Regulation to drive diversity & inclusion is becoming a necessity

03 May 2018 Authored by Consultancy.uk

A survey of senior Irish business leaders found an even split between those who favoured a regulatory solution to drive diversity at management level, and those opposed. Conducted by EY, the report also found that, while investment in diversity initiatives is up, businesses’ lack the strategy to implement them.

In its second annual report on Diversity & Inclusion (D&I) in the Irish marketplace, professional services firm EY sought input from more than 150 senior leaders across the private, public and multinational sectors. Analysts found an increased willingness to adopt regulatory solutions to a broadly accepted need to boost the number of women and ethnic minorities occupying senior management positions, and cut perceived gender pay gaps.

Leaders were roughly split on the notion of using the law as a tool to encourage diversity. Only a minority of 35% are completely opposed to the idea, an interesting finding given the business world’s traditional opposition to state intervention. Among the 49% who support implementing diversity-focused legislation, 91% wanted a legal antidote to the gender pay gap. A slightly lower figure of 79% were prepared to go a step further and embrace legislative tinkering with the gender makeup of the boardroom.

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Researchers from the Big Four firm found that the representation of women in Irish boardrooms stood at 26% and in senior management positions at 32%. In 2017 the respective figures were 24% and 33%, showing that little has changed in the past year. While both figures have ample scope for improvement, Ireland performs better on diversity than the UK, and outdoes the G20 average – where women make up just 17% of corporate boardrooms

What has changed in Ireland are the levels of investment businesses are ploughing into D&I research. EY found that the proportion of businesses investing €50,000 per year has increased from 9% in 2017 to 15% in 2018. At the same time the proportion investing €1,000 per year or less has decreased from 36% in 2017 to 20% this year.

But much of the increased investment is being spent on events and sponsorship deals. Just 19% of the leaders surveyed said they are investing in strategies to combat a lack of diversity. A similarly small proportion are working on implementing diversity-boosting programs. Less than a third (31%) invest in the collection and analysis of employee diversity data. Just 16.7% are employing diagnostics and benchmarking to help improve upper level’s female headcount.

Diversity & Inclusion in Ireland

Olivia McEvoy, Director of Diversity & Inclusion Advisory Service at EY Ireland commented, "With gender pay gap legislation on the government agenda, it's encouraging to see that many Irish businesses are supportive of the move.”

“However, actual progress and work practices do not entirely reflect that view. This seems in part due to a failure to make the connection between Diversity & Inclusion and the bottom line."

Perhaps the most striking example of this leadership disconnect found by EY saw 98% of respondents agree that an inclusive business environment was vital for business performance. Yet just 40% of the same cohort said their organisations leveraged diversity to deal with disruption as a driver of innovation and new opportunities.

In the dark

The vast majority of Irish businesses preferred not to monitor the sexual, racial, and religious composition of their offices. A higher proportion (26%) collected data on disability – for more obvious practical reasons – than data on the sexual orientation of their employees (15%). Analysing the findings, McEvoy implied that a lack of data collection left businesses in the dark: “Without knowledge of who is working in the organisation, it's nigh on impossible to address issues that drive diversity”, she said.

Unsurprisingly, companies which spent in excess of €25,000 on D&I were more likely to claim they were diverse and inclusive enough to attract young talent. Roughly six out of ten businesses which invest in D&I said they had experienced stronger ‘cultural values’ in the workplace since spending began. Organisations who had carried out a full-scale diagnostic assessment of their unique D&I landscape were three times more likely to attribute higher revenue and profits to a more representative workforce.

Investment in diversity & inclusion

This chimes with recent analysis from McKinsey & Company, which identified a major correlation between better diversity markers and improved financial performance. In particular, having more women in executive positions was linked to increased profitability. But farsighted leaders see that further advantages of a more diverse workforce lie in the ability to attract top future talent, said McEvoy.

“With younger employees, particularly Millennials, increasingly looking to workplaces that stand for more than profit, the potential impact of D&I in this regard is remarkable. Businesses can't afford to rest on their laurels by overlooking an asset as crucial as talent," she concluded.

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