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Uniform businesses are missing out on talent

29 September 2017 by Simon Osborne

Uniform businesses are missing out on talent - Read more

We must work harder to boost diversity, says Simon Osborne.

Writing in The Times this August, business columnist Alexandra Frean said a ‘shocking’ lack of racial and ethnic diversity means that companies are missing out on talent.

Having recently addressed a room of senior in-house lawyers at a Law Society event who were seeking advice on how to access the boardroom – many of whom were from a BAME background and who told me personally of some of the difficulties getting where they are today – I can only concur.

According to Frean, only 6% of management jobs in the UK are held by ethnic minorities, less than half their proportion in the working-age population, and 53% of FTSE 100 companies typically use only one race (white) on the customer-facing pages of their websites.

This is a problem because it is unreflective of British society and is unrepresentative of the international markets in which companies operate.

The lack of diversity is also hurting businesses’ operations. As the Financial Reporting Council wrote in April 2016: ‘Diversity is as much about differences of approach and experience, and it is very important in ensuring effective engagement with key stakeholders and in order to deliver the business strategy.’

With Sir John Parker’s report into ethnic diversity revealing that only 1.5% of directors in FTSE 100 boardrooms are UK citizens from a minority background, and that more than half of FTSE 100 boards are exclusively white, companies do not reflect the ethnic diversity of the UK, or the stakeholders with whom they are seeking to engage.

This is an issue that needs to be taken seriously.

The lack of diversity at the top of companies can be damaging to staff morale and productivity because it can breed a ‘them and us’ attitude.

Recent research by DRIVE and Green Park showed 82% of respondents believe there is an institutional prejudice against ethnic minorities in the UK workforce. If employees feel that their ethnicity is considered a barrier to progress, why would they want to give their all; and yet they do.

“The business benefits of making your company an open, inclusive place for people from any background are well known”

Furthermore, it means that the UK’s reputation as a meritocracy may be seen as illusory if employees from minority backgrounds do not believe that if they work hard they can make it to the top.

The business benefits of making your company an open, inclusive place for people from any background are well known.

A board that is committed to identifying, attracting, retaining and promoting the best talent will have a strong base on which to build a talent pool of future corporate leaders. Proactively building diverse boards will also yield benefits from the constructive challenge that people from different backgrounds with different experiences and perspectives can bring.

The examples set by the Davies and Hampton-Alexander reviews, which have prompted improvements in gender diversity, show how embedded cultures can be nudged to change.

As Pavita Cooper argues in our interview this month, the same needs to happen with ethnicity so companies can be sure they are drawing from the fullest talent pool and benefitting from wider experience.

Globalisation means that companies need to engage with a more diverse range of stakeholders. Boards should be aware that sales are increasingly made outside the UK and that customers more often want to align themselves with brands that reflect their ethical concerns, as shown by a study from Morgan Stanley last year.

Investors are also pressing on this issue. John Rogers, chairman and chief executive of Ariel Investments LLC, and a board member of McDonald’s and Exelon, founded the annual Black Corporate Directors Conference back in 2002.

It brings together African-American business leaders to focus on their role in corporate governance and Rogers feels that African-American investors and asset managers can help to improve ethnic diversity.

In the July/August issue of Black Enterprise, Rogers said that if asset managers and other firms demand that companies in which they invest ‘look like America and live up to values they say they care about, [the companies] will change’.

By requiring inclusivity among portfolio companies, his firm Ariel has successfully diversified corporate board and leadership positions. This is something that UK companies need to take note of.

Regardless of external pressures, a culture that fosters genuine diversity works to the long-term benefit of both the company and society. Companies seen as out of touch or unrepresentative of their staff, customers and the communities they serve risk an early demise.

With 20% of the UK population expected to be of non-white ethnic origin by 2030, rising to 30% by 2051, Sir John’s call for ‘Beyond One by ‘21’ is the least we should demand.

Simon Osborne FCIS is CEO of ICSA: The Governance Institute

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