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Three's Company - The Importance of HR, The Board and Governance Function in Promoting Diversity and Inclusion

Posted 11/01/2021 by Glenn Oborne
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Over the past decade we have seen large developments in inclusion and diversity across the business-world. While researching this article, it became apparent that general trends for women being represented at board-level is on the rise and according to the Parker Review, representation of various ethnic backgrounds at senior levels seems to also be improving. It is also clear that there is a great deal of work yet to be done. Traditionally, HR has taken the biggest slice of responsibility when it comes to employing a diverse work force while helping to ensure that equal opportunities are given however, as more focus is spared, and more studies completed it is becoming clear that the board and governance function have their part to play as well.

The rationale seems to have evolved with earlier articles citing the importance of inclusion and diversity to generate a content workforce, more recent articles focus on the measurable output generated by businesses. In Deloitte’s 2015 research, they concluded that “businesses labelled inclusive [have] 2.3 times higher cash flow per employee over a three-year period”.  Since being diverse and inclusive became viewed as being productive and profitable as opposed to being simply morally just, we have seen greater developments with less resistance and greater priority being allocated to improving these business practices to have a positive impact on employee morale and profitability of a company.

"Businesses labelled inclusive [have] 2.3 times higher cash flow per employee over a three-year period

Preventative measures against discrimination have been in place for longer than D & I and seem to be relatively effective. There is scope for greater pressure to be applied in promoting inclusion and diversity through statute and regulation, although the first steps have been made. Diversity is more measurable and there is evidence that this is improving; inclusion is tougher to measure, and there can be a variety of negative effects if it is ignored. In an interview regarding reports of a toxic work culture, Under Armour CEO Kevin Plank was able to utilise statistics to demonstrate some gender diversity within the business at board and senior management level. However, he was less assertive on questions on inclusion, the main thrust being UA were “a company that will fight for you. We’re a company for the little guy.”

This feels like a lost opportunity and could be an area where the governance function has greater impact. In acting as a conduit between the organisation or company, and the board, Company Secretaries are in a privileged position to have visibility of the daily running of a business whilst also have access to the board and strategy-forming area. If a greater focus were placed on them to analyse the effectiveness of inclusion and diversity policies, they would be able to feedback to the board if further work is required and whether changes can be made to how policy is enacted throughout the business.

Company Secretaries are in a privileged position to have visibility of the daily running of a business whilst also have access to the board and strategy-forming area

Championing inclusion and diversity along with the benefits that come with, can be another value this secretariat adds to the business or institution in which it operates. It requires the governance function to seize the initiative in directing conversations around diversity and take a leading role in ensuring that inclusion forms an integral part of an organization’s strategy moving forward. Company Secretaries are highly skilled professionals. The past 10 years has seen the function evolve from administrative support to a valued governance advisor. The best can influence the board to ensure it meets its objective to shareholders, employees, and customers.

The consensus is that issues surrounding inclusion and diversity traditionally fell under the remit of Human Resources – they have been instrumental in developing diversity within businesses over the past few years. Pat Wadors, HR Director at LinkedIn has identified this as being a massive contributing factor to the company’s success: “When we listen and celebrate what is both common and different, we become a wiser, more inclusive, and better organization.” The governance function could still play a significant role in listening to the different arms of an organization and feed this message back to the board. This in turn well help the board govern on strategy to further efforts and relies both on this feedback element and this operational element to best perform.

“When we listen and celebrate what is both common and different, we become a wiser, more inclusive, and better organization

As mentioned, most reviews into this subject matter demonstrate improvements in diversity across organisations. However, following the targets set by the Hampton-Alexander and Parker reviews there is still a lot of work to be done. For boards to be true bastions of promoting inclusion and diversity, their own make-up needs to change; 50 of the companies on the FTSE 350 index are yet to meet their target of having 33% representation of women at board and exec committee level and 150 out of 256 UK domiciled companies “did not meet their target of having at least one director of colour on their Boards”. This isn’t to say board members lack the empathy to consider the concerns of different groups or individuals, yet in order to truly lead in this space, they must become examples of how it can work.

In addition, it should be recognised that these are two areas in which progress has been made and where there is a greater awareness. Improvements are still required in promoting diversity and inclusion of other groups of individuals. Currently, there is no equivalent report on diversity of disabled people, individuals with learning difficulties, and other developmental disabilities in the commercial workplace. There is obvious scope for developments in inclusion of these various groups within organisations and once again, this can be championed by the governance function in developing as part of a business or organisation’s strategy in developing their work environment and hiring strategies.   

There are early, promising signs that actions around inclusion and diversity are improving and are being developed by boards across the commercial world. We have only considered diversity through the lens of gender and ethnic background as these are the areas where more recent work has been done, although as mentioned above, there are various other groups which have not been considered and where further improvements are needed. It would also be naïve to say that we have achieved optimum inclusion and diversity in the workplace; this is patently untrue and efforts are required to make all careers more accessible for people of all backgrounds and ideally make it a fairer reflection of society in general. The board is instrumental in setting out the goals and strategy of an organization, however it is reliant on the HR departments to successfully act upon this strategy and the governance department to feedback on the effectiveness of policy. It is essential these three functions act in harmony in order to ensure both diversity and inclusion targets are met and the benefits of having strengthened this element of the workforce are enjoyed.

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