What is the cost of bias?

06 August 2013

For decades now, diversity has been on the management agenda, but the terms of reference have been political and legal: affirmative action, equal rights legislation, quotas. In the case of gender, it is often lamented that, despite decades of anti-discrimination legislation, women’s pay still lags behind. Men, and specifically white men, are still dominant in the upper echelons of corporations and government in western economies. A staggering 83 per cent of delegates at this year’s Davos meeting of world leaders were male.

Perhaps, however, the problem is that diversity has rarely been addressed properly as a business issue, and that politicians and lawyers have framed the debate. Talk of quotas and equal opportunities can sound like special pleading or inverse discrimination; an agenda that is unappealing to a commercially focused senior manager – of any background.

Business needs to seize this as a business issue. And it desperately needs a new vocabulary; one that excites the entrepreneur and chief executive. Concepts such as promoting on merit, encouraging ambition, and understanding customers are fundamentally business issues. And they are areas where a more eclectic employee and leadership population will help, in purely commercial terms.

The question can be turned around. Instead of asking ‘Why diversity?’ we should be asking ‘How do we stop limiting our talent pool?’ Getting the right people for the role, and creating the climate in which they can achieve, is the ultimate business challenge. Such a fundamental switch in philosophy would lead, for example, to seeing adaptations for employees with mobility problems as creating an opportunity to harness new talent, not as a cost to the bottom line.

There may be more scope to make the business case, following the spectacular collapse of financial businesses caused by excessive risk-taking of highly paid, over-confident men based in the western financial capitals, as the recent book Masters of Nothing (written by two conservative men, not by feminists) has recorded.

Research also indicates that diverse teams make better decisions – using the term broadly, to describe a range of backgrounds, personality types, ethnicity, gender, and so on. According to Scott E Page, professor of complex systems, political science and economics at the University of Chicago, when everyone in a group thinks in the same way, they tend to get stuck in the same place, as illustrated in this interview for the New York Times. Diverse teams are more effective at problem-solving even than a panel of relevant experts – provided that they listen to one another.

In western economies, the highly educated population is becoming more diverse by ethnicity; while in recent years women have begun to outnumber and outperform men as undergraduates. Some 32% of our members at CMI are women. Perhaps most strikingly, in around one quarter of dual-income households the woman earns more than the man, according to a study in the USA. There is a similar pattern in the UK.

Internationally the rise of the emerging economies means that a domestically focused, mono-lingual company is increasingly likely to be at a disadvantage. Even within the western white populations, around 70 per cent of consumer decisions are made by women.

Globally and regionally, the white male consumer is a minority – and quite a small one, at that. So how much sense does it make to have an overwhelmingly white, male boardroom? In short, what is the cost of bias?

On overcoming gender imbalance, a new literature is growing up around a more optimistic, business-focused approach. Aviva Wittenberg-Cox and Alison Maitland, co-authors of Why Women Mean Business, argue that balanced, diverse companies are naturally better marketers and more successful businesses.

This implies radical change for all managers. The CMI Report Women in Leadership, produced with Women in Management (WiM) in March 2013, sets out some practical policies for achieving the gender-balanced, high-performance workplace. These include: talks in schools and universities by female high-achievers; more mentoring opportunities through programmes such as WiM’s Horizons Mentoring Scheme; earlier development of management skills among young women; creation of clear career paths for women – which sometimes require slightly different forms of development, for example with more emphasis on coaching.

WiM will be addressing the issue of tackling the talent pipeline at a national event in October at the Park Plaza, London with keynote speakers Valerie Dias (Visa Europe) and Dame Carol Black DBE CCMI (Department for Work and Pensions).

Further effort is likely to be needed to be inclusive to minority ethnic women. A study by Race for Opportunity found that, while 75 per cent of white women reported that their development was helped by having a mentor or other help, only 20 per cent of minority ethnic women said they received help from their line managers.

Despite residual bias and related problems, the economy is becoming feminised, diversified and globalised. It is a complacent and backward-looking management team that ignores these historic changes and refuses to seize advantages from them. Diversity is an opportunity, not a cost; and it is one that businesses cannot afford to miss.

Do quotas do more harm than good? Vote at the top of the page!

Submitted by Philip Wood

Read more opinions