The diversity squeeze as you climb the corporate ladder

The outline of this post covers 1) Why diversity is important for business and 2) Data that shows how diversity gets squeezed out going up the corporate ladder.

Let’s start with point #1: Why is diversity good for business?

There is a lot of research that shows why having gender and race diversity in staffing and leadership is good for business.

There is a strong correlation between disruption, innovation, and business performance and diverse leaders. According to the World Economic Forum, BCG found that companies with more diverse management teams have 19% higher revenues due to innovation.

HBR, McKinsey, and Deloitte compiled research that show ten benefits of diversity in the workplace including higher innovation, increased creativity, and increased profits.

Other diversity & Inclusion studies demonstrate that inclusive hiring will help companies succeed in the future. “The millennial and Gen Z generations are the most diverse in history: only 56% of the 87 million millennials in the country are white, as compared to 72% of the 76 million members of the baby boomer generation.”

I invite you to be curious and look at more studies and research about the impact of diversity and business.

Let’s dive into point #2: Where does diversity tend to get squeezed out going up the corporate ladder?

I have had the privilege to work with lots of big brands over the years. As I have done a lot more self reflection lately around the topic of diversity, I started to think more about diversity within corporate hierarchies. Is it my imagination that in the sea of cubicles and open floor plans, I notice a lot more minorities as a percentage of the workforce compared to the executive levels? Most of the big companies I have visited have the elusive “executive: floor(s) or wing(s) and I am pretty sure, based on what I have seen, it does not reflect a similar diversity breakdown of the non-executive groups. Again, is this just my imagination?

Thinking as an analyst, I started to do a little research and found some interesting data.

Let’s take a look at this chart by McKinsey & Company from the report “Women In The Workplace 2019” which shows how diversity changes from ‘Entry Level’ all the way up to the ‘C-Suite.’

McKinsey & Company https://wiw-report.s3.amazonaws.com/Women_in_the_Workplace_2019.pdf

To explain the above in a different way, the proportion changes from Entry Level to C-Suite are as follows:

• White Men: +94% change. Proportion almost doubles between Entry Level to C-Suite.

• Women of Color: -78% change. Proportion becomes less than a quarter between Entry Level to C-Suite.

Interpublic Group of Cos . and Dentsu Aegis Network recently explored how US employment figures breaking down the percentage of people of color in advertising agencies. In the chart below, it is easy to just follow the ‘White’ bar go up as you moveup the ladder.

“I don’t think we are where we should be—all you have to do is look at the numbers,” said Michael Roth, CEO of IPG

Some black ad executives say they have heard this story for many years, with disappointing results.

View this IGTV clip on the Daily Show starting at the 4:40 mark.

Not one CEO in this group said there will be either a woman or minority succeeding them. If you have nine minutes, watch the whole thing as it is educational (and funny).

I wrote a post recently to commend sports companies who took a bold stance on racism on their website. Hopefully they will take action to diversify their leadership and not just make bold statements. Someone was quick to comment on the post that the executive leaders of those companies are not very diverse. I researched that claim and he was right. Forbes found lack of racial diversity in leadership from the same companies making bold statements against racism.

“Corporate governance is the guiding arm of a publicly-traded company and is responsible for making sure that the four P’s are optimized for corporate sustainability: people, performance, process and purpose. Diversity and inclusion are driven by the cultural aspects of a company (people and purpose) and the executive board is the primary force influencing corporate governance. The board of directors for Nike is 15% black and 31% female. The supervisory board for Puma is 16% black and 33% female. Adidas’ executive board is 0% black and 17% female.”

Below is the executive team at Nike.

I think it is great they are taking a bold stand against racism. My hope is that actions will follow suit and they will bring diversity to their leadership team.

Like corporate America, similar patterns emerge in the Federal Reserve leadership. Drop off happens moving up the Federal Reserve leadership ladder.

What do we do moving forward?

I do not have great answers. As I have learned a ton in the last few years attending a racial diversity class my wife leads at our church, a great starting place for everyone is empathy, humility, truly listening and getting educated. Hopefully through that process, one will start to have a change of heart and take action for good.

What are your suggestions?