Across banking and financial services organizations, inadequate diversity is the elephant in the room. Even a quick look reveals that lack of diversity in terms of gender, race, religion, sexual orientation etc. is a challenge faced by organizations across all industries and geographies. This situation prevails despite the fact that organizations have policies in place to promote diversity; many even have diversity goals.
Lauren Stiebing is the founder of LS International, an executive search firm that is passionate about helping companies improve their diversity.
[45% of their placements are women simply because they go the extra mile to find suitable candidates]. We sought the LS International team’s views on diversity. Despite the obvious benefits, why haven’t companies done too well on the diversity front? Lauren candidly says, “The poor diversity in organizations is the result of the conscious and unconscious biases that exist in people’s minds and the way companies have traditionally approached hiring and promotion decisions”.
The benefits of organizational diversity
At an intuitive level, the advantages of organizational diversity are almost obvious. Ms. Stiebing points out that “Diverse teams have access to a broader set of ideas, skills, expertise, competencies, perspectives and problem-solving abilities. These contribute to innovative solutions, better collaboration, less conflict and superior performance overall”. There is also credible empirical evidence to show clear and positive linkages between diversity and corporate performance. BCG’s study of 1700 companies across multiple industries and sizes spread over 8 countries found that companies with more diverse management teams were more innovative, and reported 19% higher revenues. (source).
McKinsey’s study of 366 public companies across Canada, Latin America, the United Kingdom and the United States too found significant linkages: 35 percent and 15 percent higher financial returns respectively for companies with higher ethnic/racial diversity and gender diversity. In the UK, every 10 percent increase in gender diversity saw earnings (EBIT) go up by 3.5 percent. In the US, every 10 percent increase in racial/ethnic diversity on the senior-executive team translated to a 0.8 percent increase in EBIT. (source)
Although causality cannot always be inferred from correlation, there are enough reasons for companies to aim for greater diversity. Ms Stiebing sounds a warning when she says “In the days ahead, companies that do not pay adequate attention to achieving their diversity goals will lose the war for talent”.
Poor organizational diversity can erode competitive advantage even more in the future
The lack of diversity in organizations is a cause for concern, and not just because of the “opportunity cost” of missing out on doing better. Inadequate diversity will bite organizations even harder in the days ahead. With more millennials entering the workforce, the war for talent will take on a different hue in the future. Millennials generally tend to be more inclusive in their thinking; they prefer to work with organizations that are more conscious of and responsive to social issues such as diversity, the environment, exploitation of child labour etc. Therefore, the best candidates will prefer to be a part of organizations that embrace diversity.
A shift is already visible with technology companies now consciously hiring more graduates with degrees in the liberal arts. These hires bring new ways of thinking about the kinds of solutions needed- thinking that may elude linearly-thinking techies.
Daniel Torres Dwyer of LS International says, “Hiring is an opportunity to infuse superior functional skills and behavioural competencies into teams. Boosting diversity is an obvious but inadequately used strategy to achieve this objective”. Indeed, it would not be wrong to say that the strength of corporate brands will increasingly be determined by how companies respond to globally-relevant issues including diversity.
What’s holding diversity back?
Despite the clear value of organizational diversity, on-the-ground statistics remain dismal. The weak diversity landscape is the result of several factors. Corporate leaders and decision-makers fall prey to unconscious biases. “Strength lies in differences, not in similarities”, said Stephen Covey. But people prefer to hire/promote those who are similar to them or with whom they think they can get along well. This unconscious but insidious bias perpetuates the “Old boys” syndrome and raises the risk that the best candidates are not hired for a particular role.
Another reason for poor diversity is conscious bias. Many male leaders, for instance, sometimes believe that women cannot play certain roles or are not equipped to shoulder certain responsibilities. This one belief then outweighs the candidate’s experience, education and track record. This could be a double whammy for teams because qualified candidates denied personal growth opportunities may choose to leave. Apart from the disruption, the team loses an opportunity to perform even better. It is worth noting that multiple studies have consistently shown that “blind” applications that do not reveal the gender, ethnicity or race of the candidate result in significantly higher selection rates for women and minorities.
Systemic weaknesses are a third reason for poor diversity in organizations. Most hiring decisions are based mainly on the candidate’s track record of performance. Past performance should certainly be considered- but is that sufficient? As an investor, would you choose a mutual fund that has delivered superior returns in the past but because of its portfolio of stocks, unlikely to do well in the future? If the answer is no, why would you as a hiring manager not look at a candidate’s potential to perform in a new role?
Even if it is an internal promotion, a new role has a different context in terms of responsibilities, culture, teams etc. It is thus important that due consideration be given to the candidate’s potential for performance. As leadership coach Bruno Lubeigt, who works closely with LS International, says, “Personal styles determine behavioural responses. Success in a role depends on individuals being able to consistently exhibit behaviours that are critical to those roles. Hiring managers must objectively and accurately gauge the candidate’s personal style in advance to predict future success before finalizing the hiring or promotion decision”. What is often missing in the traditional hiring/promotion process is an assessment of how well an individual is likely to perform in a new role.
Actions to boosting diversity in your team/company
Raising the level of organizational diversity is not easy. However, business/HR leaders and hiring managers can take various measures to enable organizations get to where they ought to be on their diversity journeys.
Here are some actions that you can take within your own teams and companies:
- Encourage all your managers and fellow leaders to informally coach/mentor candidates who exhibit potential and the spark, irrespective of their gender, race etc.
- Many women executives believe that what they have achieved is not worthy of being talked about. Help women executives to showcase their achievements during performance appraisals or at meetings. This may sound trivial, but is actually a big deal because only when their achievements are talked about do executives get noticed.
- Put in place formal coaching and mentoring programs and enable all executives to benefit from them. Remember that taking advantage of such programs is also evidence of an individual’s willingness to adapt to change- and ability to do so.
- Even before women employees go on maternity leave, offer them training to upskill them in ways that will allow them to contribute from home. They already know the business, people and the culture- so don’t let all this explicit and tacit knowledge go waste.
- Encourage women employees on maternity leave to learn new skills (e.g. through MOOC platforms), so that they have new skills to offer once they get back to work.
- Work to consciously eliminate gender-based pay differences. For example, do not use a woman employee’s last compensation prior to her career break as the baseline to determine her new compensation.
- Make sure that business and HR reviews track progress towards diversity goals.
- Both when hiring externally and promoting internal candidates, ensure that in addition to experience and expertise, you also look at objectively assessing their potential to perform in the new role. LS International conducts such assessments as part of its search process.
- Choose to work with executive search firms that are themselves passionate about diversity, so that their longlist truly contains the best candidates and not just those who are in their database.
Like any other corporate strategy, enhancing diversity must be seen as a strategic goal. To achieve this goal, adequate resources must be allocated and deployed- money, management time and attention and people who are committed to make it happen. The pride in Ms Stiebing’s voice is obvious when she says, “At LS International we invest significant time and effort to interact with candidates to gather a thorough, objective and nuanced assessment of their fit for roles. Even without a formal diversity brief, we go the extra mile to identify the best candidates for every search we are retained for. We do so because we believe that gender, race and other such accidents of birth should not come in the way of them being the best they can be”.
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Euro zone business activity shrank in January as lockdowns hit services
By Jonathan Cable
LONDON (Reuters) – Economic activity in the euro zone shrank markedly in January as lockdown restrictions to contain the coronavirus pandemic hit the bloc’s dominant service industry hard, a survey showed.
With hospitality and entertainment venues forced to remain closed across much of the continent the survey highlighted a sharp contraction in the services industry but also showed manufacturing remained strong as factories largely remained open.
IHS Markit’s flash composite PMI, seen as a good guide to economic health, fell further below the 50 mark separating growth from contraction to 47.5 in January from December’s 49.1. A Reuters poll had predicted a fall to 47.6.
“A double-dip recession for the euro zone economy is looking increasingly inevitable as tighter COVID-19 restrictions took a further toll on businesses in January,” said Chris Williamson, chief business economist at IHS Markit.
“Some encouragement comes from the downturn being less severe than in the spring of last year, reflecting the ongoing relative resilience of manufacturing, rising demand for exported goods and the lockdown measures having been less stringent on average than last year.”
The bloc’s economy was expected to grow 0.6% this quarter, a Reuters poll showed earlier this week, and will return to its pre-COVID-19 level within two years on hopes the rollout of vaccines will allow a return to some form of normality. [ECILT/EU]
A PMI covering the bloc’s dominant service industry dropped to 45.0 from 46.4, exceeding expectations in a Reuters poll that had predicted a steeper fall to 44.5 and still a long way from historic lows at the start of the pandemic.
With activity still in decline and restrictions likely to be in place for some time yet, services firms were forced to chop their charges. The output price index fell to 46.9 from 48.4, its lowest reading since June.
That will be disappointing for policymakers at the European Central Bank – who on Thursday left policy unchanged – as uncomfortably low inflation has been a thorn in the ECB’s side for years.
Factory activity remained strong and the manufacturing PMI held well above breakeven at 54.7, albeit weaker than December’s 55.2. The Reuters poll had predicted a drop to 54.5.
An index measuring output which feeds into the composite PMI fell to 54.5 from 56.3.
But despite strong demand factories again cut headcount, as they have every month since May 2019. The employment index fell to 48.9 from 49.2.
As immunisation programmes are being ramped up after a slow start in Europe optimism about the coming year remained strong. The composite future output index dipped to 63.6 from December’s near three-year high of 64.5.
“The roll out of vaccines has meanwhile helped sustain a strong degree of confidence about prospects for the year ahead, though the recent rise in virus case numbers has caused some pull-back in optimism,” Williamson said.
(Reporting by Jonathan Cable; Editing by Toby Chopra)
Volkswagen’s profit halves, but deliveries recovering
BERLIN (Reuters) – Volkswagen reported a nearly 50% drop in its 2020 adjusted operating profit on Friday but said car deliveries had recovered strongly in the fourth quarter, lifting its shares.
The world’s largest carmaker said full-year operating profit, excluding costs related to its diesel emissions scandal, came in at 10 billion euros ($12.2 billion), compared with 19.3 billion in 2019.
Net cash flow at its automotive division was around 6 billion euros and car deliveries picked up towards the end of the year, the German group said in a statement.
“The deliveries to customers of the Volkswagen Group continued to recover strongly in the fourth quarter and even exceeded the deliveries of the third quarter 2020,” it said.
Volkswagen’s shares, which had been down as much as 2%, turned positive and were up 1.5% at 164.32 euros by 1158 GMT.
Sales at the automaker rose 1.7% in December, at a time when new car registrations in Europe dropped nearly 4%, data from the European Automobile Manufacturers’ Association showed.
Like its rivals, Volkswagen is facing several challenges due to the coronavirus pandemic as well as a global shortage of chips needed for production.
It also sees tough competition in developing electrified and self-driving cars. The merger of Fiat Chrysler and Peugeot-owner PSA to create the world’s fourth-biggest automaker Stellantis adds to the pressure.
Volkswagen said on Thursday it missed EU targets on carbon dioxide (CO2) emissions from its passenger car fleet last year and faces a fine of more than 100 million euros.
The group is expected to release detailed 2020 figures on March 16.
($1 = 0.8215 euros)
(Reporting by Kirsti Knolle; Editing by Maria Sheahan and Mark Potter)
Global chip shortage hits China’s bitcoin mining sector
By Samuel Shen and Alun John
SHANGHAI/HONG KONG (Reuters) – A global chip shortage is choking the production of machines used to “mine” bitcoin, a sector dominated by China, sending prices of the computer equipment soaring as a surge in the cryptocurrency drives demand.
The scramble is pricing out smaller miners and accelerating an industry consolidation that could see deep-pocketed players, many outside China, profit from the bitcoin bull run.
Bitcoin mining is closely watched by traders and users of the world’s largest cryptocurrency, as the amount of bitcoin they make and sell into the market affects its supply and price.
Trading around $32,000 on Friday, bitcoin is down 20% from the record highs it struck two weeks ago but still up some 700% from its March low of $3,850.
“There are not enough chips to support the production of mining rigs,” said Alex Ao, vice president of Innosilicon, a chip designer and major provider of mining equipment.
Bitcoin miners use increasingly powerful, specially-designed computer equipment, or rigs, to verify bitcoin transactions in a process which produces newly minted bitcoins.
Taiwan Semiconductor Manufacturing Co and Samsung Electronics Co, the main producers of specially designed chips used in mining rigs, would also prioritise supplies to sectors such as consumer electronics, whose chip demand is seen as more stable, Ao said.
The global chip shortage is disrupting production across a global array of products, including automobiles, laptops and mobile phones. [L1N2JP2MY]
Mining’s profitability depends on bitcoin’s price, the cost of the electricity used to power the rig, the rig’s efficiency, and how much computing power is needed to mine a bitcoin.
Demand for rigs has boomed as bitcoin prices soared, said Gordon Chen, co-founder of cryptocurrency asset manager and miner GMR.
“When gold prices jump, you need more shovels. When milk prices rise, you want more cows.”
Lei Tong, managing director of financial services at Babel Finance, which lends to miners, said that “almost all major miners are scouring the market for rigs, and they are willing to pay high prices for second-hand machines.”
“Purchase volumes from North America have been huge, squeezing supply in China,” he said, adding that many miners are placing orders for products that can only be delivered in August and September.
Most of the products of Bitmain, one of the biggest rig makers in China, are sold out, according the company’s website.
A sales manager at Jiangsu Haifanxin Technology, a rig merchant, said prices on the second-hand market have jumped 50% to 60% over the past year, while prices of new equipment more than doubled. High-end, second-hand mining machines were quoted around $5,000.
“It’s natural if you look at how much bitcoin has risen,” said the manager, who identified himself on by his surname Li.
The cryptocurrency surge is affecting who is able to mine.
The increasing cost of investment is eliminating smaller players, said Raymond Yuan, founder of Atlas Mining, which owns one of China’s biggest mining business.
“Institutional investors benefit from both large scale and proficiency in management whereas retail investors who couldn’t keep up will be weeded out,” said Yuan, whose company has invested over $500 million in cryptocurrency mining and plans to keep investing heavily.
Many of the larger players growing their mining operations are based outside of China, often in North America and the Middle East, said Wayne Zhao, chief operating officer of crypto research company TokenInsight.
“China used to have low electricity costs as one core advantage, but as the bitcoin price rises now, that has gone,” he said.
Zhao said that while previously bitcoin mining in China used to account for as much as 80% of the world’s total, it now accounted for around 50%.
(Reporting by Samuel Shen and Alun John; Editing by Vidya Ranganathan and William Mallard)
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