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COVID-19 a Threat to Diversity & Inclusion Progress

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Right now, in the midst of the COVID-19 Pandemic, critical decisions are being made about the size, shape and nature of organizational operating models.

It’s a known fact that the workplace will change drastically, in fact it already has. Employees are working from home, meeting online via video platforms, while parents are simultaneously juggling child care and home-school. This is the new normal.

Looking at examples from history, even a crisis as far-reaching and destructive as a global pandemic creates opportunity for new and forward-looking businesses. While everything is upside down, companies have a chance to land right-side up.

This is the case with diversity and inclusion programs. According to “Diversity Wins: How Inclusion Matters,” a report released in May by McKinsey & Company, 27 percent of D&I leaders say their organizations have put all or most D&I initiatives on hold because of the pandemic.

Research shows, however, that putting these programs aside would be a big mistake, as D&I is a proven link with performance and profitability.

Over the past five years, “The likelihood that diverse companies will out-earn their industry peers has grown, as have the penalties for companies lacking diversity,” McKinsey said.

Sara Prince, a partner in McKinsey & Company’s Atlanta office and an author of the report said, “I know the social and moral value of D&I, but the business value of a relationship with D&I and financial performance is very important.”

By including more women, companies increased their performance in 2014 by 15 percent; and performance increased to 25 percent in 2019, she said. Penalties have also increased, she added. “When we look at some of the different dimensions on the penalty, it was 9% in 2014, now it’s a 19% deficit.”

In the case of ethnic and cultural diversity, the report found that companies in the top quartile outperformed those in the fourth by 36 percent in terms of profitability in 2019, compared to 33 percent in 2017, McKinsey said.

Miss Prince observed, “What we see is that those companies that will thrive are not letting go of their D&I programs, and in fact may be becoming more aggressive with them.” The reason, she said, is that “In this environment, the things that are beneficial and that we think fundamentally relate to financial outperformance are seen more in those companies that have greater diversity than those that don’t.”

For example, innovation and decision-making are key to supporting and connecting with customers in a different way. “That matters right now in a world where the very foundation of how we operate and how supply chains flow is challenged more than at any point in recent history,” she said. “Companies that understand that this is a pivotal moment to continue this work, and maybe to accelerate it, are going after that value.”

New approaches to company decision-making

Ms. Prince noted one of the findings, that people of diverse backgrounds are disproportionately affected by the job losses, furloughs and salary setbacks. According to the study, “39 percent of all jobs held by black Americans—compared with 34 percent by white ones—are now threatened by reductions in hours or pay, temporary furloughs, or permanent layoffs. That is seven million jobs.”

While organizations attempt to make fair decisions and rules about how to handle these issues, “Those rules don’t necessarily thread the needle for maintaining their focus on diversity and inclusion,” she said.

A decision to cut back on the lowest tenure non-administrative roles, for example, can have adverse consequences. McKinsey notes that “Diverse teams are more innovative—stronger at anticipating shifts in consumer needs and consumption patterns that make new products and services possible, potentially generating a competitive edge.”

When making these decisions, taking a different approach can lead to financial savings. “If you are trying to control costs and your operating model is about people who drive—and women are less expensive to insure—it makes sense that more women in your driver base translates to lower cost on your insurance base,” Ms. Prince said.

Another example, she added, is that in client or consumer-facing organizations, “We’ve seen percentages of consumer-spend shifting to women and people of color, or from different backgrounds than they historically were.” In such a scenario, “Having teams that effectively represent these changes is critical. It’s a straightforward dynamic of knowing and understanding your consumer,” she said.

A time for forward thinking

 

One organization, Arthur J. Gallagher & Co. has taken these initiatives to heart.

 

 

 

 

“The pandemic hasn’t stopped our ability to focus on inclusion and diversity,” said Rodney Johnson, vice president of culture and inclusion business division at Arthur J. Gallagher & Co.

In fact, the company is making the most of employees and clients working remotely. “We have become more strategic and agile in our outreach through virtual meetings,” he said. “Philanthropic and community outreach projects have also provided new opportunities in light of COVID-19, which helps us to foster and grow relationships in these challenging times.”

Mr. Johnson noted that the company is simultaneously supporting its diverse employees and clients through a previously established infrastructure, the Gallagher Connect Partners program, a network of minority-owned, woman-owned, veteran-owned, and other diverse, certified insurance firms. “We are creating lead generation opportunities so that women can reach out to women-owned businesses, for example.”

The company, he said, is sharing its resources with Gallagher Connect Partners to help them position their businesses for financial solvency.

Many of our partners are small businesses without infrastructure. Our business resiliency webcast with COVID-19 content helps support the health of their businesses, but it also can be shared with the clients of our partners,” he said.

In preparation for difficult times, Mr. Johnson recommends that companies establish relationships with diverse centers of influence that align with their inclusion strategies. Gallagher, he noted, has formal partnerships with organizations like the Women’s Business Enterprise National Council, National Minority Supplier Development Council, LGBTQ Chamber of Commerce, National African American Insurance Association and the National Underground Railroad Freedom Center.

“Our work with these organizations has always been very intentional, but with the COVID-19 Pandemic we’ve found more mutually beneficial needs that created value on all sides,” Mr. Johnson said, adding, “We don’t believe we have all the answers, and recognize we still have much work to do; however, we’re an organization that aspires to do better and be better.”