Strong leadership accountability and capabilities has emerged as the key common denominator among diverse and financially successful companies, according to new analysis from Small Business Prices.

The top 25 UK companies in the FTSE 100 with a larger number of women on their board on average scored higher than those in the bottom 25 in all categories which include: culture and values, diversity and inclusion, work-life balance and career opportunities.

Furthermore, a report published in 2020 by McKinsey highlighted how companies in the top quartile for ethnic diversity on executive teams were 36% more likely to have above average profitability in 2019 than companies in the bottom quartile, up from 33% in 2017.

However, as McKinsey’s report points out, progress to improve diverse representation in business – particularly at leadership level – remains slow due to a lack of a “systematic approach” and “bold steps to strengthen inclusion.” McKinsey’s data also shows that gender diversity at leadership level moved up just one percentage point to 15% in 2019 from 14% in 2017. Executive representation globally of ethnic minorities fared only marginally better across the same period rising to 14% up from 12%.

The results have led the consultancy to recommend companies to “not only strengthen the inclusive-leadership capabilities of their managers and executives, but also more emphatically hold all leaders to account for progress on diversity, equality and inclusion (DE&I).”

Is money the answer?

Some companies have chosen to make leaders more accountable for DE&I by tying senior bonuses to progress. PWC’s 2022 global CEO survey showed how 11% of global CEOs have gender representation targets in their annual bonus or long-term incentive plans, while 8% have the same for racial and ethnic diversity targets. 

One company taking this approach is global media and advertising network Dentsu. In 2021 it set a target to achieve gender parity at all levels of business with its £500m revolving credit facility (a flexible financing arrangement that allows the borrower to withdraw, repay and withdraw again). If the targets are met, the company receives a discount from its financers, and if not, they pay an interest penalty. C-suite bonuses are paid out (or not), accordingly. One of the targets is to achieve 50% female leadership by 2025, up from the present senior female representation of 35%, resulting in a mean gender pay gap of around 24%.

Dentsu’s chief sustainability officer, Anna Lungley, says the structure creates a “powerful financial incentive for the business to prioritise the delivery of our strategy. This has created visibility and sponsorship across the network, and importantly created an understanding and fluency around the business case for gender equality.”

She adds: “It’s already making a difference – we’ve seen regional, functional, and service line strategies align to our priorities. This is important: as one of the world’s largest digital media and communications networks, we have the ability to shape business models and influence human and societal behaviour – both are key to creating the economy and society we need to thrive.”

Hollow initiative: When securing senior support at all costs is what matters

Critics of this approach believe financial rewards undermine genuine motivation. However, as Dillon highlights, a lack of leadership buy-in can make pushing an initiative virtually impossible, arguing the case for securing senior support at all costs. 

Dillon is the founder of return to work programme specialist Inclusivity Partners, which helps companies like Shell, Virgin Money, Nomura and others to place candidates – largely women – who have been out of the workforce for two years or more. In one case, Dillon placed a candidate who had been out of the workforce for 17 years. 

“Ultimately, it does come down to an organisation’s leadership at the top saying, ‘We're going to make this work and we're going to do it,’” says Dillon. “For example, with Nomura, I met with the chief technology officer three years ago about launching a returners programme. He was at the end of a big boardroom with all men, not a single woman. And he turned around to his colleagues and said, ‘We're doing this.’ And that was that, there was no room for negotiation. If you don't get them at the top, that's when it becomes really hard.”

As a result, the returners programme Nomura developed with Inclusivity in 2019 is part of its plan to increase female representation in the business to 33% by March 2022. A statement on its website said it had reached 31% from 29%. It is also at 14% senior female representation, with a current goal of 19%.

Avoiding a vicious cycle

A lack of leadership DE&I advocacy could also land companies in a vicious cycle of not being able to attract diverse talent, as candidates may interpret that as a closed, stagnant culture. That’s why Haifa Barbari, executive vice president of integrated strategy and creative products at tech and gaming marketing agency Dialect, who is one of three female members of a board of six, has turned down roles at companies where leaders were not demonstrably moving forward with DE&I.

“When I was interviewing, I always researched the company, who is on the leadership team, and how long they've been in their roles. If there was only one female on the leadership team, or no other diverse representation, that would be a red flag for me,” she says. “I’d be open to a first interview, and have the conversation about, what is the vision of the organisation? What are the values, the culture? What does this mean as a leader in this role? And how do we shape the future? What is the plan to evolve as a business?

She adds: “If there wasn't a tangible DE&I plan from leadership all the way through to interns, then I wouldn't take a second interview. Until there's an authentic desire to change, then why would I go there? I don't feel like I’ve missed an opportunity to make a difference - those companies were not ready.”

Barbari is far from an anomaly, but part of a wider cohort of women who are increasingly prioritising joining companies with diverse leadership. “People are feeling more empowered to put themselves first and find the right environments, including environments that are diverse and have female representation because we want to grow our careers, and we want to influence culture. I'm hearing this across the board in my networking groups,” she says.

Making criteria clear

Although companies should address how they can advance diverse talent into senior roles to keep DE&I accountability at leadership level high, they must, as McKinsey caveats, ensure “a level playing field” through clear criteria and measurement. “They should deploy analytics tools to show that promotions, pay processes, and the criteria behind them, are transparent and fair; de-bias these processes; and strive to meet diversity targets in their long-term workforce plans.”

The plethora of data out there doesn’t lie when it shows that encouraging more diversity and inclusion in your business boosts performance. 

Research from McKinsey in 2020 revealed that large companies in the top quartile for ethnic and cultural diversity outperform those in the fourth quartile by 36% based on profitability. That’s down to a broader talent pool, stronger brand image and better insight into a wider range of customers. 

But it has also become clear over the last two years, in which social movements like Black Lives Matter have proliferated, that more work on inclusivity is needed both outside and inside organisations

A recent survey from tech group Datasite revealed that although 63% of people working in M&A said workplace diversity was important to them, 21% said they were unsure how to show allyship to people with diverse backgrounds.

L&D in focus

To address this, experts suggest a bigger focus needs to be placed on workplace learning and development programmes to embed a more inclusive and diverse culture and educate staff to have different conversations around the subject.

“Workplaces can move the dial on inclusion by first tackling systematic issues in an organisation, related to processes and systems. But second, it is around training and development, and working on people's understanding, knowledge and behaviours,” says Rachael Wilson, managing director of diversity consultancy EW Group. “You end up with a more informed, knowledgeable workforce who feel more confident speaking up and spotting disadvantage.”

Ruth Kudzi, a learning and development expert, describes this as cultural change. “It goes beyond saying, ‘Yes this is an inclusive place of work,’” she says. “It needs to be embedded through training. How are you going to be more inclusive and diverse? What skills do you need to develop? How will you support people post-training?”

Accessibility is key

The first part of ensuring better inclusion is to make sure that everyone in an organisation is invited to, represented by and able to engage in learning. That means every employee being offered the chance to take part in the programmes from the most senior leadership to junior staff. 

“We carry out all staff training programmes that reach everyone within an organisation, but the most important group are the group that line manage others, that's where the bottlenecks are within an organisation and they are a critical group; they bring to life the policy and processes through living it and communicating it within an organisation,” says Wilson. “They're making decisions about how talent is spotted and rewarded and how they can progress.”

“People need to know what inclusion is and what inclusive practices look like throughout the business. You want to change how people do things and the language they use”

At innovation consultancy Ayming, Scott Ward, partner of people, performance & development, says senior leaders are also encouraged to participate in every programme so culture can be changed from the top down.

Ward says its employee  programmes are also designed with a diversity lens considering the language and nuance of message for people from different backgrounds and neuro-diversity abilities. “We change all of our programmes to suit the specific learners and their objectives. It’s about removing the barriers of entry and making learning absorbable for all,” he explains. “It’s not about making yourself feel clever and articulate.”

He stresses the importance of digitalising L&D -with multiple language functions - making it even more accessible to all on smartphone or computer. “But if you can’t afford Wi-Fi at home or have enough credit on your phone then we ensure that you can complete the learning offline as well,” he adds.

Putting it into practice

Typical L&D programmes focused on D&I can take the form of group sessions either face-to-face, online, one-on-one or small roundtable or group discussions. Affinity groups – people who share a common identity characteristic such as religion – are another area where L&D programmes can be run.

Markita Jack, VP head of diversity and inclusion at Iterable, stresses that these groups do not remain closed off. “Our affinity groups and others at Iterable discuss and collaborate remotely on Everyspace, an employee engagement platform to connect distributed teams through internal communications, communities, and events,” she says. “ We often host book clubs, DE&I conference sessions and more on Everyspace.”

Typical programmes cover specific issues such as introductions on equality and diversity and making recruitment more inclusive, improving internal communications and operations, tackling unconscious bias and reverse mentoring to enhance allyship and advocacy. 

“People need to know what inclusion is and what inclusive practices look like throughout the business,” says Kudzi. “You want to change how people do things and the language they use.”

Life stories where employees describe their own experience of work and home are also powerful in building empathy and understanding. “It’s about being more aware of those around us, and the appreciation of what people can offer based on their background,” Ward says. “On all of our learning programmes we create story-based exposure to help these issues come to life and encourage communication.”

Delivering results

They can also deliver results. Nasdaq listed Cimpress’ range of L&D programmes includes remote learning so staff “can learn skills from anywhere, at any time,” and collaborating with the Mom Project in hiring and re-training mums. “Many employers are missing out on talented and creative women by ignoring mothers and are a testament to the inclusive culture,” says Brittany Sohns, manager, L&D at Cimpress. 

She adds that these programmes have resulted in a decrease in female attrition rates from 23% to 14% and an increase in female key leadership hires.

Kudzi believes more companies will benefit if they get L&D right. “Great inclusion is personalisation and realising that everybody in the business has got different needs,” she says. “You have to embed it. It’s no good just training once a while. Everyone needs to buy in.”

Leadership buy-in for diversity, equity and inclusion (DEI) programmes is heavily dependent on going beyond the theoretical business case. It requires providing insight into the organisation’s DEI baseline and creating practical data-driven action plans to deliver measurable progress.

According to figures from Gartner, mentions of DEI on S&P 500 earnings calls have soared by 658% since 2018. That’s not just because it is arguably the right thing to do, but DEI programmes provide a strong foundation for navigating a complex new landscape of changing workforce demographics, hybrid work environments and growing talent wars.  

According to the 2020 ‘Diversity Wins’ study from McKinsey, companies in the top-quartile for ethnic and cultural diversity outperformed those in the fourth quartile by 36% in terms of profitability. A recent MIT Sloan survey of 34 million US workers who left their jobs between April and September 2021 found that the top reason was toxic corporate culture, particularly non-inclusive work environments.

The first step to a well designed programme is to establish your organisation’s DEI baseline and identify what micro-cultures and trends exist within it. Leaders can get too bogged down in believing that HR or demographic data is the only gauge of DEI health. “You may be getting more diverse people through the door, but they won’t stay if the culture isn’t there and they do not feel free to be their authentic selves,” says Harper Wells, chief compliance officer at Learning Pool. “Leaders need to be front and centre of measuring allyship, inclusion, and the readiness of their employees to interrupt bias across the whole organisation, not just rely on the HR department to deliver DEI.”

Leaders who want to measure DEI readiness and elevate progress within their organisations post-pandemic should look at the Royal Air Force for inspiration and direction. The continuous evaluation, immersive adaptive training and checklists every pilot goes through every day of the year make flight training “pervasive and perpetual.” Organisations need to do the same with DEI and measure readiness for every employee while providing safe practice and coaching to shape neural pathways until becoming a DEI ally is almost “muscle memory” for each employee.

“It is about cycles of training and response, simulation and feedback, and measuring and adapting to how each employee performs,” says Wells. “It’s employees thinking about DEI day after day after day.Just like those pilots, active simulation and coaching must be provided to help employees uplevel their readiness to be allies and interrupt bias constructively” she says.She advocates for intelligent e-learning programmes as they provide a safe, self-driven space that empowers employees to learn how to do the right thing at the right time.

“It means that in a real meeting, for example, where an employee feels like a colleague is being marginalised or not listened to, it is easy and almost instinctive  for the employee to effectively call attention to their colleagues' opinions or ideas to drive inclusion because they have done that in a digital simulation before .”

Wells says that leaders need to be armed with predictive data rather than ‘hindsight’ metrics to commit to a DEI strategy. Leveraging behavioural insights from these types of training simulations can help eliminate inaction or apathy. “You can listen to a leader’s town hall speech saying, ‘We need to focus more on DEI,’ and nod and agree and nothing really changes. But if that leader comes in with behavioural data from adaptive training saying, ‘25% of us think it's ok to use this kind of language.’ It then becomes a ‘my friend has a problem’ type discussion that opens up two-way dialogue.” The behavioural insights also reveal where microcultures within a business may reside, as line managers often drive their own values within their teams. “You discover where the gaps are prompting a more focussed than generic response,” Wells adds. 

Like the RAF, Wells says, DEI needs to be integrated into the everyday fabric of the organisation, across all its operations. “Once everyone can rally around a defined problem statement, leaders can give managers and employees an array of tools and learning pathways to tackle these biases both in e-learning, group training, discussions and DEI groups, but also self-study to drive effectiveness and continuous measurement.” 

She adds: “Some businesses are still taking an ad hoc approach to DEI, inviting consultants in or booking a speaker once or twice a year. These can be incredible sessions, but after a period of introspection people forget. There can also be a focus on definitions and types of bias rather than teaching employees how to effectively interrupt it.”

She calls on leaders to truly understand the business case, define how DEI fits into their overall organisation’s mission, vision and values, and commit to a well designed strategy that goes beyond HR systems and processes and and focuses on the training and awareness of every employee to bring the DEI vision to life and build a more embedded DEI culture. 

“Having a commitment to DEI is only the beginning of the story. Leaders need to communicate a vision, utilise a measurable framework that can be rolled out across the broader company– and focus on adaptive training, leadership and manager engagement in addition to updated systems, processes and controls. The journey of change begins with every employee learning more about themselves and each other through self study and practice. It is about how the longer-term DEI goal ties into each business practice. If you can’t do that, it will always feel too foreign or be just an empty value statement for employees.”

Diversity, equality and inclusion (DE&I) accountability among middle managers is one of the biggest challenges an organisation can come up against when moving from strategy to implementation, as McKinsey research highlights. 

Stephanie Dillon, founder of Inclusivity Partners, found that in advocating for a fairer business, educating managers is equally as important to DE&I progress as ensuring the intention is genuine when seeking to collaborate with corporates on boosting senior female representation.

Dillon, whose return to work programmes assist people who have had a break of more than two years, says: “While it ultimately comes down to leadership to launch these programmes, it then comes down to managers to make them work. Returners going back into a career after time away will be more successful when working with managers who have thought about it, and put in place structures and processes to accommodate and support returners. 

“A lot of organisations don't have that structure in place, and returners, as well as traditional new joiners, can have a wobbly start if they've got a manager who's got no process or structure. It definitely makes a difference.”

Helping managers keep up with new initiatives

Equipping managers with the right tools to adapt to new programs has been key for Xero, the small business accounting software platform, particularly as they have transitioned towards a skills-based hiring approach over the past three years, and stripped the requirement for a university degree away from many of their roles.

Xero is seeing this approach pay off in terms of creating a more diverse company with greater representation of ethnic minorities. Across the second half of 2021, the company saw a 7% increase in racial and ethnic diversity amongst new hires in the US compared with the first half of that year. “Historically, hiring based on degree exclusively has perpetuated discrimination,” says Jana Galbraith, the company’s executive general manager for people experience partnering.

Middle managers are a key part of our leadership structure and often the glue that holds our overall strategy and efforts together

But it isn’t as simple as just deleting a bullet point from a job advertisement, Galbraith notes. Training interviewers and hiring managers to reduce bias in the selection process is one of the many aspects related to hiring and corporate structure that companies have to change when moving towards hiring for skills, rather than a university degree. Another, she adds, is “challenging the perceived value of the status quo” by gaining buy-in across the business to support skills-based hiring decisions – a mindset shift that isn’t always easy to achieve.

“We've been on a journey for the last couple of years, looking at the diverse and inclusive nature of our organisation, realising where there were gaps and how it starts from the top down, but how that also gets pushed down to managers and individual contributors,” says Galbraith. 

Making guidelines and resources available

Although training is a crucial component for helping managers deliver against DE&I goals, they also need clear guidelines and access to helpful resources, recommends Vanessa Stock, co-founder and chief people officer at presentation templates platform Pitch. Pitch has recently released a presentation collection for Pride month, covering topics like allyship, inclusive language, and pronouns for managers to use for themselves and with their teams. 

This follows a previous collection dedicated to female founders, in which Arianna Huffington’s vision deck for Thrive, the wellbeing platform she founded, has received nearly 17,000 views. Pitch plans to represent more underrepresented groups with more detailed content in upcoming presentation collections further aimed at supporting managers in becoming more DE&I savvy.

“If you make DE&I part of your mission, then it's a lot easier when you hire managers to make sure this is a central part of their mission too to embrace diversity and equality across the organisation,” says Stock.

“When you're scaling, you have to continuously reiterate on your DE&I consciousness and focus, and I think there's a big opportunity for us in particular to make this a central part of our manager development processes.”

Holistic tracking versus individual measurement

What, then, are the measures of success for managers' involvement in cultural change? The trend appears to be towards holistic tracking that assesses a company’s wider DE&I trajectory, and attributed to specific initiatives rather than individual people.

General Motors (GM), for example, has a number of key DE&I metrics: an Inclusivity Index score, diversity in the overall GM population and diversity in the overall executive population, as well as also measuring hiring, promotions, performance assessments, candidate pools and attrition as indicators of equity. In 2021, the company averaged over 20 hours of DE&I training for each employee, and achieved a level of 31.9% of women in top management positions, up from 30% in 2020.

Despite measurement not going as far as analysing the role of managers in DE&I, GM’s  executive director for workforce strategy, Tammy Golden, says giving managers a direct feedback line to leadership helps “identify opportunities to make us a better company.

“Middle managers are a key part of our leadership structure and often the glue that holds our overall strategy and efforts together,” she adds.