Diversity and inclusion levels can affect the bottom lineReprints
SOUTHAMPTON, Bermuda — The business case for diversity and inclusion is clearer than ever, and the insurance industry needs to step up its efforts to become more inclusive, according to Jonathan Reiss, chief financial officer of Bermuda-based Hamilton Insurance Group Ltd.
“Organizations that embrace diversity and inclusion and actively focus on it are better managed and they produce superior results because of it,” he said in delivering the industry keynote at the 2018 Bermuda Captive Conference in Southampton, Bermuda, on Wednesday.
Companies in the top quartile for gender diversity on executive teams were 21% more likely to outperform on profitability and 27% more likely to have superior value creation, while those in the top quartile for ethnic/cultural diversity on executive teams were 33% more likely to have industry-leading profitability, according to a report published by New York-based consultancy McKinsey & Co. in January.
On the flip side, companies in the bottom quartile for both gender and ethnic/cultural diversity were 29% less likely to achieve above-average profitability than were all other companies in the consultancy’s data set, according to the report.
“There’s more than enough financial incentive to get this done,” Mr. Reiss said.
D&I discussions might seem to be the domain of human resource professionals, but Mr. Reiss is the executive lead on his company’s D&I initiative.
“If D&I doesn’t have support of the C-suite, it’s doomed to fail,” he said.
Hamilton is approaching its fifth anniversary, and the company has decided this is the year to put a D&I strategy into place, Mr. Reiss said.
“Hamilton put a stake in the ground about D&I almost immediately after it was born,” he said. “Our former CEO, Brian Duperreault, delivered his ‘Where Are the Women?’ speech right here at this very conference. That was in 2014. At Hamilton, we’ve been vocal about gender equality and other aspects of inclusion, but we haven’t had a formal structure to embed D&I in our corporate culture.”
The broader industry is still struggling to achieve positive results when it comes to diversity and inclusion, Mr. Reiss said. For example, the 2017 State of Diversity and Inclusion in the Lloyd’s Market report showed a significant drop in respondents who feel they have achieved a positive D&I culture in their organizations compared with 2016, likely due to an increasing awareness and understanding of what D&I best practice looks like.
“So not only are we not making much progress, in some cases we’re actually losing ground,” he said.
Many companies choose to concentrate on gender equality as the primary focus of D&I initiatives because it’s one of the broadest issues and easy to measure, and significant progress has been made by the insurance industry as a result, according to the Lloyd’s report. The number of companies with no women on their boards declined to 22% last year from 52.5% in 2016, but there is also still a gap in the executive layer, with no companies reporting that women occupy 50% of their leadership positions, according to the report.
Several myths about the obstacles to advancement for women have been debunked, but unconscious bias is still problematic, Mr. Reiss said.
“That bias affects the perception of women as leaders and women as working mothers,” he said, adding “how do you fight a bias that’s unconscious?”
“Bias really is quite insidious,” he said.
Only 22% of senior vice presidents are women, and only one-fifth in revenue generating divisions rather than cost centers, Mr. Reiss noted.
“It’s the money-making positions that tends to lead to promotion to the C-suite,” he said.
Companies wanting to become more diverse and inclusive need to understand that they “can’t tackle the whole issue all at once” and should start by developing a baseline so they can set goals and monitor progress, he said.
“Decide what makes the most sense for your company and your business strategy,” he said. “Decide what area you want to focus on. Is it gender parity or balanced ethnicity?”
Achieving a D&I workforce requires training managers who interview candidates and checking in with new employees, perhaps with buddy systems, Mr. Reiss said.
“Don’t accept that you can’t find a broader range of applicants,” he said. “The fact is that most companies don’t do what I just described. They don’t identify D&I goals. They don’t gather the necessary data, check their recruitment policies and practices, insist on diverse applicant pools or train managers interviewing candidates.”
“My message today is that we in the private sector need to lead,” Mr. Reiss added.