The Investment Association (IA) will issue warnings to top UK firms for a lack of ethnic and gender diversity of their boards and senior leadership teams. It will encourage listed companies to adopt the Parker Review target of having at least one director from an ethnic minority background by the end of 2021.

You cannot be inclusive from a distance. Managers must talk continuously with their teams to be inclusive. 

This is a clear signal that the issue of diversity and inclusion has now shifted from the HR director’s desk and into the boardroom. It’s a similar journey to that taken by environmental, social, and governance (ESG) issues and, like those ESG concerns, companies will have to take the challenge seriously.

Merely paying lip service through token appointments or initiatives will not cut it anymore. To deliver, companies will need to look hard at their culture and management systems – and they should want to, because improving diversity and inclusion will also deliver improved performance.

Encourage cognitive diversity for the win

Where to start? Inclusion can feel hard to define and measure, while diversity can sometimes be reduced to just numbers – e.g. measuring how many BAME staff a business employs or how many women it has in leadership positions.

This is important because Gallup’s research shows that having someone who looks like you among your leadership team improves perceptions that your company will do the right thing and treat everyone fairly. It also makes people feel more comfortable at work and more like valued team members.

Another big benefit comes from the diversity of thought and experience your employees bring to the table. This cognitive diversity protects against groupthink and default approaches to problem solving, it leads to more creativity and productivity, and the more diverse the backgrounds of your staff, the more diverse your thinking will be.

Diversity depends on inclusion

Without a culture of inclusion, the value of diversity will not be fully realised. Not all black employees will have the same needs at work, and not all women in a company will feel the same about their employer. You might have the most diverse workforce around, but unless individuals feel understood and appreciated for their unique characteristics, they will not feel comfortable speaking up.

Inclusion can be measured. We define it as the extent to which all employees are valued, respected and accepted. What can be measured can be improved, and our research has shown that the manager plays a critical role in nurturing inclusion.

It’s the manager

Engagement is the currency of inclusion and the manager has a disproportionate impact on the engagement and experience of their team. Up to 70% of the variation in employee engagement can be attributed to the local or immediate manager.

Managers score more highly for fostering diversity and inclusion when they:

• Include themselves in their teams rather than managing from afar.
• Manage according to their employees’ strengths rather than weaknesses or the requirements of the role.
• Trust their people.

To be inclusive, managers must include themselves in the lives and work of their employees. Good managers create partnerships and shared accountability, rather than one-sided, top-down relationships. Good managers become coaches, helping their teams to deliver, rather than setting tasks and waiting for delivery.

Inclusion is a contact sport

Engagement, and therefore inclusion too, is a contact sport. You cannot be inclusive from a distance. Managers must talk continuously with their teams to be inclusive.

Right now, not many are doing this. Only 34% of employees say their manager knows what they are working on. Just 21% say their manager talks to them about how to reach their goals, and only 30% say they are involved in goal setting with their manager.

Strengths over job descriptions

Knowing your employees’ unique combination of strengths does more than allow you to optimally arrange your workforce; it provides a lens and a language to frame engagement. It provides a solid foundation for conversations, and directly boosts feelings of inclusion.

That can develop into a virtuous circle. Leaders who coach continuously, establishing a cadence for meaningful conversations with their team, get to know their team members even better.

They learn more about their employees’ strengths and use their knowledge to position them for success based on who they are rather than the role they are in. In turn, the employees become more engaged and more productive.

Study your successes

Knowing team members as individuals allows leaders to create a culture of inclusion and openness, and encourage different ideas and ways of thinking, but how do we evaluate and talk about strengths in a meaningful way?

Studying your team’s successes will teach how you how you succeed, whereas studying failure offers lessons in how not to fail, yet only 19% of employees say their manager has reviewed their successes with them in the last six months.

Both approaches have value, but studying success reveals your strengths and suggests pathways to realistic solutions. Failures can be sometimes be caused by external challenges, whereas, by their definition, successes will contain solutions to those challenges that can be learned from.

Trust your people

Measuring productivity is complicated. Traditionally, managers have relied on ‘bums on seats’ as a visible sign of productive employees. That attitude was changing, but the pandemic, which has required remote working, has accelerated the change.

It has shown us that the best managers do not need to control and spy on their employees. Instead, they trust and empower them to deliver, but for those who still need reassurance, there are new measures to use.

Managers who coach teams according to their strengths have employees who are six times more likely to be engaged, and three times more likely to be extremely satisfied with the quality of their lives.

Previously seen as ends in themselves, and often secondary to ‘business’ measures, engagement and satisfaction are in fact the new ‘visible signs’ of productivity, the new markers of performance.

A golden thread

Diversity and inclusion can be assessed and improved, but often fall victim to opaque and varied definitions, and blunt measurement that misses the real picture.

That picture reveals a golden thread that runs first from diversity to inclusion, on through management according to individual strengths, coaching, involvement, and trust, and finally to productivity and high performance.

The Investors Association and the businesses it scrutinises could do a lot worse than including questions about some of these elements in its enquiries.

Interested in this topic? Read Redefining leadership: why it’s time for leadership to become more inclusive.