Analysis

Mind the Gap – communicating diversity into 2021 and beyond

Following a summer hiatus, several diversity areas have returned to the agenda and many businesses are taking the opportunity to set out what the future looks like.

A mixed picture

Gender Diversity has long been in focus for UK plc, but whilst the 30% Club recently announced that a key 33% target for female representation on FTSE 350 boards had been met, it’s not hard to doubt the speed of change. Female representation in the most senior roles remains low; just 25 of FTSE 350 Chairperson roles were filled by women, and there are more CEOs called Peter than there are women.

Below board level, the Hampton Alexander target for Executive Committees are unlikely to be met with both FTSE 100 (28.6%) and FTSE 250 (27.9%) significantly below the 33% level at last count and 50% of new appointments needing to be female to meet it. Perhaps even more concerning was the recent news that nearly half of eligible employers took the opportunity to not report their Gender Pay Gap this year. This key barometer across all levels is badly needed to maintain an honest dialogue and its absence drew an understandably dismayed reaction across the board.

Meanwhile, whilst firms rushed to show solidarity for the Black Lives Matter movement, recent updates have held up an uncomfortable mirror to UK plc on BAME diversity. The 2017 Parker Review revealed a severe lack of ethnic minority representation and set the target of one BAME representative per board by 2021, but the recent 2020 Parker update revealed “slow progress” with 37% of FTSE 100 companies still lacking any minority ethnic representation. The 2020 update also extended to the FTSE 250, where 69% of boards have no ethnic diversity, highlighting that they should aim to have at least one member from a minority background by 2024.

Increasing the pace of change

To an outside viewer, the targets do not appear particularly stretching given the global talent pool and there is, rightfully, more pressure being applied.

Under its new leadership the 30% Club is now focusing on senior leadership roles and have also now extended their mandate towards ethnic diversity. The CBI’s recently launched ‘Change the Race Ratio’ campaign urges FTSE 350 firms to meet the Parker targets, whilst encouraging the publishing of a clear action plan including a more ”transparent dialogue” with employees, better mentoring and a more diverse supplier base. The stakes were raised further recently when Legal and General wrote to all companies in the FTSE 100 and S&P 500 threatening to vote against nomination committees if there was not one BAME board member by January 2022.

Communicating diversity into 2021 and beyond

Whilst the situation is sub-optimal there is a clear opportunity for businesses to take a lead. Gender and BAME diversity have so far been viewed as two separate campaigns, but largely have the same issues: a widespread view that companies see them as a compliance requirement rather than something mission critical to their business.

All businesses will doubtlessly be reviewing how they increase the diversity of their talent pool. With a range of suggested targets moving closer, and scrutiny likely to increase, we believe there are three things that any organisation should consider when they communicate in the current environment.

 

  • Take a full snapshot of diversity within your business

The external Diversity picture is (necessarily) siloed into Gender and BAME and a range of targets and initiatives, but it’s increasingly accepted that solutions need to be joined up. There isn’t much love for the term BAME and the need for fairer representation goes even further, into disabilities and other societally disadvantaged groups.

This presents a unique chance to take a snapshot across the organisation; Natwest recently surveyed 22,000 staff as part of its Racial Equality Pledge; to review the various external targets and debate what recruitment and mentoring initiatives are worth further focus. Only a business itself knows how it can be truly representative of its community, and how it can translate external targets into tangible policies for staff and customers.

As part of this there may need to be some hard, reflective moments: is this area honestly top of the current Board agenda and does it have a clear owner? Are you among the 4000 companies who didn’t report Gender Pay Gap this year? Or is your company counted as one of the 19% of FTSE 250s who didn’t respond to the Parker Review 2020? If so, why is this the case – a lack of ownership, capacity or focus?

Any business that can be honest about the situation now has a clear opportunity to own the current deadlines, show why it matters to the business and develop personalised targets that run deep into an organisation.

 

  • Give your action plan the profile it deserves

Part of the problem with the reporting requirements, he says, is that publishing an action plan alongside the data is not mandatory. Of those that reported this year, 31 per cent did not submit any supplementary information with their data. “If I reported profit and loss with no commentary, what would that say? Numbers need narrative

[Peter Cheese, CEO, Chartered Institute of Personnel and Development, quoted in Financial Times]

The majority of businesses have a clearly published strategy and KPIs for performance, but many are playing catch up when it comes to sustainability and diversity. To an external (and internal) stakeholder the wide array of targets can be bewildering. It’s the job of any business to show they can draw these areas together into a coherent plan, one that’s underpinned by analysis showing what’s happening underneath the surface in a business, with specific KPIs relating to recruitment, retention and remuneration that ensure accountability.

As part of this, it may be worth analysing the state of play in your wider industry. Recent McKinsey data has shown that more gender-diverse boards outperform their peers by 20%, and when ethnicity is added that number goes up to 35%. Showing the rationale for moving early is a compelling start for any plan.

Any action plan has to be visible, with clearly identified KPIs that can be updated regularly. Change the Race Ratio has called for progress to be published in the annual report or on the company website. This is a great start, but are there chances to go further; making it part of the core mission or values statement, upgrading it into financial results presentations and ensuring it filters into commercial and marketing initiatives?

 

  • Focus on the external talent pipeline

All too often companies say the candidates just aren’t there, without showing their commitment to addressing the underlying causes. As well as direct recruitment, all companies have a responsibility to foster an aspirational environment for all genders and ethnic communities within their industries.

Whilst it depends on sector, it might be worth a check on whether existing CSR activity is aligned to your diversity plan. Whether it’s local community projects, apprenticeships or Women in Tech forums, every sector has its share of valuable initiatives to encourage a greater pool of future candidates. Sky did an excellent job of incorporating this community element into its diversity plan in June.

If you can’t think of an obvious one, there are an increasing number of cross-sector initiatives. The Diversity Project recently launched a cross-sector sponsorship mentoring programme and the 30% Club recently launched Mission Include, an initiative encouraging reverse mentorship for women of colour. Can you take the lead from the boardroom, or offer staff the opportunity to use their skills to get involved?

We’re here to help

This issue is moving fast, but we believe the current situation presents a unique opportunity to change the tone. At MHP we monitor this area constantly as part of our daily media summaries, and we work with a range of companies articulating their sustainability and diversity strategies, which are becoming an increasingly crucial part of investment cases and media enquiries. If you feel you could use some further analysis, support, or just an external view in this area, please get in touch at contactus@mhpc.com

Seven Diversity Strategies We Like

1. Natwest this week outlined its Racial Equality Pledge, with a headline commitment of increasing the number of black staff in senior roles from 1% to 3%. The ten commitments are based on a survey of 22,000 of its 63,000 staff with transparent data shared about how comfortable staff of different ethnicities felt at work. CEO Alison Rose highlighted that the process had involved “having very open and, on occasion, very emotional and difficult conversations with our colleagues about their lived experience.”

 

2. FTSE 100 Halma plc, the global group of life-saving technology companies, has improved female representation on its Board from 18% six years ago to 40% today. Its Executive Management Board is now 63% female and it is also making encouraging progress in executive leadership with 44% of its Divisional Chief Executives – who run its portfolio of companies and lead its acquisitions – being female. This is significant progress, given that neither of these groups had any female representation six years ago. As part of its drive to increase gender representation throughout its 45+ global businesses, Halma has set targets for all 45+ company boards to be within a 40 – 60% gender balanced range.

 

3. Sky launched a comprehensive diversity strategy in June which included clear business targets, a significant contribution to community funds, and enlisting the support of its high profile commercial broadcasting platforms to support the equality message.

 

4. Barclays has a highly visible diversity strategy containing five key pillars of focus with specific action plans outlined for each. The Bank has gone further in linking its commercial priorities, making a commitment to supporting female-led businesses, which have been disproportionately affected by COVID-19.

 

5. Shaftesbury recently topped the FTSE 250 Hampton Alexander rankings, with 67% of its Executive Committee being female. It also includes a strong update in its annual report defining the company’s holistic approach to diversity alongside the progress made against the targets set in the Hampton Alexander Review.

 

6. Peel Hunt has been working hard to raise awareness that working in investment banking is a great career choice for diverse talent from all backgrounds, through a combination of media outreach, grassroots initiatives to attract more socially and ethnically diverse talent, and the work of its dedicated Diversity Committee. This includes enhancing its recruitment processes to further reduce bias and discrimination ensuring a fair process for all candidates, connecting with specialist agencies to attract more diverse talent, as well as working with partners such as Arrival Education, The Brokerage and Women on Boards to promote social mobility, ethnic diversity and gender equality.

 

7. Aviva is a founder member of the Change the Race Ratio and its own plan isolates clear commitments, specific initiatives around internships and mentoring, and a clearly aligned CSR strategy.