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Slaying the C-level Diversity Myth

Diversity

Editor's note: This feature originally appeared in the June issue of MReport, out now.

It’s no secret that the mortgage industry has a diversity problem at the corporate level. When it comes to enhancing diversity, we’ve been pruning the leaves and branches for some time now, but it’s time to get to the root of the issue. While old habits die hard, we need to let go of the most significant myth that is holding back real progress.

Many industry leaders believe diversity in the C-suite can be achieved organically through training and awareness, but it can’t. Diversity doesn’t just “happen” on its own. It requires a strategic change or a game plan that organizations must see through. Most of all, it needs to start at the very top of the corporate ladder.

Fortunately, support is available to mortgage industry leaders who truly want diversity in the C-suite. There are many advisors, organizations, and resources available to help mortgage lenders build diversity at every level of their organizations. There are many effective recruitment and promotion strategies, too.

The results are clear–making these changes works. But it starts with letting go of old habits.

'I Know a Guy'

According to the 2017 study “Women in the Workplace” by LeanIn.Org and McKinsey, diversity is plentiful at entry-level positions and growing in mid-management positions. When one looks at senior management positions, the proportion of women and minorities falls dramatically, and at the C-suite level, their numbers are extraordinarily small.

So, what’s going on here? Many organizations have a standard recruiting process for the lower and mid-level staff members, but many companies either don’t have or follow the same procedures for their executive hiring. This is because senior hiring is so often a relationship-based decision, which perpetuates affinity bias. The phrase “I know a guy” is an all-too-familiar sound to those of us who have experienced this bias.

The first step towards increasing diversity at the higher levels of an organization is to acknowledge how and why it happens. The second is for the CEO to make an active commitment to increase diversity through targeted methods. For example, often the CEO and HR are in alignment with diversity hiring, but the senior managers continue to disregard the direction. To overcome this obstacle, the CEO could send a direct message to his group notifying everyone that available positions must move through a specific and open process. When the process is overlooked, the CEO needs reporting to demonstrate it is happening and then hold his direct reports accountable.

The third step is to put those methods in place and stay committed to them. The most prominent roadblock to success is falling back on the “I know a guy” approach. This is nothing more than an excuse that preserves the affinity bias, which got us to this place initially. To cement a new process, it’s essential to track, measure and report on candidate selection and internal promotion activity, including such detail as the source of the candidate and the candidate’s gender and ethnicity.

Opening the Process

While many mortgage organizations struggle with diversity, there are human resource and recruiting firms who are more than happy to work with lenders to improve diversity among the executive team and can help define the hiring process. Often these firms have standard processes in place for recruiting senior managers and C-level executives that can be augmented to attract a more diverse pool of candidates. Other executive recruiting firms specialize in identifying highly talented women and minority candidates.

Whether they get help in the recruiting and promotion of C-level talent or not, organizations can develop their strategies for improving diversity, such as blind resume reviews. This is where you remove the name from a resume, but everything else remains, including past positions, accomplishments, and skills. This makes it less likely that interviewers make assumptions about a candidate based on the candidate’s name, gender, or ethnicity.

Another method is to make sure the interview panel itself is diverse and comprised of people with a variety of backgrounds, which helps reduce bias in the process. Interviewers should also be given a set list of questions about skills and job requirements and give each candidate numerical scores based on their answers. At the end of the interview process, the panel should come together to discuss each candidate with the hiring manager.

Promotion is an important part of increasing diversity at the C-level. However, it can also be challenging, particularly for a large organization. Often, people who have higher day-to-day visibility are more likely to be promoted to leadership positions. Candidates are passed up for promotion because the interview panel simply doesn’t recognize them.

One of the best ways to resolve this is by institutionalizing nine-box evaluation grids, which are progress charts that measure individuals by job performance, skill set, and potential. The exercise is typically performed twice a year with all managers and shared with executives throughout the company. They are useful because they provide a quick, in-depth profile of each employee. Essentially, it creates a talent stream within the firm. When done well, the nine-box grid becomes part of the company’s culture of identifying and promoting people based on performance, not on popularity.

Utilizing Available Resources

There are many organizations and entities dedicated to helping companies improve diversity. You can find examples of organizations that have developed leadership diversity at the CEO Action website, created by PwC and its partners. CEO Action is led by CEOs who have made commitments to advancing diversity in their workplaces and who understand that the change needs to start with them. More than 400 CEOs representing some of the most significant companies in the world participate in CEO Action, and you can find many of the strategies they’ve developed on the CEO Action website.

Organizations that are still having trouble making a commitment to diversity should be reminded of the many benefits it brings to the C-suite and on corporate boards. The data are incontrovertible: diversity has a substantial impact on a company’s bottom line.

Recently, a working paper by the Peterson Institute for International Economics and published in the Harvard Business Review found that companies with greater numbers of women at the CEO, board, or C-suite level were more profitable. In fact, between companies with no women in positions of leadership to companies with 30 percent of leadership positions occupied by women, there was a 1 percent increase in net margin. For a typical firm, this equated to a 15 percent rise in profitability.

Global consulting firm McKinsey, which has been measuring diversity among corporate leadership for several years, recently examined proprietary data sets for 366 public companies, including the composition of top managers and boards. Companies that were in the top 25 percent for racial and ethnic diversity were 35 percent more likely to have better results than the median for their industries. In the U.S., the data showed a direct relationship between racial and ethnic diversity and better results. For every 10 percent increase in racial and ethnic diversity that existed on a company’s senior leadership, earnings before interest and taxes (EBIT) rose by 0.8 percent.

It’s easy for organizations to say they are committed to diversity. But it won’t happen by itself. There needs to be a plan, a process, and a commitment to following them. Even when leaders are armed with the right information and strategy, it can be easy to circumvent the proper process by falling back on the “I know a guy” approach.

So, don’t buy into the “organically grown diversity” myth. That is the long and less successful path. The best way to build diversity is at the top. When organizations say, “we know there is a problem, and here’s what we’re going to do about it,” everything changes—and it’s so worth it.

About Author: Debora Aydelotte

Debora Aydelotte is the COO of Credit Risk Solutions, a Denver-based provider of consultative residential mortgage fulfillment and due diligence services. Aydelotte is a recognized expert and leader in executive diversity and inclusion practices.

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