Diversity and Inclusion = Better Performing BusinessesAugust 2021
The more diverse a business is the better able it is to attract top talent – Fact. This is an approach that will improve client engagement, employee satisfaction, and business decision making. While progress has generally been slow, individual companies are now starting to make real headway in improving their diversity and inclusion (D&I) and effectively using these results to influence business outcomes. Law firm partnerships currently lag behind their clients in this regard, with D&I often being regarded as a game of quotas rather than fully committing to an integrated D&I programme that will lead to real and sustained positive change.
Smart businesses use diversity as an enabler of business impact, and to effect sustained positive change by promoting D&I in senior decision-making roles – and specifically line manager roles on executive teams.
McKinsey have identified four imperatives for delivering such impact through D&I:
|1. Commit and Cascade. CEOs, business leaders and senior decision makers/partners must articulate a compelling vision, embedded with real accountability for delivery, and cascade down through middle management and the line manager/partner ranks.
|2. Link D&I to growth strategy. D&I priorities must be explicitly defined, based on what drives the business growth strategy.
|3. Craft an initiative portfolio. Initiatives in pursuit of D&I goals should be targeted based on growth priorities, and investments made to both hard- and soft-wire the programmes and culture of inclusion required to capture the intended benefits.
|4. Tailor for impact. D&I initiatives should be tailored to the relevant business area or geographic region context to maximise local buy-in and impact.
The business case for D&I is clear.
A relationship between diversity and business performance exists with a direct correlation between a more diverse leadership team and a positive financial performance.
Leadership roles matter. Companies in the top-quartile for gender diversity on executive teams are more likely to outperform on profitability and more likely to have superior value creation. The highest-performing companies, on both profitability and diversity, had more women in line (typically revenue-generating) roles than in staff roles on their executive teams.
It’s not just gender. A diversity of thought and experience is critical. Companies in the top-quartile for ethnic/cultural diversity on executive teams are significantly more likely to have industry-leading profitability. That this relationship continues to be strong suggests that inclusion of highly diverse individuals – and myriad ways in which diversity exists beyond gender (e.g., LGBTQ+, age/generation, international experience) – can be a key differentiator among businesses.
There is a penalty for opting out. The penalty for bottom-quartile performance on diversity persists. Overall, companies in the bottom quartile for both gender and ethnic/ cultural diversity were less likely to achieve above-average profitability. In short, not only were they not leading – but they were also lagging behind.
Clients increasingly are buying services only if businesses are implementing a credible D&I programme.
Local context matters. On gender, while there is plenty more to do, in terms of both absolute average diversity and representation, Australian, UK, and US companies lead the way. On ethnicity, there is less global progress, with notable exceptions for South African and Singaporean companies.
In simple terms – a failure to embrace D&I will result in less profit. The time to act is now.
LTN encourage legal businesses to examine the case for D&I at a more granular level to craft an approach that is tailored to their business. We can help you analyse and assess the approach taken by leading global businesses to construct a bespoke D&I programme and path to implementation to ensure the maximum positive impact. To discuss this topic further and/or see if LTN & Partners can help please contact Tim Jeveons – firstname.lastname@example.org