Companies that claim to care about being socially responsible are often greeted with a cynical eye. Sure, they talk, but are they really walking the pace?
While we understand the deep skepticism of many, our latest research suggests that at least when it comes to diversity and inclusion, there is a significant connection between the way businesses speak and whether or not they walk.
To explore the relationship between what companies say and the actions they take, we looked at company purpose and value statements posted on the websites of 640 large publicly traded companies. Of these, 101 cite diversity and / or inclusion as one of their few core values.
For example, software vendor F5 networks says she is “committed to a diverse and inclusive business,” adding, “We know the magic ingredient is our differences, when embraced with humility and respect. And because we know it, we believe that the best talent is found in a diversity of individual profiles, experiences and perspectives. “
To test whether such claims are worth anything, we then compared the mix in the top ranks of the 101 companies with the 539 others. And we found that there was, in fact, a real difference between the two cohorts.
Among the 101 companies that say they value diversity and inclusion, women make up 21% of senior executives and senior executives, according to financial information provider Refinitiv Eikon. In other companies, it is only 16%.
In addition, 26% of board members in 101 companies are women, compared to 23% in the other 539 – not as big a difference, but still statistically significant.
Unfortunately, we have been forced to limit our analysis to gender diversity because company-level information on racial and ethnic diversity is not widely available. But we assume the results would be similar.
When a business states a particular set of values on its website, it needs to be held accountable by employees, investors, and customers, especially in an age of constant social media scrutiny.
Indeed, it’s telling that only 16% of the companies we looked at have made diversity and inclusion one of their core values on their website. This indicates that such proclamations are not made lightly.
Verbalizing values seems to be an essential part of how companies deal with and internalize change. There is a serious purpose to all of this – and this, in turn, can improve performance.
Notably, our research shows that the 101 companies score slightly higher than their 539 peers on the Drucker Institute’s.business effectiveness assessment. They also score slightly higher in each of the individual categories the institute measures: customer satisfaction, employee engagement and development, innovation, social responsibility, and financial strength.
On a series of other financial indicators, the 101 companies also perform significantly better than the 539, surpassing them on the bottom line; gross profit; earnings before interest, taxes, depreciation and amortization; and other key indicators.
In the coming months, we expect more companies to issue value statements pledging a commitment to diversity, equity and inclusion. Our own review of corporate websites was completed prior to the police murder of George Floyd in May, andmany companieshave spoken about the need for racial justice ever since.
It’s encouraging. Based on our results, we would expect that, over time, stating such values will lead more companies to live them.
Ultimately, however, it’s important to point out that saying something isn’t the same as doing it, and the numbers across US companies remain woefully low. The fact that women make up 21% of senior executives in the 101 companies we have highlighted means that 79% of these positions are held by men.
It is good that companies are talking. But when it comes to walking, they all need to step up – by a lot – because there is a very long way to go.
Signe Spencer is a customer research partner at the Korn Ferry Institute. Evelyn Orr is the Institute’s Senior Vice President and Chief Operating Officer. Michael Hyter is Korn Ferry’s director of diversity.
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