A number of our clients have asked Roy and I what is our view about the future of the work we do with you on diversity, in the changed context of Brexit.
Well firstly we should tell you that, in many, many conversations over the last couple of weeks with clients and colleagues, we haven’t yet spoken to any who are jumping for joy. But we all know that we’ll have to make it work!
And these clients and colleagues do range, rather delightfully, from a Duke and Duchess to VCs, CEOs, HR Heads, Deputy Heads and Business Partners, Deans of University Schools, companies who sell coffee, broadband, travel, food and fast food and people and organisations who build, tend to the nation’s health, recruit staff, make TV and radio, handle society’s money and create and propagate knowledge of all kinds.
All of whom expressed their anxiety as stemming from both:
• the enormous immediate uncertainty – which has lead to a stall in investment and hiring decisions – combined, in the medium term, with the as yet undefined terms of future trade and freedom of movement with and in the EU
• the specific challenges which their particular sector will now face – eg withdrawal of EU funding, the potential for future tariffs where there are none now, reduction of immigration and free movement and the increase in bureaucracy to trade across borders…. etc
Where are we – the big picture?
While we may have an economy that is recovering, we don’t, in the view of most clients and colleagues, yet have a “sound economy”, a state of affairs which heightens the economic risk of Brexit substantially – and is an argument which, of course, the Chancellor couldn’t use in the Referendum campaign. Many have said to us that the economy is still on life-support – breathing ‘cheap money’, artificially high house prices – and is persistently unbalanced.
And so there were the immediate predicted movements: in the rate of exchange (lowest level for 30 years), in stocks and shares (a fall, although now recovering as Brexit seems a bit further off and confidence stabilises somewhat for the moment), and in the cost of Government bonds.
The view is that this is uncertainty of the most profound kind. As one commentator put it, “2008 was a financial crisis that needed a political response. This is a political crisis to which markets are responding”. The biggest risks in the longer term are:
• that growth will be affected very significantly. Some say to the extent of creating a (severe) recession. The Economist Intelligence Unit has downgraded its forecast for UK growth next year and is now predicting a fall of 1%. And the IMF has similarly downgraded their forecast, saying, “We are worried about investment and confidence. There is a substantial rise in risk aversion which is raising the cost of capital” (Deputy Director of their European Department, Mahmood Pradhan, quoted in the FT on 9/7/16)
• the risk to your company/organisation’s talent stream by reducing or completely stopping freedom of movement.
Wolfgang Münchau, who writes the FT European economic column, gave a pretty candid assessment of the country’s options in the Brexit negotiation with the EU, concluding that:
“The reduction to only two categories of deals means that there will be a direct trade-off between passporting, available in the European Economic Area, and control over immigration, possible under a free-trade agreement. The UK can have one or the other, but not both”.
Mark Carney, governor of the Bank of England, said on July 5th launching the Bank’s twice-yearly assessment of financial stability: “The current outlook for UK … is challenging. The number of vulnerable households could increase due to a tougher economic outlook and a potential tightening of credit conditions. In particular there is growing evidence that uncertainty about the referendum has delayed major economic decisions, such as business investment, construction and housing market activity,”
One of our University clients, Sheffield, has already warned of the danger to their £21m of EU research money and is reporting a severe dip in confidence from potential EU research partners who simply don’t want to engage in programme discussions at the moment. They also report a number of significant European hires who have now declined to sign their contracts because of uncertainty about their ability to work and live in the UK.
The shock of Brexit has been immediate. And while entrepreneurs, business people and those who run UK Universities are determined to make the new situation prosper for the UK, they are uneasy about the storm through which the economy and the country will have to go before we reach sunnier uplands.
Specific Worries re diversity
In the immediate, we have been worrying about three specific things as a result of Brexit:
1. a general feeling that, if the votes of half the population were in part some kind of a revolt against “metropolitan, liberal, city opinions” (which one charming Facebook correspondent of Simon’s said he epitomised, adding the presumably intended slur “middle-class”!) there could be a push-back against diversity, against advancing the value of difference, and which gives weight to an attempt to reverse the changes many of us thought we were creating in the country and in business. The rise in the number of reported hate crime and racist incidents has given some weight to the view that the campaign legitimated views that are deeply hostile to immigrant people and bme people more widely.
2. the bargain that will have to be struck on freedom of movement – which is already a fault line in both the Conservative and Labour Leadership battles and future electoral strategies – and how the eventual outcome will affect recruiting for diversity;
3. the tensions that have arisen between people who voted on opposite sides of the question. The result of the referendum wasn’t 75:25 or even 60:40. It was 52:48. The country and potentially your staff are divided. How might that affect company morale and performance?
1 A potential pushback against the values of diversity
We have always analysed diversity in two overlapping, but separate, strands: the diversity deficit and the diversity dividend. We think this will help to resist pressure to retreat on diversity by recognising it as a business / organisational / societal benefit rather than solely a matter of liberal values (of which we are also perfectly happy to be champions!)
The deficit: The data tell us that there are blocks to the development of talent experienced by certain groups in your staff. This is not some kind of PC-gone-mad conclusion. It’s a researched fact. We won’t rehearse the figures here, but you might have seen a piece that Simon wrote in the FT recently for which he researched who held the top 297 jobs in the FTSE 100 (Chair, CEO and CFO). It turns out that “there are more people called Andrew, David and John than women and bme people”. This, as we all know, illustrates a phenomenon that is both wider and deeper.
In the context of the new commercial and academic pressures of the post-Brexit world:
• talent will be at an ever greater premium, so organisations should redouble their efforts to recognise the blocks that exist for those groups in their staff, understand in depth what they are and focus on removing them, thus
• ensuring that, by understanding and acting on your data, the investment you make in staff will be effectively realised by people achieving their full potential in and for your organisation/ company.
The dividend: This comes not from the innate value of any one group of people, but from the way you combine people of different backgrounds, types and identities.
• Most of the work we all do, we do in groups or teams. Given the three pre-conditions – best stated in Scott E Page’s significant ten year research project on diversity, “The Difference” as (i) the task at hand is complex (ii) there is the right level of high skill required in the team or group and (iii) the diversity is well and creatively managed – diverse teams perform more highly than homogenous ones.
• To create diverse teams and earn this dividend, we have to design out the bias, not train it out or just raise staff awareness.
• Creating diversity in your organisation is a conscious exercise of leadership
More than ever in an uncertain time, if diversity is to be effective in driving the performance of your organisation/company, it has to flow from your goals and strategy. Diversity is not abstract, it is a way of enhancing what you are trying to do.
It’s not about giving extra privileges to certain groups of people, as is often alleged in the push back, it is about understanding that in a global context, whether operating in international or just UK markets, combinations of gender, race and different personalities will enhance your University/ business’ performance, levels of innovation and problem solving.
One thing businesses/organisations need, in times of uncertainty like these, is to know that the expenditure they make is effective, cost effective, achieves a good return and increases productivity and innovation. In times of insecurity there is not money to waste. Brexit makes all of these broad conclusions even more salient.
2 Freedom of movement.
Diversity is not just about overseas staff. There is of course huge diversity in the UK to be drawn on to serve your customers, develop your products and services, understand your markets, global and UK, and innovate.
But freedom of movement matters. Simon was hosting the Excellence in Construction Awards last week – a diner of 650 people. The keynote speaker was the distinguished Andrew Wolstenholme OBE, CEO of Crossrail and former Programme Director on Heathrow Terminal 5. He said: “We have about 12,000 people currently working on Crossrail with around 35% from overseas, many from Eastern Europe. And we really, really need them”. The applause from the Construction sector was deafening.
The Referendum vote showed that cities are proud of their diversity and the welcome they give to migrants, the post-industrial heartlands are by and large not and voted for an end to free movement. In the latter it has developed a feeling of threat.
However, if the end of free movement would mean reduced growth, any UK government will need to fight as hard as it can to shore up the tax base by preventing operations shifting to the Eurozone and people in businesses, like the 650 in Construction at the dinner, will need to lobby with all their might to support the greatest freedom of movement that can be achieved in the new out-of-EU settlement.
We believe that those of us who see the value of diversity and its contribution to organisations, business and growth will have an obligation to argue as strongly and publicly as we can for this. And counter the anxieties of those who voted out.
3 Staff discord
“How sad to have to contemplate this”, said one client to us. The vote has exposed division in families, between friends and workmates. People are understandably nervous about how and whether to ask “How did you vote?” because the tone of the debate has been characterized by lies, blandishments, absence of facts, verbal aggression and, in some awful cases, actual intimidation and racially motivated threats and violence.
Somehow we need to work through this. Simon takes particular solace from an organisation of which he is a Patron, The Forgiveness Project. “The greatest understanding I have gained from people who have been in conflict and suffered the worst kinds of personal assaults, violence and loss, is that resolution comes not from eventually agreeing with each other but from listening to one an other. Simply finding ways for each other to be heard is what heals.”
We have both done an amount of conflict resolution work and, since clients and colleagues have asked our view on this, if we can help, we certainly will do so with sessions to support your staff.
This is quite a moment for the country and we will certainly commit to continuing, in practical and effective ways, to put into practice our belief that diversity equips organisations and companies for greater success. Brexit will happen, in whatever form, and we are, along with you, our clients and colleagues, committed to making it work and supporting the success of UK companies and Universities.
We will continue to develop our Diversity by Design programme in recruitment and promotion, to help you use diversity to create the highest performing teams, to develop the talent of your staff to the highest level, whoever they are and to design out the biases that we all have.
It’s great working with you all.
Simon & Roy