The importance of workplace diversity at the leadership level

There are many benefits to a diverse workplace, especially for consumer-facing companies. After all, our country is diverse and when people from a variety of backgrounds work together, they bring different perspectives to the table that in turn help create products that will appeal to a wide audience.

It’s especially important to have diversity at the leadership level — and this is an area where much improvement is needed. A 2018 study conducted by the Boston Consulting Group showed that diverse business environments were responsive and better positioned to adapt when addressing a problem, and this resulted in a 19% average increase in innovation revenue compared to companies with below-average leadership diversity.

These results come as no surprise to leaders of diverse companies. “If you’re only looking at a problem in a one-dimensional way, you’re not going to be nearly as successful or creative in finding a really great solution,” says Erin Andrews, founder of indi chocolate. “So finding people who have that diversity in outlook, experience and perspective is really helpful to creating something that’s not your average solution.”

Andrews recently won the Ascend Challenge through the University of Washington Foster School of Business’ Consulting and Business Development Center, which offers consulting and management education programs to businesses owned by women, people of color, veterans, the LGBTQ community and those located in underserved communities. She credits her diverse team with her company’s success — although indi chocolate is a small company, Andrews made a conscious effort to ensure that she hired employees of diverse age groups, gender identities and race.

Despite studies like the ones conducted by the Boston Consulting Group, leadership at mid-to-large companies and corporations remains overwhelmingly white and male.

Michael Verchot, director of the Consulting and Business Development Center at the University of Washington Michael G. Foster School of Business sheds some light on why this is the case and what needs to happen in order to see more diversity in leadership.

For starters, Verchot explains that the hiring and mentoring process contributes to the vicious cycle of white men leading the majority of companies. “Most people hire people who have similar characteristics to themselves. Most leaders in large corporations and midsized companies are white and male,” Verchot says. “So you hire and promote folks who are like you. It replicates that set of leadership.”

In both good and bad economies, the African American unemployment rate in America is about twice as large as the white unemployment rate, and the Latino unemployment rate is about 1.5 times higher than white unemployment. “The reason the CBDC focuses on businesses owned by people of color is because we know that they will hire more people of color than white-owned businesses,” Verchot says. “So as we’re trying to improve gaps in employment opportunities and income and wealth, supporting the growth and success of businesses owned by people of color is a critical piece of that.”

The same goes for workplace mentorship — just like managers are inclined to hire people who are like them, they’re also more likely to mentor them and groom them to move up the corporate ladder. Verchot emphasizes the importance of women and people of color having champions in the workplace. “We tend to mentor and promote folks who are like us, and so people aren’t getting the mentoring and, more importantly, aren’t getting the championing,” he says. “And it gets down to even specifically what tasks and challenges people are given and how teams are formed.”

It’s admittedly an uphill battle, but Verchot says there are solutions — and they need to come from the top. “The solution has to be requiring diversity at a senior leadership level,” he says — and that means addressing the biases that we all have and that are so prevalent in our country. The effort to increase diversity at the leadership level, which benefits companies in the long run, needs to come from the top — not from the new hire who just graduated college and points out that there need to be more opportunities for people of color and women.

“It has to come from the CEO and, if it’s a publicly traded corporation, it needs to come from the board of directors,” Verchot explains. But that leads to another issue — the lack of diversity at corporate boards.

Progress is being made but Verchot describes it as “very, very slow.” However, there has been some encouraging news in recent weeks. In mid-April, JP Morgan Chase moved their female CFO, Marianne Lake, into a position where she is considered the heir-apparent to CEO Jamie Dimon — and another woman, Jennifer Piepszak, will step in as CFO effective May 1.

“It takes intentional leadership like that from Jamie Dimon,” Verchot says. “You need somebody at that level to say ‘this is how it’s going to be.’ ”

As the CEO of KeyBank, Beth E. Mooney is the only female head of a major bank in America. Verchot emphasizes the importance of moving away from “these one’s and two’s” to a much more structural change.

“The market, until there’s broader pressure, is at this point going to rely on a handful of individuals like Jamie Dimon who say we need to make things different,” Verchot says.

As services like the ones offered by the CBDC help produce a more diverse new crop of leaders and current CEOs pay attention the success rates of companies led by people like Dimon, hopefully progress will accelerate — after all, it’s a win-win for both companies and consumers. Studies have shown that diversity in staff and leadership produce better results and revenue.

The Michael G. Foster School of Business at the University of Washington consistently ranks among the top business schools in the United States — for both undergraduate and graduate degrees.