Series Eight, Episode One: Building Resilience Within Work Through Behavioural Science

Julia: Hello, my name is Julia Streets, and welcome to DiverCity Podcast, talking about equality, inclusion, and diversity in financial services. On the podcast we seek to shine a light on positive progress, call out areas requiring further focus and offer lots of ideas to help drive change. Today I’m delighted to be joined by Dr. Grace Lordan and Richard Nesbitt. Dr. Grace Lordan is an Associate Professor in behavioural science at the London School of Economics and is the Founding Director of the Inclusion Initiative. Launching in November this year, the Inclusion Initiative will aim to bring together behavioural science insights, designed for firms to really reap the benefits of inclusion of all talent and will produce academic research to support this end.

Designed to be highly measurable, quantifying the link between inclusion and business outcomes, the initiative will provide practical suggestions and interventions to drive change. In addition to her teaching role on behavioural science at a master’s and executive master level, Grace has led many projects advising both the UK and European Government on major policy change initiatives, including minimal wage laws and advising on the future of skills. Grace, welcome to the show.

Grace: Thank you for having me.

Julia: Richard Nesbitt is the adjunct professor of the Rotman School of Management at the University of Toronto. He’s also recently been a Visiting Professor here at the London School of Economics in the UK. Richard is a retired COO of the Canadian Imperial Bank of Commerce, CIBC and retired CEO of the Toronto Stock Exchange. In 2017 Richard published a book entitled “Results at the Top” with Barbara Annis who was also a guest on the show in January 2018. The book focused on the issue of men’s responsibility for gender diversity to improve their organisations. Richard it’s wonderful to see you, welcome to the show.

Richard: Very pleased to be here.

Julia: This episode is recorded in Grace’s office here at the London School of Economics. As always we invite each of our guests to take a minute to just tell us a bit about what they’re up to at the moment. Grace, let me come to you first of all, what are you focused on at the moment?

Grace: At the moment I’m focused on launching the Inclusion Initiative here at the LSE. This is a new research unit that will bring behavioural science insights to financial professional services firms in the City of London to help them enhance the inclusion of all talent. The idea is this that this is all encompassing, and I want to move firms away from thinking about diversity along one or two particular spectrums to thinking about the teams that they have, and making sure that all voices are heard with respect to assessing behavioural risk, which is quite important for financial professional services thinking about products for their customers and innovating. But also to get them thinking about including talent at the bottom of the pipeline, and encouraging people who up to this point have not necessarily thought about careers in the financial profession and services to come forward and think about joining the City of London.

Julia: Amazing. We’ll get into so much of that on the show today for sure. Richard, it’s great to see you here in London. I think the last time we met we were on the stage in Toronto together and congratulations on the book by the way. I talk about it all the time. Tell us what your focus is. What brings you to London?

Richard: Well, I’ve actually moved to London.

Julia: Welcome!

Richard: I’m working with Grace to help get the Inclusion Initiative off the ground. She’s going to be responsible for the content. She’s the brains behind it, but I hope to help her bring it out to industry. What’s very important about this initiative is we want to take the findings from the research and apply them to industry. We’re going to be focusing initially, at least on the financial services industry in London, but of course also in North America.

Julia: Really keen to hear your thoughts on how organisations should be embracing change. Also where some of the difficult parts of the elements are as well. Grace, let me come to you first of all, talk to us about your findings. You’ve been doing some research, tell us what you found.

Grace: My research started with thinking about why people choose the jobs that they do and also once they actually get into those jobs, what determines who was successful beyond their own skills, abilities and talent. One of the big factors that comes true from my research is that inclusion really matters. That’s inclusion in conversations when you’re at kind of key ages, like 16 when you’re determining whether or not to stay in A levels in the UK or go to university in some other countries. Also, what you decide to do when you go to university.

Equally when you actually get to jobs, whether or not you’re actually included in opportunities such as getting stretch assignments, stretch projects, stretch goals. Based on that and my belief that inclusion really matters for the City of London, I’ve spent some time doing a qualitative study, which really involved going and meeting 40 of the most senior leaders in London City. I interviewed six CEOs, seven other executives, there were 20 people who are very senior income generators in their firms, four from the first line of defence and three from human resources. We asked them what they thought the obstacles were to inclusion in the firm with my gut feeling that actually if we improve inclusion, that we’ll improve outcomes for some people who are getting a raw deal in the city at the moment.

Rather than just take what the 40 leaders said as a given, I also went and organised three events that were attended by 114 people from across the entire pipeline. Then I went and met 30 people who are very junior in the pipeline, paying attention to making sure that I included voices from lower socioeconomic status, different ethnicities, and also gender balance. From all of those conversations, I came up with the 10 obstacles that were cited the most for inclusion in the city. Now based on what I’ve known in the past from behavioural science, I came up with actions. That’s now out there in a report for any firm to download and take forward in their firm themselves.

What I’m hoping to do going forward is learn more about how effective those actions are. My gut feeling is that they will be effective, but I’m a scientist, so I want to see empirical evidence in that way. I’m also interested in learning how they work in particular contexts. So some actions might work better in toxic environments, some actions might work better when you already have a particular good culture in the firm. If you kind of think about it in terms of bang for the buck. Some firms will be interested in linking inclusion to profits and loss, which I’m really excited about. But equally some firms might be interested in linking it to employee wellbeing. I think that’s kind of the future of where I want to go is learning. If I pull a lever, which is the best lever to get firms to a more inclusive workplace.

Julia: You mentioned about having the list of the 10 that you uncovered. Can you just give us a sense of which ones bubbled up to be the most challenging?

Grace: The one that I’m most interested in is always group thinking. I’ve done a lot of work with firms where I’ve gone in and looked at the conversations that individuals are having amongst themselves. Look to see whether or not they’re discussing in a way that would push the boundary of the firm. So come up with a more creative solution, look to see whether or not they’re interested in each other. It’s probably no surprise to your listeners that you see a lot of group thinking at times when you have toxic cultures. That’s a no brainer. What’s really interesting that has come up is that often you go in and you meet happy teams. Often teams that seem like they are embracing dissent, having a good argument, but feeling very, psychologically safe. But those same teams do still seem to avoid topics of conversation where members don’t necessarily feel familiar with the content. They overfocus on the shared information that they have and they tend to push to the sides hidden information.

Now you can imagine when we think about diversity and the values of diversity, the whole point is that you have different individuals with different life experience coming up with unique solutions. But then if we get together as a group and we overfocus on what the average have in common, it’s probably not going to give you the best from those diverse people who are around the table.

The report contains some very easy actions to get people speaking more at meetings. One of the simplest solutions to do this is most of the meetings I’m in, the chair of the meeting or the leader of the meeting speaks the most in the beginning, usually lets me know their point of view before the meeting even begins. Which is quite baffling given they’re going to make the decision later on anyway. Just actually coming into the meeting and saying, “I’m really interested to hear what you say. This is the topic. Tell me something I don’t know. Whoever tells me that something that I don’t know, that’s what I’m going to be interested in hearing.” And really turning on its head what we do when we come together as meetings. Really try to move away from group thinking.

Julia: It is funny you say that, because I was just thinking exactly those words while you were talking, was that it is literally turning this on its head. Richard, you spent an enormous amount of time in boardrooms and in meetings and you were smiling while Grace was talking as well. First of all, is that your experience and do you think that It’s a turning on its head? Is that something that can be done very easily or is that such a cultural shift?

Richard: Well, I think the environment’s better for that now than it maybe was a decade ago or two decades ago. People are aware that there are issues and problems, and part of that scene in just being able to recruit people now into the industry. It’s not a slam dunk anymore that financial services is the top industry to be attracted to. I think that what positive development and we’re hearing it from corporations is that they’re really focused on the wellbeing and the inclusion of people and including people of different backgrounds as well into their organisation. That’s something that’s developed more recently and I think it’s a very positive thing.

Julia: What do you think will be one of the drivers again? I know you’re thinking a lot at the moment about the role of technology in organisations as well. I’m keen to explore that with you because the world of work has changed so much. Not only as you say in terms of culture and behaviours, and the way in which meetings are run perhaps is beginning to shift, but also the role of technology. Can you share some thoughts on that?

Richard: Well, technology is going to change everything and I’ll give you a little promotion on a new book I have coming out called “The Technological Revolution in Financial Services,” which will be out in the summer, published by University of Toronto Press. Really what we’re seeing is just what we say is a revolution in financial services. The world of financial services is being changed inexorably by technology. That has a tremendous impact on people. Some people are threatened by that. Some people are advantaged by that. One thing technology will be used for is to reduce costs within the incumbent players. Technology is changing everything, including things like machine learning and artificial intelligence, which are being used increasingly in decision making. I don’t think we can really anticipate the impact that this is going to have on the customer experience, but we certainly can anticipate the impact it’s going to have on employees, which is going to be a traumatic amount of change.

Julia: Can you give us a couple examples where you see that change coming from?

Richard: A good example in North America is we still like checks in North America, we used to have to take the checks in paper form and then created a digital image of it. What happened was the technology came along about 6/7 years ago that the customer could take the picture of the check, digital picture of the check and then that could be put into the system. Customers really like that by the way, because then they don’t have to go to a branch, but who’s saving the money on that? It’s the bank, and it’s a tremendous cost savings to have the cut pushed to the customer to do all of the creation of the digital image.

You can think of parallels of that in other industries as well. You do the self-checkout and Amazon would like to have a no checkout,  you just walk out, so there’s one example of significant change. The other thing is in terms of making decisions on loans, those are increasingly going to be made using machine learning and artificial intelligence, particularly in the retail sector.

I would say the one area that’s already gone through a profound change is the trading of foreign exchange. When you buy foreign exchange from your local financial services bank or credit union or even a kiosk, that is executed by a machine. Entirely, 100%. There’s no human interaction other than the person maybe that you’re talking to. That is entirely now automated and it is revolutionised, the trading of foreign exchange. Made a lot better for people actually in terms of the efficiency of the market.

Julia: I think when it comes to organisations to rethink the way in which they communicate and engage and drive change. Or to harness the potential of their employees at a time when they’re embracing great technology is asking some very key questions of the senior management level. What we hear a lot is that senior management are very committed to diversity inclusion. They’re very committed to change. What I was really fascinated by was the group of 20 you were talking about there, the next level down, who are arguably the sticky middle. Keen to hear both your opinions actually about how do you encourage that level of management to really get the diversity point? Because you need the diversity as you were saying Richard, to innovate and to bring in technology. But also they are perhaps a reluctant group to change and harness the potential. Grace, let me ask you first of all, your thoughts on that.

Grace: I think that the gains are more than that. As we move towards a world where we expect customers and financial professional services to interact more with technology in order to get services, there’s going to be many more winners and losers if we don’t embrace diversity and inclusion within these teams of middle management. Because otherwise the products are going to be made by very specific people for very specific audiences. For example, in behavioural science we know that how we present information matters to people, but also how we present it matters, depending on a person’s gender, their age, their ethnicity, and other aspects of personality.

If we only have one type of person who’s identifying those products, that’s problematic. It’s the same with the messenger effect. How we actually deliver the message of changes in technology, the person that we put in front of those audiences, the role model really matters, again, if we just have one type of people who are discussing what those products are actually going to be, that’s problematic for the business. It will hurt the customers, but it would also hurt the business.

A lot of times these decisions are made by mid-level managers. It’s very easy at the top for people to say, “We believe in diversity and inclusion.” And I would ask them how much are they spending or what resources are they putting into making sure that their mid-level managers are inclusion leaders? Beyond that, are they checking that the services are working? Because buying services is a really quick way to signal that we care about diversity and inclusion. But most other projects that are rolled out in firms, we look to see what the value was, what the value added was and we don’t do that for diversity and inclusion.

I think that we need to do that and also move focus to the mid-level managers who ultimately are the people that the majority of the pipeline are interacting with on a daily basis. We hear words like permafrost, which I really, really don’t like. I think most mid-level managers are absolutely trying to do their best. I think if they realise that their gains that they can actually get from including diverse perspectives around their table that can go both to their bottom line and their customer, you will get more buy-in.

I really believe the subject that I studied, behavioural science is perfect for this. Because you can teach leadership through behavioural science tools that allows a leader, a mid-level manager, however disenfranchised they may be to learn quite quickly whether or not that change is actually working for them. I think sometimes if you’re working in a time pressured environment and you are excluding voices around the table, sitting through unconscious bias training or sitting through some training that tells you that you need to be more inclusive isn’t very helpful. But I think learning tools that you can do live in meetings in order to actually bring better perspectives to that meeting is something that you will do. It’s quick, it’s easy, it’s not tasking on your time. And actually learning how if I change my style a little bit and seeing if it works and knowing how to audit that is actually fun as well.

Julia: When you say tools, can you just give an example of what you mean by a tool? Is it a piece of technology that you’re using as you run the meeting? Or is it a tip and a trick such as a management technique?

Grace: It’s definitely more tips and tricks. While I believe technology can do a lot, I think for our businesses we still really need to invest in our people. A very simple example is very often when I sit in meetings, the person who speaks the most are the extroverts. They dominate the conversation. I find it hard to get a word in, I’m actually naturally quite introverted, even when I teach I find it extraordinarily draining. If I’m in a meeting and then people are called on randomly, that disrupts who’s putting up their hand and who’s shouting the loudest and it also disrupts the flow of the conversation.

Equally, if I’m in a meeting and the first 15 minutes is spent with me writing down my ideas that I bring to the meeting, and my leader takes that up on days that I don’t necessarily feel like talking loudly or indeed battling when someone is interrupting me in that meeting, I do feel much more included in that space. I think for a leader, if they do that, they learn quite quickly whether some of the quiet voices at the table actually really have nothing to say, or they’re finding it hard to get their voice heard in that meeting. Very easy tips and tricks, very cheap, no subscriptions, very easy to bring in on a day-to-day basis.

Julia: Very intensely incredibly practical as well. Just thinking about your book Richard, the “Results at the Top,” this is all about breakthrough performance. It was about helping managers at the top of their game, the top of the tree and the middle managers understand the commercial potential that is there. From what Grace was saying, aligning it clearly to a commercial imperative, which we always talk about on the podcast as well is incredibly important. Were there other areas where from your research you found those middle managers really got the points because they had their eyes open to something specific?

Richard: I would say today most people want to do the right thing. Most people actually believe in this quite honestly I think. They actually don’t know how to do it though, that’s what I find. What I think we’re lacking in the business is giving people the training and the ability to know what to do. I found that in my career, it was trial and error. I’m trying to deal with this problem, nobody ever told me how to deal with this problem. In business we learn about the capital asset pricing model and motivational tools and things like that. But these are complex human interaction problems that really has not had a lot of time put into the research on how to deal with these problems. That’s what the Inclusion Initiative is going to hopefully provide us.

I think that we need to think a lot more about training people on how to manage. Middle managers are the people that you would start with quite honestly, because they are operating the day-to-day operations of your organisation. I think people want to do the right thing. They realise that these are important initiatives. But I don’t know that they have the training to really affect that change. That’s I hope where institutions and companies will go in terms of the training.

Julia: Grace, you talk in your research about disrupting the style of leadership training as well. Talk to us a bit about that. How can that training be disrupted?

Grace: Again, it’s taking a behavioural science approach. The behavioural scientists believe differently to economists who believe that when we make decisions, we weigh up the cost, benefits and risk, that there’s actually two styles of thinking. One is very fast, impulsive, you’re on autopilot. The second is slow and deliberative. Our system one, which is our fast system, we’re using about 80% of the time. Our system two, which is what you would actually use if you were choosing a mortgage for example, or doing a really hard maths equation. We’re using about 20% of the time. Most of our mid-level managers, when they’re going about their daily business, they’re actually in system one. Everything is really, really fast, and we tend to make many more errors with our system one.

The type of training that I’m interested in putting out there are ones that equip the mid-level manager with the tools that I’ve just spoken about for group thinking and kind of leadership styles if you like. Very quick and easy that they can bring into their daily lives and get big bang for the buck, and also very small tweaks that they can make to their environment in order to make their workplace more inclusive. I think why I’m really motivated by this, when looking at the very, very executive level and looking at the lower level is that if you think about culture change as tipping or a domino effect. I think if you bring along what I call the low hanging fruit to the mid-level managers who will be excited about learning about behavioural science and they see gains and as their colleagues get to see that, slowly you can have culture change in the organisation.

I think organisations that had their leaders saying for a long time that we believe in diversity and inclusion without changing the middle level of the organisation, they can say that forever and nothing is going to change. But tipping, the tipping phenomenon of mid-level management is something that can really move a culture from quite bad to pretty good.

Julia: Certainly from the people we talk to, those who really understand it are gaining a daily competitive edge.

Grace: Yes.

Julia: They are the ones actually within their organisations who are truly flying, and that is the momentum that I think is going to drive change. I think that’s a perfect moment just to pause the conversation as we turn to Cynthia, who’s got some research to support the discussion.

Cynthia: When it comes to workplace culture, there is a large gap between what leaders think is going on and what employees say is happening on the ground. In the 2020 Accenture report getting to equal hidden value of culture makers. Two thirds of leaders feel that they create empowering environments in which employees can be themselves, raise concerns and innovate without fear of failure, but just one third of employees agree. In addition, employees care increasingly about workplace culture and believe it’s important to help them thrive in the workplace, reported by 77% of women and 67% of men. A larger percentage of those in younger generations are more concerned with workplace culture than their older counterparts, 75% of generation said vs 64% of baby boomers.

Julia: Thanks, Cynthia. The links to the research can be found on our website, divercitypodcast.com. That’s where you can find all our episodes and sign up for early notifications of future recordings. Please do follow us on Twitter @divercitypod, and DiverCity Podcast is available on BrightTALK and all good podcast channels. We’d love a rating because it all helps to promote the show.

Before the break, Grace you mentioned unconscious bias training, which of course a lot of people go, “We’ve done our training, it should be making us better.” But actually is it? I’ve been thinking a lot about technology and at the heart of the technology lies a similar question about bias as well. Richard, as you sort of reflect on your previous book and now your book that’s about to come out, but also for your management experience and the technology dimension as well, what are you thinking about in terms of bias?

Richard: I would say two things on that. Number one, on the data side, I would say there’s just a lack of data around the topic of inclusion and diversity. I think that to some degree is deliberate, and there’s been somewhat of a resistance to publish this kind of data because, while the story I would argue is improving, the story is still not that good in many industries. I would really like to see the same kind of rigour in terms of reporting on diversity and inclusion as we have on executive compensation, for example. We have pages and pages on executive compensation and annual filings, but we have very little on how they deal with their people. I think that could be a big improvement, and hopefully as we get into measurement issues, we can encourage people to start publishing more of this data. Because clearly if you don’t know what’s happening within your organisation, really it’s pretty hard to affect change.

Julia: When it comes to holding people to account, obviously we talked earlier about the capacity of edge, you can measure that, holding people to account. Should that be baked into scorecards and remuneration as you say?

Richard: In a corporate setting absolutely. You only change what you’re being measured on. There are so many things you have to do in business that you focus on what you’re being measured on. Profit for example, efficiency for example. So if we want to effect change and we want to accelerate the pace of change, you really have to provide proper measures for this and have people have that baked into their evaluations and ultimately their compensation. That’s the way to make it.

Julia: Are you seeing a shift in mindset of people recognising that that’s appropriate? People going, “No, fair enough, I should be measured on that.” Or are you still feeling a bit of resistance in the industry?

Richard: Yes, I think there’s still a bit of resistance. As I said, the story’s not that good in many respects, while it’s improving, it’s improving slowly. Therefore I think that people would rather hold off reporting until they get to a better state, quite honestly. But how long are we going to hold off? We can be holding off for a long, long time till everybody gets to a better state. I think that this is very important, and I also think that businesses should embrace this and not rely on the government to impose it. I would encourage businesses to get on with the job as well as get on with reporting the good work they’re doing.

Julia: It’s fascinating you say that, because you’ve led me entirely to my next question which was around the role of policy in some regards. There is some discussion about policy engagement around the question of culture, and Grace was saying earlier about toxic cultures and navigating toxic cultures and thinking about how organisations can improve that. You touched on it very lightly but really keen to come back to that as well in terms of from an employee’s perspective, because we’ve talked a lot about it from a management perspective. But some of your research was talking to younger talent, emerging talent if you want to call it that, around some of the skills of how do you navigate toxic cultures without walking out the door and go, “I never want to work here again. I’m out.” Are you looking at that area as well?

Grace: Yes, one of the interesting things is that if I’m an individual who goes into a toxic culture and I’m experiencing that over months, the best thing probably for myself is to leave. But the best thing for the group is that I actually stay and make a difference. I think in having companies invest in the core skills of their employees can really help during that transition period. I’m talking about giving education on how to build resilience, how to build grit, how to build adaptability, how to be more creative, how to be more innovative. I think that these skills will help people not just navigate toxic cultures, but would also help people when they’re within a firm that actually has a good culture that’s just going through a bad economic shock. There might be cost cutting, there might be redundancies.

Also I think in today’s world where people do change jobs much more often, labour markets are tight. It can feel sometimes like the world is against you. So having those skills is really important. I’ve been involved with a project that has placed those skills into secondary schools in the United Kingdom, and with the Inclusion Initiative I really want to think about how we can place those, not just for our students here at the LSE, but for the very young pipeline going into the financial and professional services firm to get them over that first one and two year transition.

Julia: It’s fascinating, isn’t it? Because I think at this time when I still have a sense that talk is cheap. People are very keen to talk about the company’s diversity inclusion. That’s why we have the podcast because we want to get into what’s difficult or where we have to focus and that’s what your research is, it goes right the way through the chain, as you say right the way back into schools as well. From the people you were talking to I imagine that people who get the joke were keen to engage. What is it you want the industry to do when they listen to this podcast and step up?

Grace: I really do want the industry to think about measurement and to think about data. I’m going to try to come up with a credible macro measure of inclusion that will quantify inclusion across firms. Also within firms I’m going to be looking at how best to measure inclusion within firms. I also want firms to try to bring data into some of the big decisions that they’re making. For example, who we hire is really important. These days, it’s not uncommon in an interview setting to be asked if you care about diversity and inclusion. You would want to have rocks in your head to say that you don’t, regardless of where you come from or who you are. But one big test of that is to look backwards and look and see who were the people that that person brought along in their teams, who have they worked with in the past, and is that statement credible?

I am an economist and we do have this term cheap talk for people who say things that aren’t necessarily true. In behavioural science we do say, “Don’t listen to what people say and just look at what they do.” I think the data allows us to go closer to that, so really embracing data.

Julia: Amazing, and the time on these podcasts just canters past. To be here in your office on a Friday afternoon, thank you. Thank you for hosting us and what has been a really wide reaching conversation actually. We’ve talked about technology, we’ve talked about data, we talk about bias, we’ve talked about cultures, leadership, new talent coming through. Richard and Grace, thank you so much for joining us today.

Grace: Thank you. It’s been fantastic.

Richard: Thank you Julia.

Julia: Thank you.

Kieron: This episode of the DiverCity Podcast was produced by me, Kieron Yates, on behalf of Julia Streets Productions. Thanks to Cynthia Akinsanya for her insights. You can find out more about the guests on this week’s show on our website, divercitypodcast.com. Whilst you are there, you can also sign up to our newsletter for all our latest updates.

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