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Spencer Stuart UK Ethnic Diversity Forum

December 2016

Panellists: Sir John Parker, Manjit Wolstenholme, and Ken Olisa
Moderator: Shami Iqbal, Spencer Stuart

In October 2016, Spencer Stuart hosted a panel discussion in London to answer two important questions surrounding the representation of minority ethnic groups in business. The first, why are there proportionally fewer ethnic minorities at board and senior management level compared with society at large? The second, what can be done to build a pipeline inside companies to ensure a broader range of ethnicity at all levels of the organisation?

The Panellists
  • Veteran industrialist, Sir John Parker, has chaired five FTSE 100 companies including Anglo-American and is the director of the European multinational aerospace and defence corporation, Airbus SE. He is chair of the taskforce established by the government to increase ethnic diversity in Britain’s boardrooms.
  • Manjit Wolstenholme is the chairman of Provident Financial group and Albany Investment Trust, among the seven boards on which she sits. She is a former partner in the M&A boutique, Gleacher Shacklock, and former co-head for investment banking of Dresden Kleinwort Wasserstein.
  • Ken Olisa is a non-executive director of Thomson Reuters Corporation, Lord-Lieutenant of Greater London, deputy chairman of the Institute of Directors, as well as founder and chairman of Restoration Partners, which advises young entrepreneurial businesses. Mr Olisa also sits on the ethnic diversity taskforce headed by Sir John Parker.

Ethnicity within the UK population has become increasingly diverse. In Sir John’s opening remarks, he pointed out that in 1970, the number of people from ethnic minorities was only 2% while today that number has increased to 14%. Moreover, the number is likely to rise to 20% by 2030 and to between 35% and 38% by 2050. By contrast, only 1.8% of board directors on FTSE 100 companies can be described as ethnically diverse, and a third of those directors come from seven companies alone.

The paucity of non-white directors among the UK’s top 100 companies is at odds with the number of black, Asian and other minority ethnic groups entering the workplace. As Ken Olisa said, “The problem isn’t about joining companies but the challenge of moving up the hierarchy into senior positions. The easy answer is to state that middle management doesn’t find, recruit or promote BAME people – but it is much more complicated than that.”

Middle managers are not usually part of high-level initiatives to promote more BAME people inside a company, nor are they given the opportunity to show leadership in this area. Their attention is to KPIs and sales figures, not to the promotion of talent among minority groups inside the workplace or even to addressing the unconscious bias that means fewer people from ethnic minorities move up the corporate ladder. The focus on delivering sales number and minimising risk may lead to the misguided assumption that a person whose accent or skin colour or presentation is considered “different” may introduce an uncertainty that could potentially impact the bottom line.

Practical solutions to this are not easy to come by. However, Ken Olisa offered this, “Some companies will ask middle management to place a number of candidates on a short list, then remove the responsibility for the decision from them in the final selection. That way, no single individual carries the responsibility for the choice, if that is the barrier.”

The notion that people with a different skin tone are “different” is part of the problem. “That’s the hardest bit to get over because a person may look different but actually most of them are born in this country, have come through the same education system and are remarkably similar to everyone else. In fact, they are not different at all,” Manjit Wolstenholme explained. “Some sectors are less resistant to difference. In investment banking, for example, you never feel that ethnicity is a hindrance.”

Ken Olisa commented that even the most subtle differences can be detected, and that apparently minor disparities between people are actually the most defining ones. “If you think about normal distributions, normal is that thing in the middle and it doesn’t matter which dimension you choose. If you choose genre, height, skin colour, language, accent, there’s a normal distribution and the closest to the middle is considered the safest, irrespective of the facts.”

Ethnicity may be a factor from the point of view of the prospective candidate, who may not put themselves forward for any number of reasons, from a lack of confidence or from a sense of not fitting in. “If you see people above you with whom you can identify, it gives you more confidence that the organisation is open to diversity because you see others who have made it through,” explained Manjit Wolstenholme. “That’s why role models further up the organisation are so important.”

While some may contend that it isn’t the responsibility of big business to foster social outcomes but instead to maximise value for their shareholders within the law, others would argue that prioritising shareholder value above all other matters is a relatively recent phenomenon. For decades, it was understood that companies played an important role inside the communities in which they were based and in the development of those working within them.

Ken Olisa disagrees with the notion that increasing ethnic diversity at the senior management level is a competing priority threatening a company’s profitability. He argues that the need for ethnic diversity at the senior management and boardroom level may be an issue of social justice, but it is also one of competitive advantage. “Without it, management is not reflecting the customer base or the supply chain, and is risking damage to the company’s competitive advantage. Not being able to access the best talent from the widest pool will also affect competitive advantage,” he explained.

If Sir John’s figures prove correct, and within the next twenty-five years half the world’s population will be located inside nine countries, it makes sense to look for talent in those same locations. However, Sir John set out some guidelines required to make this happen. “You’ve got to get policy settled in the boardroom and a commitment from the chairman and chief executive,” he said. “If you look at the base facts today, that 75% of the earnings of FTSE 100 comes from overseas, you cannot ignore the need to recruit overseas executives and overseas non-executives into those companies.”

Customer and employee representatives are another way of improving the representation of ethnically diverse people at boardroom level, though asking them to hold the board more to account on matters of ethnic diversity seemed to Manjit Wolstenholme more of an indication of a failing board than a sound strategic initiative to improve diversity.

Whatever individual companies decide today, one thing is certain: the leaders of tomorrow have very distinct views on the matter. The demographic often referred to as Millennials or Generation Y are not necessarily accepting shareholder value as the metric by which they judge the merits of a company. “They don’t look at companies in the same way anymore. I think there is almost a mismatch between what is happening at senior levels and what is coming through the pipeline. The reputation of a company, its ethics and what it stands for are very important to them,” said Manjit Wolstenholme.

As for the question of how to create a pipeline of talent from an ethnically diverse populace, it would seem that the first priority would be to ensure the preparation of young people for the workforce. Shami Iqbal pointed out that British children from non-white families are outperforming their peers at school level, and that university participation among ethnic groups is higher than their white British counterparts pro rata. In some demographics—for example, among Chinese British children—even those from the lowest socioeconomic backgrounds are outperforming white British children in the highest socioeconomic group. Manjit Wolstenholme identified the problem, however. “They go to university where it is relatively equal, but then they come to the workplace and see a world which is very different,” she explained.

“Universities, governments and companies need to work together to define what is needed for the next decade and beyond,” said Sir John Parker, who went on to explain that within the aeronautical sector, for example, companies and governments looked at the twenty-year horizon, identified that a lack of engineers was likely to dampen growth, and collectively invested in scholarships for those with physics and maths backgrounds to train in engineering and technology. “That is the sort of joint initiative that you need, the triangle of university, industry, and government,” he said.