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Dream team better than quotas

Roland Berger has published a study about diversity & inclusion management. Read the abstract and most important results in this paper.
Most important points:

- Lack of management strategy for diversity & inclusion (D&I) is costing companies in Germany around EUR 21 billion a year

- Holistic D&I initiatives promise per capita HR savings of more than EUR 10,000 a year

80% of survey respondents recognize the importance of D&I

- Holistic D&I policy has many benefits for companies: greater staff creativity, access to new markets and fresh capital, fewer legal disputes, positioning as a preferred employer, and more attractive to top talent

- But 80% of companies find it difficult to identify the reasons for a lack of diversity

- 70% are skeptical about quotas for minorities

As many as 80% of the large-scale international companies surveyed are aware of the importance of diversity & inclusion (D&I) as a management issue. Changes in legislation and demographic trends are forcing them to take it more seriously. But there are a number of internal factors preventing the rollout of effective D&I initiatives: management behavior, corporate culture and a lack of appropriate guidelines and processes in HR. This situation needs to change, because successful and sustainable D&I management would bring annual savings calculated at almost EUR 21 billion for German industry as a whole. And not only that, it can also deliver clear-cut competitive advantages for individual companies. This finding emerges from a study by Roland Berger Strategy Consultants entitled "Dream team better than quotas – Successful diversity & inclusion management".

"The public debate on legally binding quotas for, say, women in executive positions, doesn't get to the root of the problem," says Professor Björn Bloching, Partner and Head of the global Marketing & Sales Competence Center at Roland Berger Strategy Consultants. "The important point is to understand the causes of a lack of diversity and integration within a company and then remove those causes permanently."

Holistic D&I strategy delivers real benefits

The Roland Berger Strategy Consultants survey covers forty large corporations, including companies from the automotive, construction, energy, chemical and electronics industries. It shows that four out of five businesses believe that diversity and inclusion management is important. "D&I is not just about doing more to integrate women, older employees and colleagues with a foreign background," explains Carolin Griese-Michels, Head of the Practice Group Corporate Responsibility at Roland Berger. "Recognizing the specific skills and competencies of each employee and their individual ways of working also forms an important part of a holistic D&I strategy aimed at delivering major benefits for the company."

By better integrating certain groups of employees, companies can, for instance, achieve faster access to new markets and customer segments. And their different ways of working and different skill sets are important drivers for innovation. Moreover, successful integration allows businesses to avoid legal disputes. Companies with good D&I policies are perceived as good employers by the public, their employees and potential recruits. They have less staff fluctuation and become more attractive to top talent. HR costs can then be reduced along the entire lifecycle of an employee – from hiring through to final departure from the company. These savings are calculated at around EUR 10,000 per person. Given that there is an annual fluctuation of approx. two million employees in Germany, this means potential savings of about EUR 21 billion a year for the economy as a whole.

Diversity without quotas

Regarding the main drivers pushing businesses to adopt D&I measures, 60% of the companies surveyed mention government legislation and the increasing heterogeneity of the modern workforce. Although companies recognize they still have a lot of catching up to do in terms of diversity, 70% of respondents argue against introducing legally binding quotas for minorities. "In the worst case, firms would have to hire or promote someone representing a minority even though they lack the necessary qualifications for the job," says Griese-Michels, explaining the fears voiced by companies. "This would undermine the principle of rewarding performance." Managers also point to problems in defining terms. For example, it would be very difficult to set a target "proportion of women in senior management" for all companies, because the demands vary from business to business and even among the different divisions within a corporation. "We shouldn't compare apples and oranges. That won't help women get ahead."

Although the overwhelming majority of respondents argue for greater diversity in their company, 80% have difficulties when it comes to recognizing the internal causes behind their lack of diversity. The experts at Roland Berger have identified a number of factors at work here. For instance, women and foreigners are more likely to pass on opportunities to boost their career, such as taking a post abroad. This is partly because they are offered such career accelerators less frequently, and partly because such jobs are not configured to their needs. For example, companies rarely make it easier for the employee's partner to join them abroad by arranging an attractive offer.

Reasons for a lack of diversity

Another part of the problem is that companies do not enable their people to find an adequate balance between family and work. "Sometimes, companies haven't put in place any instruments for this," says Griese-Michels. "In other cases, the employees themselves don't take advantage of what is on offer because they fear disadvantages for their career." Another aspect is the hiring procedure. Criteria such as the gender, age or ethnicity of an applicant still play a decisive role – even if unconsciously. This often results in what can be called "self-cloning": executives tend to choose people like themselves. Since selection panels are frequently homogenous in composition, the candidates who fit the pattern are more likely to be approved.

"Only those companies that identify and deal with the internal causes of their diversity deficit, and change their corporate culture accordingly, will find the good people and retain them as career staff," concludes Roland Berger Partner Björn Bloching. "Highly skilled and committed staff are indispensable for a company's market success – and a measurable competitive advantage."