Promoting diversity is not just the right thing to do, it’s a commercial imperative - Susannah Donaldson

Good progress made – but room for improvement. That's the verdict on the FTSE 100 after publication of the latest batch of data by the Parker Review looking at ethnic diversity in the top UK listed companies.

Personnel Today highlighted the negative – that nearly a fifth of FTSE 100 companies lack board-level ethnic diversity and progress is slow, while People Management focused on the positive – that “significant progress” has been made with four in five top listed companies now having at least one ethnic minority board member.

Ann Francke, chief executive of the Chartered Management Institute, made the point that those businesses that have managed to improve diversity had reaped the rewards, including better financial performance and the ability to attract and retain talent.

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The principles contained in the Parker Report and also in the McGregor Smith Report are relevant to all businesses. There are many more smaller listed companies and tens of thousands of private employers across the UK who have a far greater impact on the UK corporate landscape and on the lived experience of employees in the UK, than the FTSE 100 companies.

I am advising a number of clients on their diversity strategy and there is a growing acceptance that the implementation of such strategies is not just the right thing to do, it's an absolute commercial imperative. Research has shown that diverse and inclusive businesses are more profitable; more innovative; better placed to answer to their shareholders; more able to win and retain clients and customers who are increasingly interested in these issues; and better placed to attract and retain talent.

There is also a growing realisation that this shouldn't just fall within the remit of the HR team. It very much needs to flow from the top, from board level. Boards have an absolutely pivotal role to play and need to be strategic and holistic in their approach to these issues. In my view, it should be a standing item on the board agenda.

Management boards need to embed racial diversity, equality and inclusion into their business's DNA in terms of their business strategy, their values and their culture, and that means taking a multipronged approach in terms of raising awareness, gathering the relevant data, examining existing practices and procedures, especially in relation to recruitment and promotion, and putting mechanisms in place to ensure accountability.

Companies of all sizes need to ensure that they're role modelling the correct behaviours and there needs to be executive sponsorship for Diversity & Inclusion (D&I) initiatives. Board members should be involved in reciprocal mentoring schemes and should be encouraged to be open about how they progressed to the senior levels within the organisation.

But it is absolutely critical to gather the data. You can't manage what you don't measure. You can't assess the impact of your policies, procedures or your D&I initiatives, if you don't measure to see what is getting better and what isn't. So I think the first step is for organisations to gather the data, and harking back to the accountability point, to set targets and to review progress against those targets at regular intervals.

Many of our clients are in the process of collecting their diversity data and traditionally because it's special category data under the GDPR, companies would do this on an anonymous basis, but I think there's a growing realisation that this type of data has much more value if it can be linked to the individual.

For example, many clients are now gathering the data through their HR systems. Where the data can be linked to the individual it means that progress in terms of diversity can be tracked. This allows the business to chart the effectiveness of policies and procedures, succession plans, talent programmes and promotion schemes in relation to the different diversity strands, and feeds into the company’s target setting.

Equally, there are a lot of organisations who are proactively reporting on their ethnicity pay gap even though it's not yet a mandatory requirement. This exercise helps to shine a spotlight on the issue of ethnic diversity, enables businesses to better understand where the problem areas lie within their organisations, and provides them with an opportunity to underscore their commitment to making positive progress.

Susannah Donaldson, Legal Director and employment law specialist at Pinsent Masons

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