CDO report: Room on board
There is growing pressure for firms to effect change from the top. Karam Filfilan investigates how diversity has entered the boardroom and what it means for morale and performance.
Chief diversity officers (CDOs) are not new. As far back as 2007, Fortune 500 companies such as Johnson & Johnson, Citi and General Electric had already introduced diversity and inclusion leaders to the C-suite, complete with big budgets and expansive remits.
Reporting to the executive committee, or in some cases the CEO themselves, this first wave of CDOs saw their role as both a developer and diversifier of talent and, ultimately, a driver of business performance. “It’s about leveraging the new streams of talent around the world and responding to the changed face of our customers,” claimed then General Electric CDO Deborah Elam in an interview with Harvard Business Review.
Fast forward to the present and CDOs are once again being talked of as the must-have C-suite executive. Data from LinkedIn shows that the number of leadership titles with the word “diversity” in them has exploded in the past five years. Head of diversity job titles have more than doubled (up 107%) between 2015 and 2020, director of diversity titles have grown 75% and CDO roles 68%.
By 2019, 47% of S&P 500 companies had hired a CDO, with almost two-thirds having been appointed in the preceding three years.
There’s no doubt social issues have had a big impact on how businesses view diversity in the workforce and how they’re viewed in turn by customers and clients. The Black Lives Matter protests following the killing of George Floyd in May 2020 forced many businesses to act. For some, this took the form of a public show of support; but others chose to look inwards, promising to change how they recruit and operate.
In fact, by November, job postings for diversity and inclusion roles were up 54% on pre-Covid levels and a massive 245% on those available at the height of the pandemic-induced slump, according to Glassdoor. For all that, there are no quick fixes when it comes to creating more diverse workplaces.
“Having constructive conversations is key to understanding the issues we can solve,” says Sonia Cargan, Chief Colleague Inclusion and Diversity Officer at American Express. The financial services giant held a series of global conversations around race, social inequality and racism for its people last year, designed to normalise what were previously seen as difficult conversations and giving employees a space to talk.
While the series was a success, Cargan cautions other leaders against thinking of diversity as a checkbox that can be ticked by holding a single event. Instead, American Express chose to expand on the conversations to include raising awareness of other marginalised communities, as well as creating a specific department driving long-term cultural change on diversity and inclusion.
“Conversations and ideas must be actioned to ensure that change is moved forward and progress is being made,” observes Cargan. “When we feel that we’re included, valued and respected, we are empowered to connect on a deeper level, contribute more effectively to our team and are more comfortable in challenging the status quo.”
After initially providing inclusive leadership training exclusively to senior management, American Express extended the learning to all employees in 2019 with the aim of ingraining inclusivity into its culture at all levels. It also launched a voluntary colleague self-identity programme in 2020, with which employees shared diversity data with the organisation confidentially, including information on gender and sexual orientation. The aim is to better understand American Express’s people with a view to providing training and diversity strategies that can make the organisation more inclusive, says Cargan.
“The importance of fostering an inclusive culture at work and in our communities has never been greater. Inclusion is at its most powerful when our colleagues feel seen and heard, and that they truly belong,” she adds.
It’s one thing to agree that a more diverse workforce is desirable, but another to ask executives to invest resources and finance into people programmes at a time of great stress on business, especially when you consider that the average UK salary for chief people officer or equivalent is £97,000. So, what is the business case for diversity?
A 2020 McKinsey research paper called Diversity Wins looked at the link between the executive team diversity and business success of more than 1,000 companies across 15 countries. It found that companies in the top quartile for gender diversity on executive teams were 25% more likely to have above-average profitability than companies in the fourth quartile. The case for ethnic diversity was even stronger, with those in the top quartile outperforming the bottom quartile in profitability by 36%. In fact, the greater the representation, the higher the likelihood of outperformance.
“The things we have been saying for many years about the business case for diversity are coming true. People used to think it was fluffy HR stuff, but when your client wants to know the ethnic profile of the team that will be working on their engagement – that’s the harsh reality of the current situation,” says Sarah Churchman, Chief Inclusion, Community and Wellbeing Officer at PwC.
To this end, PwC has introduced measures to make their business leaders more accountable, with financial penalties if they fail to meet their diversity targets. The aim is to get leaders to model the right behaviours, not just say them. One way PwC encourages this is by getting employees to experience discrimination themselves – albeit through virtual reality training.
“We believe that one of the core skills of an inclusive leader is empathy. You can only do this by putting yourself in someone else’s shoes to get that emotional charge to understand what [discrimination] is like. So, we’ve developed some virtual reality training where you experience the daily microaggressions that take place every day,” says Churchman.
The professional services firm has also created forums for their employees to discuss their own experiences with discrimination. In an increasingly globalised world, events such as Floyd’s brutal death and the pandemic affect employees regardless of where they are based, and their employers have a duty of care, argues Churchman.
“Our senior partner did a livestream with our black partners about their experiences, such as sitting on a train and being aware that people didn’t want to sit next to them because of their skin colour,” she says. “Then, at our staff diversity council, a colleague who was Chinese discussed the hideous aggression they faced on the streets because of the pandemic.
“How can you experience that and then come to work and deliver your best? You don’t leave that at the door on entering the building, so it’s about creating an environment where your people are comfortable raising their experiences and then supporting them.”
Kelly Hartman is Chief Wellness and Engagement Officer at payment solutions unicorn Flywire, having previously served as Chief People Officer until January 2021. She agrees with Churchman that modern businesses can no longer stay quiet on social issues if they want to compete. “Diversity affects the clients you get, the investment you receive (Flywire completed a $120m Series E round in February 2020, taking its valuation past $1bn) and the people who want to join you,” she says.
Founded in 2011, Boston-based Flywire has rapidly scaled to more than 500 employees across 12 countries, with a further 50 employees working remotely across the globe – including Hartman, who is based in Antigua. So, how has she ensured all employees are included in the organisation’s culture?
“No one size fits all,” she says. “What you need in America might differ greatly from what you need in the Middle East. Analyse your needs by department and location before deciding where you want to intervene. Then, it’s about how you include the people you bring in and make them feel comfortable. How do we have conversations about differences?”
Like PwC, Flywire hosted employee forums to discuss concerns around discrimination during the Black Lives Matter protests and the pandemic. While Hartman welcomed the “huge” turnout and response, she cautions leaders to expect difficult conversations.
“As well as Black Lives Matter, we also did forums for Brexit and the US elections,” says Hartman. “How do you give respect to people’s opinions if you’re strongly opposed to them? You have to understand that everyone is different, set ground rules of respect and allyship, and stop judging your people. It’s about stopping these conversations being taboo. We want our people to be their authentic selves and we want to maintain each region’s culture and what makes them unique. As long as we’re living by the same Flywire values, that’s fine.”
Equality, diversity and inclusion in the workplace are about more than policies, programmes and quotas. Instead, it’s about creating a culture based on your organisation’s values that allows your people to be themselves. Hiring a CDO is an excellent way to make a start, but to truly build an inclusive culture everyone needs to be… well, included – from the CEO to the newest hire. It’s an investment worth making.