Strength in Numbers: Using Data to Track Diversity and Inclusion – ProMarket

Recent protests against racism and police brutality, along with the #MeToo movement, have increased pressure on businesses to measure and improve their recruitment and promotion of women and people from underrepresented racial groups. Chicago Booths Marianne Bertrand, the Chris P. Dialynas Distinguished Service Professor of Economics and Willard Graham Faculty Scholar, and Mekala Krishnan, a senior fellow at the McKinsey Global Institute, discuss with Caroline Grossman, executive director of the Rustandy Center for Social Sector Innovation, how businesses use data to track diversity and inclusion.

Editors note: To mark the 50-year anniversary of Milton Friedmans influentialNYTpiece on the social responsibility of business, we are launching a series of articles on the shareholder-stakeholder debate. Read previous installmentshere. The following is an edited and condensed transcript of a panel discussion held during the Corporate Social Responsibility Revisited conference hosted by Chicago Booth.

Caroline Grossman:

Research and data must play arole when it comes to implementing Diversity and Inclusion (D&I) strategythat actually moves the needle on equity. If you dont collect data, its hardto diagnose how your company is performing. If you dont track data, you wontknow how youre improving. A necessary complement to putting a diversity andinclusion plan in place is using research and data to ensure change is actuallyhappening. Our two panelists today offer that complementarity a two-way lens:Chicago Booth Professor Marianne Bertrand and Mekala Krishnan, Senior Fellow atMcKinsey Global Institute.

Much of Marianne Bertrandsresearch on this topic uses data to quantify the effects of racial and genderbias and to understand which mechanisms work better than others. Because manyfirms are in early stages with these topics and may not have great data, itsalso useful to have Mekalas voice on what this looks like in practice today.

One possible lever to pull that may make sense for some industries more than others is the question of quotas. On the topic of hiring, quotas have been adopted in a few countries, especially here, for those of us who are in Europe as theyre tuning in, and recently in the US in the State of California. Proponents see quotas as mechanisms to increase gender and racial diversity, but they can also lead to concerns like tokenism. Research, including some by you, Marianne, suggests that quotas arent a panacea. Based on the data youve seen, whats your take?

Marianne Bertrand:

We studied, a few years back,the first gender quota policy that was adopted in Europe, and that was inNorway back at the beginning of the millennium. I think the main way tosummarize what we saw in the data is that quotas didnt really do anything bad,but they are not the kind of transformative tool that I think companies may belooking for if theyre really trying to improve diversity.

Just so everybodys on the same page, Norwayvery similar to a lot of other European countries after itpassed a law that forced publicly traded corporations to have 40 percent of women on their board. There was a lot of pushback by corporations that were basically saying, Were never going to be able to find women with the kind of talent that is required to be on those corporate boards.

What we found was that corporationswere clearly wrong when making that statement. We were able to document thequalifications of the women that were appointed to the board once the companieswere forced to find 40 percent of women on the board. These women were, ifanything, more qualified than the very few women that were on the board priorto the quotas being put in place.

So those companies managed to find highly qualified women to serve on these boards, which means that once you force the companies to look beyond the standard network that they have, lets call it the old boys network, there are a lot of qualified women to fill in those positions. So thats really, I think, the good news about what we found in the context of this quota reform.

What is, I think, the less optimisticmessage is that if you believe that this is a policy that is really going tomake a difference, thats going to be transformational for womensopportunities inside of corporation, you really have to hope that there will bespillovers of these quotas beyond the corporate boards. Corporate boards arevery, very few individuals. So the idea theoretically is by appointing movementto the boards, you may have more women joining the C-suites, more women risingin the operational ranks of the organization. And then what we do is basicallycheck the data to see whether that was happening. And there was really no signof that.

So the bottom line is: by forcing companies to look for women, theyre going to be able to find highly qualified women to serve on the board. But you should not expect that this kind of policy will be transformational in terms of bringing more talented women at the top of organizations. So the main takeaway for me is that there was a sense in a lot of European countries that, Okay, we have these quotas in place. Thats it. Our job is done, and weve achieved gender diversity in the corporate sector. And that would be a really, really big mistake.

I think gender is quite different for me than racial minorities and their representation. When it comes to gender and the representation of women in the corporate sector or in the higher-paying jobs, in many ways I think that the key difficulties are not so much biases but really have to do with the structure of work, really have to do with what just happened today. Kids are walking around the home and the other responsibilities that women may have that make it very difficult for them to succeed at balancing the work and the family responsibilities.

Mekala Krishnan:

Just to add a couple of thoughts, Marianne, because I completely agree with what you just said. I feel like with quotas, people arrived at quotas as a panacea, as the silver bullet. And its great that it has led to increase representation on boards, but thats really not had the kind of spillover effects that people had hoped. And in fact, our research would suggest two things that I think are of interest to this conversation. The first is there is a lot of work out there including boards that correlates representation in leadership positions with corporate outcomes. And of course, its correlation, not causation. But interestingly, that correlation is not as strong compared with women in top management positions when you look at women in boards. If you think about appointing women in boards as a corporate performance driver, it may be less helpful than having women in top management positions.

People arrived at quotas as a panacea, as the silver bullet. And its great that it has led to increase representation on boards, but thats really not had the kind of spillover effects that people had hoped.

I think the second is when you look at the corporate pipeline, its really interesting to see that as quotas have been implemented, you see this funnel go down way from entry level to C-suites and then a jump up at the end for boards as weve put quotas in place. But really, that funnel, if you look at the data carefully from our survey of North American companies, where you see the funnel drop off is really that first promotion. So from the entry level to that first manager role is where you see most women fall off. And of course, for some companies, it might be the end of the funnel. But on average, if youre focusing your efforts at the end of the funnel, youre not really solving the issue, which is enabling women to make that first promotion.

I think the second thing that was really interesting with that data is that that first promotion, people came to us to say, Okay, the reason that women are dropping off at that first promotion point is that thats the age where they want to leave the workforce to have children, and so its women leaving companies. But actually, when we looked at the data, attrition rates for women and attrition rates for men were essentially the same. It was the promotion rates that were quite different. So whats happening is that women are getting stuck at that first entry level. They arent progressing through the funnel, whereas the common zeitgeist is that women want to leave the workforce to have kids. But we arent really seeing that, at least when we look at data in North America and Europe. It may be different than other countries, but in those two regions, we arent really seeing that in the data. And this, again, emphasizes why data is so important.

Marianne Bertrand:

So thats super interesting, and this is about data to study diversity and inclusion. This is the call out for more corporations to make the study of the funnel and how it evolves available because absent the ability to look inside of corporations and see the funnel that youre able to see by your consulting work, its really hard for us researchers to bring additional insights. One more thing I will say is that what you described is somewhat different from what Ive seen in other data set. So theres a lot of really, really good research that documents that its not so much women want to leave the workforce to have children, but really documents the dramatic effect that having children, the birth of a first child has on the career opportunities of women. So it is not being done, unfortunately, focusing solely on the kind of woman that would have the potential to lead corporations. Its done on a much broader side of the populations, but the data is remarkably striking You see the career of men and women evolving really in parallel with one another up to the point of the birth of a first child. And this is really the point where women start experiencing very rapid losses and really never fully recover.

Mekala Krishnan:

I completely agree with that, actually. Weve done some work again, simple correlation analysisbut it correlates the time that women versus men spend on unpaid care work, what we call unpaid care work, things like childcare and household work, and correlate that with labor force participation rates, correlate that with relative rates in leadership positions. And theres very, very strong relationships between the two. One of the things that our surveys of employees have also found is the number one challenge that women cite is what they call the double burden syndrome or the fact that theyre working both in the workplace as well as in the home. So I think it is significantly impacting womens experience in the workplace. I think its just that the idea that women prominently drop out is not true its that they are struggling to manage both work in the workplace, work in the home. It may be limiting how many hours that women work. It may be limiting the types of opportunities they reach out for. It may be impacting their own aspirations for their career.

Marianne Bertrand:

And the point that you justmade about this double burden and not being able to work as long hours I thinkalso ties back to another fact that is in the data, which is that in thecorporate sector there is massive reward, financial reward, for the ability towork very, very long hours. So thats really the massive difficulty that womenface is that in order to succeed, you have to work these long hours.

Caroline Grossman:

I actually want to go back to something you said on quotas Mekala, you said that data doesnt indicate that having more women on boards actually has an effect on corporate performance. What is the time horizon on that? We know performance is measured on a quarterly basis, but when would you expect to see the impact of diversity on boards on corporate performance? I know this is an issue we talked about a lot relative to the environment, that if a company makes decisions around sustainability, will you see it on a quarterly basis? Maybe not. Well, is it an important long-term strategy? I think certainly. So how do you see this play out?

Mekala Krishnan:

A corollary to that question is also, if companies are putting in certain D&I practices, when do you actually expect to see those practices pay off in representation data? So maybe with something like hiring, you expect to see it relatively near term. But on inclusion practices, for example, promotion practices, maybe it takes time for things to actually peter through the dataset. We havent really looked at timeline analysis of this kind just because these data sets are all relatively new. What I will say is that when we work with corporationsnot so much on this topicon broader organizational transformations, so culture shifts that kind of work in companies, what we find is that for change to really start to peter through the organization can take anywhere from five to seven years.

So really, true culture shifts,mindset shifts, norm shifts, practice shifts happening in a way that the entirepsyche of a company changes can take time. And so I agree that maybe this is,again, a plea for more research and data as these data sets become available,that the ability to do more analysis that is over time and allows us to dotimeline analysis is super important.

So as we think about data, theres almost two flavors of data that we need more of. The first is data on actual outcomes, gender-disaggregated data on outcomes both in labor markets more broadly but also within corporations. And then data on what works. How do you actually drive change?

Marianne Bertrand:

When I think about therelationship between the diversity inclusion agenda and corporate performance,I think theres really two ways I think about it. And that also ties back toFriedman, which is what this event is all about. There may be really valuehaving more diversity in management for corporate outcomes. So theres justmore ideas, different ideas. People are going to talk about different things,and thats valuable. It is just remarkable to me that thats an argument wehear very often, that diversity per se is going to help corporate outcomes.This is an area where theres essentially no research that I can think about.Theres really not a good piece of research that can point out thatconvincingly shows that diversity is valuable for corporate outcomes.

But theres another angle toit, which is that if you are focusing all of your recruitment on one half ofthe population because youre only looking at men, theres absolutely no waythat youre on the frontier in terms of the talents that you bring within yourorganization. And that in itself I think doesnt even need to be demonstratedin data. That seems pretty sensible that by limiting your search to half of thelabor market you cannot be at the frontier. So I just want to make this pointbecause theyre really the two ways I think about the relationship betweendiversity and inclusion and corporate performance and why there would be apositive relationship. The second one is pretty straightforward to me. Thefirst one is one that we hear a lot of corporations talking about, thatdiversity is good for corporate outcomes, that we really dont have the kind ofresearch I would like to be able to point at to say, Yes, heres theproof of that.

Mekala Krishnan:

Yeah. And I think the other argument you were making, Marianne, its especially true in a world where in many developed countries now women are graduating from college at exactly the same rates, maybe higher rates, than men. So its not on just innate talent. Its also learned skills that women are actually possessing at maybe higher rates than men. So its just such an economically inefficient argument to not be tapping into that talent pool. So fully agreed.

Caroline Grossman:

One place I think there is some data is on parental leave policies and the effect that those have. Marianne, could you speak to that?

Marianne Bertrand:

Theres lots of discussionabout the value of giving women longer maternity leave to be able to havechildren but remain in the workforce. The research there, I think, says prettyclearly that longer maternity leaves are not going to be beneficial to women,especially the more educated women.

What you find in the data,which is typically put all of UCD together, study economic outcomes for women,and look at the correlation with these economic outcomes and the lengths ofmaternity policies that these countries have in place, you will find that amongthe more educated women, longer maternity leave policies associate with abigger gender wage gap, so lower wages for these educated women compared tomen.

I think what is behind thisresult is really that as you make this maternity leave longer, women becomekind of separated from the labor market for longer, and theres a price forthat. Companies like to keep their employees. They want to have them kind ofcontinuously, and the longer you let the mothers out of the labor force, themore difficult it is for women to reenter these corporations on the same trackas the one they were in before.

Thats, I think, one of theexplanations. The other one is really just strategically, corporations may notwant to put women, single women, in important positions knowing that thesewomen will leave the company for an extended period of time when they becomemothers.

That is, I think, kind of areally important finding which sometimes people find counterintuitive, butlonger maternity leave policies are not a silver bullet to help women in laborforce, especially the more educated women.

Now, what is, I think, muchmore promising to the extent that children will keep on appearing is policiesthat try to change the norm, moving away from maternity leave policies toparental leave policies and paternity leave policies.

In this regard, the Scandinavian countries, I think, have been the most frontier in terms of trying to put in place policies and incentivize fathers to stay at home and share the burden with mothers when kids are born. Its still to be determined whether these policies will make a difference, but in many ways, I see them as really the directions we need to go into, because those policies are about trying to change the norms, trying to change the norms that say that the mother is going to have a disproportionate share of the burden when it comes to child rearing.

Mekala Krishnan:

You know, I think that yourlast point about changing the norms, I actually think these policies areimportant for such vital reasons. The first is the fact that they change normsabout who actually bears this burden. It actually signals that thisis not just the womans burden.

I think the second thing itdoes in terms of changing norms is in the company, now, you have both men andwomen taking leave. Its not just the women taking leave, so just from theequality that it creates in terms of career progression, in terms of normsrelated to performance reviews in terms of some of the mindsets that you talkedabout, about how companies perceive single women, it changes those norms, and Ithink thats also incredibly important.

Then, I think the third thing it does is for women, themselves. In one of the surveys we did about two, three years ago, surveyed employees about if an employer has maternity leave practices, they have flexible leave practices, a whole set of policies, whats the adoption rates? They were abysmal, like 10 percent.

I think the third thing itdoes, it actually makes it okay to adopt some of these policies, because peopledont feel like their careers are threatened. I think its important onmultiple fronts to think about these not as women policies but as peoplepolicies and make them ones that everyone in the organization feels comfortableadopting.

Marianne Bertrand:

I just cannot reinforce that last point you made enough. In many ways, when I think about good policies in that environment, they are not womens policies. They are human policies. The more we take gender out of these policies, the more we make them policies for all employees, the better it will be.

When I think about good policies in that environment, they are not womens policies. They are human polices. The more we take gender out of these policies, the more we make them policies for all employees, the better it will be.

Caroline Grossman:

Marianne, earlier in the conversation you said women are one side of it, but this is different when we talk about issue of race, and I want to come back to that question. I first want to ask, as you think about diversity and inclusion, and you think both about the questions of gender and race, what are some of the common themes you look at across, and where do you see them diverging?

Marianne Bertrand:

When I think about issues of race or ethnicity, thinking about Europe and European audience that we have here where they may not just be issues we have with African Americans in the US and compare that to women, in my mind, where I am right now based on my research and the research that Ive read is that I think that bias and discrimination is a much more important force when it comes to thinking about the under-representation of racial minorities in corporations than it is with respect to gender.

I am not saying that theres nogender discrimination going on, but I do believe the force that we just talkedabout are much more important than just discrimination per se to explain whywomen are underrepresented. I think when it comes to racial minorities, bias,whether it is implicit or explicit, is a much more important force.

I think the other big difference when I think about women versus racial minorities is that theres a lot that comes with being a racial minority in America or in Europe that is not associated with just being a woman. When you think about racial minorities in the US that goes hand in hand with economic disadvantage. That goes hand in hand with access to lower-quality schools, lower-quality public services, and lower quality amenities because of residential segregation.

Obviously, thats not forgender. Boys and girls are born in equally rich families. They are verydifferent conversations in my mind at least when I think about what we do interms of improving womens representation compared to when it comes toimproving racial minorities representation.

Caroline Grossman:

One complement to this conversation is the question of individual responsibility and action and Booth Professor Jane Risen teaches a course on this topic, and she weaves in research from behavioral economist Dolly Chugh from Harvard by really digging into the book, The Person You Mean to Be, How Good People Fight Bias. Chugh encourages us to acknowledge unconscious bias, take a stand, get involved, and be a builder.

What are things that each of us can do, and this is a question for Marianne, Mekala, the things that each of us can do in our day-to-day work, particularly in a virtual world where were feeling more disconnected, to check our unconscious bias, be advocates and allies, and drive forward meaningful change?

Mekala Krishnan:

I think the main unconsciousbias lever that we see companies implementing, and then I think employees andindividuals can complement that, theres a variety of trainings that companiesdo related to unconscious bias. Its to create awareness of unconscious bias.

I think the corollary here is step oneactually recognizing that you have unconscious biasesbut I dont think its necessary that every unconscious bias you have is a negative thing. The reason we have these biases is this is how its helpful to process the world in some ways, but recognizing where they exist and where they are really biases, so I think step one starts with that.

Just recognizing that you haveyour own world view and there may be others that are experiencing realchallenges that you may not be seeing or be aware of, so thats kind of stepone.

I think step two is having the conversation. As weve been surveying employers and employees, its really stark to me how much sometimes employers put in place policies and practices that employees dont really care about or want. One of the funny examples is weve done a survey now of Covid practices, and one of the things that so many companies have put in place is practices around open forums with senior leadership to create encouragement and lift morale, but when we surveyed employees, they dont see it as a high priority.

Im using that as a sillyexample, but the idea is I think we often make assumptions about what peoplewant and what people need and what is helpful, which may completely be a flawedassumption. I think really asking the question and having an authenticconversation coming from a place of curiosity and spirit of learning I think isreally important.

Then, I think there are a bunchof things that you could do structurally even as an individual. If youre amanager ensuring that a performance review has an unconscious bias check. Ifyou think about all the activities you engage in on a day-to-day level, findingways to embed that check on your biases through those day-to-day activities Ithink is important, too.

Marianne Bertrand:

Yeah, I agree with kind of allthat Mekala said. To go back to your original question, Caroline, Im inspiredby the work of psychologists that have studied particularly implicit bias andkind of tell us about the particular situations under which it is more likelyto creep in and drive our decisions. We know the implicit bias is more likelyto drive our decisions when we are rushed, when we are stressed, when we areangry, even when we are happy. So, when we are more emotional, we have moreimplicit bias.

Just that suggests that, andtaking it back to the corporations, taking it back to the HR process, the morewe can move away from HR decisions being made under those kind of, say, timepressures, the better probably it will be in terms of having HR managers reallytaking the time to review applications or be thinking about promotiondecisions.

Theres also lots of work,again in psychology, that tells us that we can train ourselves to be lessbiased. Same way that we have this increased association between seeing a blackface and feeling frightened, we can teach ourselves to engage in contrary tostereotypical thinking.

Theres good evidence from thelab, fairly short-term, that by forcing yourself to associate positive thoughtswith a black face rather than the negative thought you would have, you can makea difference. You can make people kind of less biased. We dont know how longthis lasts, but this matters.

Another thing that I thinkcomes strongly from the debiasing literature in psychology is to really moveaway from thinking in categories. That goes back to the point we were making,Mekala. Its not about men and women. Its about people.

One of the kind of methods thatpsychologists would use to debias people is to get them to think about theperson, individuating. Thinking about not this black guy, but think about him:Whats his life like? What does he do? Thinking beyond the category and tryingto imagine the person, putting yourself in the shoes of the person.

There are lots of tools thathave been shown, again, in lab experiments, to help in reducing bias. Im goingto make the same call as the one I made before. As Mekala said, Im suretheres lots of corporations that are using those kind of training to try toimprove bias inside the corporation. It would be fantastic to allow researchersto take a look at whether or not this makes a difference.

Besides the work in the lab, wereally dont have the kind of data to assess whether those kind of trainingprograms matter.

The other thing that I wouldstress, and I think Mekala also mentioned that, is that if you dont believethat those kind of training are really going to make a long-term difference, Ithink the other important step is really to have formal processes in place.

When I think about my ownorganization and how we do recruiting, I feel like over the two decades Ivebeen doing it, we are moving slowly towards having more and more structure. Asmuch as we dislike structure, because it feels like its bureaucratic andacademia shouldnt be bureaucratic, structures really help.

The most common examples that I always come back to is just rejecting someone for a promotion or for a job because he or shes not a good fit. That is just not the world that we should still be in. We should have explicit criteria ahead of time when we decide what are the kind of skills that were looking for in a person and not deviate from those, because we dont like the person that emerges after weve gone through these criteria. So I think formalizing a lot of the HR structure, even though it means more bureaucracy, is also, I think, another way to reduce the extent to which we have biases creeping in.

Mekala Krishnan:

Yeah. Just on the company training on unconscious bias, I mean, what were seeing, similar to the quota crutch, this is becoming the crutch where a company does an unconscious bias training with their employees once a year. And then they think theyre done and people are all set for the year. When really, I mean, its such a process. So you need to think about continuous nudges. You need to think about structural change, but its what I worry about is that this is now kind of the buzzword that everybodys using and its going to be the quotas of 2020 is going to be unconscious bias training.

You can view the entire panel discussion here: