Cultural diversity: not just nice to have, it’s good business

Analysis

Cultural diversity: not just nice to have, it’s good business

A report by the Diversity Council Australia has found that a ‘bamboo ceiling’ at ASX 200 companies is preventing non-Anglo–Celt and northern European employees from moving into leadership roles.

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A report by the Diversity Council Australia has found that a ‘bamboo ceiling’ at ASX 200 companies is preventing non-Anglo–Celt and northern European employees from moving into leadership roles.
 
With all the discussion about the gender balance of the first Abbott Government ministry, little was said about its cultural balance. With the exception of Treasurer Joe Hockey, who has a Middle Eastern background, and a couple of members of the outer ministry with Southern European names, the new team is decidedly Anglo-Celtic, as well as predominantly male.
 
But the Government is in good company. According to the results of a recent study conducted by the Diversity Council Australia (and sponsored by PwC and IBM) only 22.2% of directors, 21.9% of CEOs, 19.9% of senior executives, and 13.5% of chairs of ASX 200 companies are ‘culturally diverse’, compared to 32.2% in the general Australian community.
 
Half of that group have North/West European heritage; if you include people with French, German and Dutch origins in the mainstream, the number of truly culturally diverse leaders drops to 11.3%, 11.4%, 9.7% and 7%, respectively.
 
Meanwhile, only 1.9% of executive managers and 4.15% of directors have Asian cultural origins (compared to 9.6% in the general community).
 
In compiling the report, DCA worked with a company called OriginsInfo, which uses a software program that matches people’s first names and surnames with their cultural origins to an accuracy rate of 85% or more.
 
 
  
Why diversity is good for employers
 
Why should companies worry about the cultural diversity of their workforce and their leadership team? Apart from the moral imperative to build a workforce that reflects the community it serves, the DCA report cites a host of evidence that shows that companies who increase their cultural diversity also increase customers, sales revenue and profit; they’re more innovative, have higher group performance and lower labour management costs.
 
One of the speakers at the launch of the Capitalising on Culture report, News Limited writer Miranda Devine, compared the benefits of cultural diversity to what science author Matt Ridley calls ‘ideas having sex’ — the concept that a diversity of views and ideas leads to human progress.
 
But if that’s the case, why aren’t more companies promoting culturally diverse leaders? PwC assurance & audit partner Paddy Carney ascribes the predominance of Anglo-Celtic males in leadership positions to a natural human tendency to ‘hire people like us’.
 
As Australia’s population becomes more multicultural and the definition of ‘people like us’ becomes broader, will the bamboo ceiling be dismantled?, Carney says that companies and governments need to ask: ‘Will the situation take care of itself over time, or do you need intervention?’
 
Paradox of meritocracy
 
One way to answer that question is to examine efforts to increase the number of women in leadership positions in the public and the private sector. More than 40 years after the first wave of feminism, women are still vastly under-represented in leadership positions, highlighted by situations such as the above-mentioned Federal Cabinet.
 
The general consensus of the panel of cultural experts who spoke at the report’s launch last week was that some sort of intervention is required. But Tim Soutphommasane, Race Discrimination Commissioner at the Australian Human Rights Commission, cautioned against companies using measures of merit as an intervention tool. He pointed to evidence of the ‘paradox of meritocracy’, where companies that have ‘promotion by merit’ policies in place consistently promote more males over females than those companies that don’t implement those policies.
 
Some companies are introducing targets to improve gender and cultural balance in their leadership, a practice that until recently had gone out of favour. For example, in conjunction with the release of the Capitalising on Culture report, PwC announced that it was setting a target to raise the number of partners of Asian cultural background for its Australian business from about 2% to 5% within three years.
 
‘Everyone needs to be on a journey’ toward diversity, Carney said at the launch. ‘You need to get to the how. What’s the process we need to embark on?’ She said the 5% target would be re-evaluated after three years and would most likely be raised.
 
DIY diversity
 
Although the report is only a first step and looked at pure statistics, the DCA included some guidelines for companies who want to tackle the issue of cultural diversity, recommendations that revolve around gathering diversity statistics for your own company and selling the benefits of diversity to management.
 
The DCA encourages organisations to measure their own ‘cultural quotient’ in order to identify cultural (and gender) diversity issues, and it offers a range of strategies and tactics to address those issues, including setting targets and reviewing policies that may (intentionally or unintentionally) filter out culturally diverse talent, and adopting a ‘colour blind’ approach to managing workforce diversity. The full list of measures, strategies and tactics is available here.
 
What do you think of using targets and quotas to achieve cultural and gender balance? Post your thoughts in the Comments section below.
 
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