said, many companies already do help through government-inspired initiatives for disadvantaged people such as New Deal.Spotlight: What notable examples of successful diversity initiatives could you cite?Amin Rajan: Well, I would certainly cite Shell, Barclays, IBM, Allen & Overy and Sainsbury’s, whose initiatives have been successful in the sense of their showing early positive results, although it is too early to gauge their cultural impact. These are new initiatives that have been running for some three years, whose impact will be felt over the longer period.Spotlight: What do you see as the major challenges of the future for business in terms of harnessing workplace diversity to foster creativity and innovation?Amin Rajan: The main challenge really boils down to “staying power”. While diversity initiatives are important and have the backing of many top business leaders, there is always the risk that, with a change of leadership or market environment, interest or determination will wane. But, if momentum can be maintained, we could see some very exciting results.

The second challenge is the extent to which organizations are able to make a business case to line managers, and the third challenge is that of creation of a national pipeline. As a business you can introduce as many initiatives as you like, but if there is no pool of people to take up the jobs on offer, such exercises are pointless.

Harnessing Workforce Diversity to Raise the Bottom Line by Professor Amin Rajan, Barbara Martin and Jenny Latham is the first study of its kind to assess the business benefits of diversity. The study was conducted by CREATE with funding from the London Central Learning and Skills Council, the London Human Resource Group, Deutsche Bank and Allen & Overy. CREATE can be contacted on +44 (0) 1892 526757 or visit www.create-research.co.uk