Series Ten, Episode Two: Changing the Race Ratio

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.

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Today I’m delighted to be joined by Dr. Kamal Munir and Lord Bilimoria of Chelsea. Dr. Kamal Munir has been teaching at Cambridge Judge Business School since 2000, and his focus lies firmly on technological and business model disruptions, at both the corporate and at societal levels, extending out even further to consider the competitive advantages of nations. Widely sought by industry and academic journals for his insights into organisational and technology changes, Dr. Munir has consulted for the State Bank of Pakistan, the World Bank, and the Asian Development Bank, and he’s advised governments of the UK, Pakistan, and Nigeria. Kamal, welcome to the show.

Kamal: Thank you very much, Julia. It’s great to be here with Lord Bilimoria and yourself.

Julia: Lord Karan Bilimoria is arguably best known today as President of the Confederation of British Industry, the CBI. In 2006 Karan Bilimoria was appointed the Lord Bilimoria of Chelsea, making him the first ever Zoroastrian Parsi to sit in the House of Lords. He’s founder of Cobra Beer, and today chairman as a Cobra Beer Partnership Ltd. In terms of his academic badges of honour, these include Honorary Fellow of the Sydney Sussex College Cambridge, former Chair of the Advisory Board of the Judge Business School, Cambridge University. And in 2014, he was installed as the seventh Chancellor of the University of Birmingham, making him the first Indian-born chancellor of a Russell Group University in Great Britain.

I should also add that he is an Honorary Group Captain in the 601st Squadron Royal Air Force. Lord Bilimoria, welcome to the show.

Lord Bilimoria: Pleasure to be with you Julia, and with Kamal.

Julia: Gentlemen, let’s get straight into the discussion. The first question I always ask all our guests is I’m very keen to hear what you’re focused on right now. Lord Bilimoria, can I come to you first of all?

Lord Bilimoria: What a year this has been with COVID, a pandemic that came from nowhere, none of us predicted this would happen, and there are events in the world’s history which change the world’s history. Then we go back in living memory, for me, for example, would be 9/11. Nobody predicted that, when that happened in 2001 it changed history. Changed the way we travel, It changed so many things. Similarly, the global financial crisis, when that happened, very few people predicted it, less than five people, I think, in the whole world, economists actually predicted it. That had a huge impact on the globe, and all of us.

Now we come to this. This, to me, is just extraordinary, because it’s a health crisis and economic crisis combined that has hit the whole world. Just about every country in the world has been affected by it. So looking ahead, business has had a huge amount to deal with, and dealing with the pandemic, Brexit, we left the European Union on the 31st of January, and we now have to deal with having left, what is going to happen with transitioning out of the European Union? With all that needs to be built on, to make sure that we make the most of our relationship going forward.

The EU makes up 45% of our trade, and is very, very important to us. Of course, the world has changed for Britain in terms of the global aspects of it, and the trade deals that we will now be doing, and have already started doing, around the world. However, this is in the backdrop of a pandemic where we had a lockdown for three and a half months, which has caused huge amounts of financial burden, and lots of other health issues, mental issues, that we’ve all come together as a country. We started to come out of it in the summer, and now we’re in the midst of the second wave, which is really, really terrible.

So the uncertainty continues, and a sense of ambiguity continues, and I’m personally confident that in 2021 the vaccine will be implemented. I’m confident that mass testing, affordable mass testing, can be implemented, and there’s light at the end of the tunnel. Then as long as we retain the businesses and retain the jobs, that’s the most important thing, because long-term unemployment, we’ve been squashing the curve of the virus, we’ve also got to squash the curve of unemployment, and make sure that there isn’t long-term unemployment. Also for the youth, particularly, that have been affected hugely by this virus. Whether it’s through exams, or whether it’s the disruption of universities, it’s their future. So we’ve got to make sure that we bounce back in a resilient, sustainable manner quickly. And I’m confident we can.

Julia: Really interesting to hear your thoughts, particularly about the path ahead, and the road that we’re navigating in so many different ways. Kamal I mentioned in the opening remarks about how you think about corporate change, organisational change, different operating structures as well. I’d love to hear what you’re focused on right now, and particularly how your students are engaging at this particular moment in time.

Kamal: Thank you, Julia. I think Lord Bilimoria has already pointed to a number of things that have characterised this year that we have been living in 2020, which will take some time to forget. But in addition to that, I would also like to point out the effect that BLM has had on everything. COVID, of course, tends to overshadow everything that happened in 2020, but BLM I think is a significant event that we also need to mention here.

The Black Lives Matter movement wasn’t just about the outpouring of rage that we saw on the streets. Wasn’t just about one black person getting killed at the hands of an American police officer. I think this was pent up for a long time, and it was pent up because of the persistence of inequality that has been taking place, that has occurred over the years, over decades, in fact. If you look at the numbers, the disparities, especially in the US where all this started, in the US the disparity between black families and white families is pretty much the same as it was in 1968. White families tend to have about 10 times the wealth and the income of black families. Of course, in terms of segregation, in terms of health outcomes, in terms of social problems, with everything.

Obviously what we have done over the past few years hasn’t really worked. The positive side of that is that luckily it has spurred people on. It has lifted the lid from a number of things that we just took for granted, and we never really scrutinised very much. People have sprung into action, and so have we in the university. I mean, we had already been doing things in terms of diversity, in terms of inclusion, in terms of equality in the university. But this has also put a spring in our step.

As you know, for the past few years, we have been seeking greater race equality at Cambridge. As things stand, we suffer from the same problem that we’ve witnessed in most other organisations in the west, which is that we are unable to get more diversity at the top. Given how deeply institutionalised things tend to be, this is a fight, of course, that continues.

We are collecting data. We are confronting all the different departments of the university with that data. Preparing dashboards indicating where they are, what progress they are making. At the same time, we are making diversity more visible at the university. It is now a thing, unlike in the distant past. BAME students, of course, have also played an important role in this, as has BLM of course, right? They are the wind in our sails.

We are also pursuing greater diversity at the college level in the university. We are trying to get more BAME fellows in colleges, because our students in colleges are telling us that they want more pastoral care from people who look like them. We will just continue this fight for the remaining year.

Julia: That’s really interesting, and it very much chimes with much of the discussion we’re having in the industry about the importance of visibility, and the role of role models as well. Which is, it’s fascinating to hear your thoughts on that. Lord Bilimoria, I know you’re really focused at the moment on a particular campaign, the “Change The Race Ratio” campaign. We’d love to hear more about what you’re focused on. Tell us about the campaign.

Lord Bilimoria: Yes. When I was appointed as the incoming president of the CBI in June, 2019, you start as vice-president for a year before you take over as president. And I’m the first ethic minority president in the 60-year history of the CBI. The Confederation of British Industry, the most powerful, influential largest business organisation in the UK. And our Director General, outgoing, who’s just left, Dame Carolyn Fairbairn, was the first woman Director General. It took 55 years to get there. I thought, well in this position as the first ethnic minority president, I really want to champion ethnic minority participation across business. And how am I going to do this?

I started planning for this from June, 2019. We studied the landscape, and we saw, and this well before Black Lives Matter, and early in 2020, we saw that there was a review of The Parker Review. The Parker Review had taken place in 2016/17 about ethnic minorities on boards of FTSE 100 and FTSE 250 companies. They set a target that by 2021 there should be at least one ethnic minority board member of every FTSE 100 company. And by 2024, there should be at least one ethnic minority board member of every FTSE 250 company.

When they did the review in early 2020, they found that the actual statistics were way away. It was only 37% of FTSE 100 companies still did not have even one ethnic minority board member, and FTSE 250 companies, 69% of FTSE 250 companies did not have even one ethnic minority board member. We said, well, why don’t we champion the Parker Review? Why reinvent the wheel? The 30% Club, what the 30% Club did, one of my Cambridge University contemporaries Dame Helena Morrissey is now joining me in the House of Lords, when Lord Davies had the review of women on boards, the target for women on boards is there, you’ve got a 50% target. You want 50%.

So they said let’s at least try for 30%. So Helena and her group of people got together and formed the 30% Club to champion the Davies report. I don’t think we today would be at 33% of women on boards, today we’d be where there’s only FTSE 350 company that doesn’t have a woman on their board, if it hadn’t been for the 30% Club.

We said, we will start a similar movement, but we will not call it the 15% Club, which is the proportion of ethnic minorities in the UK, because we want this to be a global movement. For it to be a global movement, it should apply anywhere in the world. We want people to take up this, and champion this. So we called it Change the Race Ratio. We’ve four things that we want to do. One is to increase racial and ethnic diversity amongst board members, and to help achieve the Parker Review targets. The second is to increase racial and ethnic diversity in senior leadership at the ExCo and ExCo minus one, with stretch targets to publish them within 12 months of taking the commitment.

So people sign up to Change the Race Ratio. We’ve always got many companies and firms, the big accountants, we’ve got Microsoft and Aviva, Deloitte have been really helpful to us. Brunswick, who helped us a lot. Lots of companies have signed up, EY, and I could go on. The list goes on of companies that have signed up, and they make this commitment. Then we want them to be transparent on their actions. To publish a clear action plan, alongside targets, and share progress in the annual report to the company website. In addition, disclose the ethnicity pay gap by 2022, at the latest.

The fourth one is to create an inclusive culture in which talent from all diversities can thrive. That’s focusing on recruitment and talent development processes to drive a more diverse pipeline. Data collection and analysis, fostering safe, open and transparent dialogue with mentoring and support, and challenging conventional thinking and working with a more diverse set of suppliers and partners, including minority owned businesses.

This is the whole point that people talk about D&I, diversity and inclusion. In fact, I was reading a paper by a Harvard professor, and I’m sure Munir says exactly the same thing, explaining for the past few years, we have been seeking greater race equality at Cambridge. As things stand, we suffer from the same problem that we’ve witnessed in most other organisations in the west, which is that we are unable to get more diversity at the top. Given how deeply institutionalised things tend to be, this is a fight, of course, that continues.

That’s what we’re trying to achieve, and we’ve got off to a flying start. I’ve been overwhelmed by the unanimous support that we received across the board.

Julia: As you know, we’re very focused on the world of financial services, both in the UK and internationally as well. I wondered if you had a message for the listeners? If you had a call to action, what would that be?

Lord Bilimoria: Well, the call to action is sign up to Change the Race Ratio. We’re starting with the board level, and I’m a great believer in role models creating inspiration. Because their achievement creates inspiration. Inspiration creates aspiration, and aspiration leads to achievement, which in turn creates inspiration, it’s a virtuous circle. Of course, there is a business case for this as well. Not only is this the right thing to do, but McKinsey’s research recently has shown that those companies that actually embrace ethnic and cultural diversity, the top quartiles of the companies outperform the fourth by 36% in profitability. I mean it makes business sense to do it as well.

Julia: Kamal, can I bring you in here as well, because as I mentioned earlier in the introduction, you think about organisational change, societal change as well. When you’re looking at the world of financial services, I mean, what compelling reasons would you give to the audience about why it’s important to get involved, and why sign up?

Kamal: I think this is an excellent initiative. I mean, the Parker Review’s findings were quite shocking, frankly. We’re all very proud of Karan for addressing it right away, because this needed to be addressed for a long time. We’re really glad that Karan has come onboard and started taking it by the scruff of the neck. In terms of the targets that the Parker Review sets, I think they are extremely reasonable. To start us off with, at least one racially and ethnically diverse board member in the FTSE 100 by end 2021, one ethnically and racially diverse board member in FTSE 250 by 2024.

I was really glad to hear Karan doesn’t stop at that. Because often these kinds of things can be a fig leaf, right? I mean, okay, let’s get one person of colour on the board and we are done. For a long time we did that by including one white woman in the board, and we thought we were done. We have ticked the box, and let’s move on. We never address the inclusion side, as Karan mentioned. This is also something that Goldman Sachs in the City was criticised for when they said we are not going to take any company public which does not have at least one woman, or one racially diverse member in the board.

But we can’t have board membership cover up for lack of diversity in the rest of the organisation. That’s where Karan’s point about the culture is important, because if you look at financial markets, a lot of the data is available on America. For example, in US finance companies, what you see is only 2.4% of executive committee members, 1.4% of managing directors, and 1.4% of senior portfolio managers are black. Goldman itself, just 4% of executives, senior officials, and managers are black. Which is up from 2.7% in 2015. At City, 2% of black men and zero black women are in this category.

We do know that the proportion of black students who joined banks at entry level is significantly higher. Which begs the question, what happens in between? Why do they drop off the radar? It’s very good to see the initiatives, you know, like what Karan has said. These organisations are beginning to take this more seriously. I mean, what we do see, what research does show us, is that black people in banking are more welcome in back and middle office roles, not in the front of house roles.

Performance measures in banking can be subjective, depend upon managers’ judgement. This is something that is very important because when we grade assignments in the university, they are blinded for us. We don’t know whose assignment we are grading. There’s no name, there’s no number on them. I mean, there’s a code that is given to every assignment and then somebody else, a third party brings together the code with the actual name of the student, so we never know what we are giving. Organisations are not like that. When you are evaluating your subordinates, this process is not blinded. We know from research that if it is made more transparent, if you are publicly accountable for what grades or what evaluations you’re giving to your subordinates, bias tends to decrease substantially in these things. So we need to bring more transparency into the culture.

The other thing of course, that we noticed, especially in the finance sector, is that clients can be biased. They drop subtle hints that they would rather see a person from a particular race or a particular community. They would rather deal with them rather than with somebody else. That is also something that we really need to push back on because it happens in hospitals too. I worked with the NHS too, and sometimes patients come in and they say, “We’d only rather be seen by a white doctor, please.”

Do we expect hospitals to yield to those kinds of requests? No. So, you know, similarly firms in the City should take a hard line on that, and they should push back on these things, whether they are direct, indirect, however subtle they might be. We also know that the higher that we rise in an organisation, the more race seems to matter. We also need to reverse that. This is all thinking, this is all culture. We also know that if we do appoint a woman or a member of a racial minority to the top job in any organisations, the commitment that the top white males tend to have, to their jobs, to the organisation, seems to drop.

There’s very interesting and eye-opening research out there on all these things, and we need to start looking at it again, and we need to start scrutinising what is going on in these organisations.

Julia: The topic of culture has come up a lot actually. This is something we’re definitely thinking about. You know, we talk about leadership at the very highest level, the board level, the ExCo, the ExCo minus one, and I just wonder constantly whether we need new models of leadership. But it’s interesting, isn’t it? Because I think one of the things we found a lot is that you had to get very comfortable with the conversation about race. A lot of people we’ve talked to just say, “We’re fundamentally deeply uncomfortable talking about race.” I wonder what advice you’d give businesses and leaders to think about how to engage with the diversity conversation. Where does it begin? Is it an HR role? Is it that the senior executive team needs to take it onto their tables? I’d love your thoughts on where we should focus.

Lord Bilimoria: With all these things, it comes from the top. It’s the chairman and the chief executive, if this is a priority for them, it will happen. I can speak from experience. What I would say about this Change the Race Ratio is I practise what I preach. For nine years I was a Senior Independent Director of Booker, the largest wholesaler in the country. When I joined the board, it was a 300 million pound valuation AIM listed company, and I was the first diversity on that board. It was all white males, and I came in on the board as a Senior Independent Director. Then we recruited one woman board member. Then a few years later, another woman board member.

Suddenly from zero diversity, we had three. That company went from an AIM listed 300 million pound valuation company, to nine years later, just before we sold and merged with Tesco, to an almost four billion valuation, almost FTSE 100. Literally, just below FTSE 100. I saw the power of that diversity, and the performance. We’re talking about performance through the credit crunch, through the financial crisis, through the great recession, and still achieving this amazing performance.

I’ve seen diversity work. I’ve seen in my own business, in Cobra Beer, which I founded from scratch. Before we merged with Molson Coors, if you just looked at the independent Cobra in those days, it was like a mini United Nations. We had people from so many different nationalities, and it created a real buzz and this diversity of thought, and diversity of culture, and diversity of thinking and input made us that much more dynamic, and creative, and innovative. It was brilliant. It was just the most fabulous atmosphere. I’ve lived this, and I’ve seen the benefit of it.

Julia: It’s wonderful to hear your personal experiences. Thank you so much for sharing those. Kamal, you’re talking to organisations all the time. What advice do you give about organisational leadership structures?

Kamal: There’s a wide variety of advice, and from top to bottom. Let me start with the top. Lord Bilimoria is absolutely right, that it must come from the top. Unfortunately, it doesn’t always come from the top. In a lot of organisations that I see, the impetus for change has come from the bottom, in fact. Where employees at low levels of the organisation are the ones who have pushed, with the help of the BLM movement, which is outside, which is on TV screens, and so on. Pushed their superiors in that organisation to do something about this.

What I have also found is that a lot of the CEOs were not properly equipped to actually lead on this front. They may have been very good as far as it comes to just the financial bottom line, but what to do about inclusion, equality, diversity in the organisation. They were just way behind the curve on this. Erika James is now the Dean of the Wharton Business School, she once wrote a paper a few years ago in which she said that often minorities are given glass cliff assignments. When they are appointed to the top, when there is a higher likelihood of the organisation not doing well, so the job is more risky.

That’s when they are appointed, we need to move beyond that. We need to be proactive in appointing minorities to these roles, or anyone else, frankly, who is equipped to lead on this front. Not everyone is. Again, there’s so much that needs to be done in businesses. I mean, staying silent or being strategically coloured blind, for example, where I have met CEOs who have said, “Well, I just treat everyone the same.” That does not help, actually, treating everyone the same. Because everyone in the organisation does not have the same lived experience. Does not have the same opportunities coming their way. Does not have the same social capital, or the social network, which allows them to come across different opportunities, and bigger opportunities.

Defensiveness, that we are doing fine, does not seem to work. Debating this thing in meetings that have your superiors present there, and looking at you intently. A lot of people are extremely reluctant to voice these things in organisations, because there’s also a hierarchy in organisations. We just assume that everyone is free to speak their mind. People are not. They don’t want to go against the current. Then again, what a lot of businesses, especially on Wall Street, it used to be the norm where firms would require new hires to sign arbitration contracts, agreeing not to join class actions. That makes accountability more difficult. So we need to dispense with that practise.

What I also tell them is diversity training is just the go-to for a lot of people, but it does not seem to work very much. In about a thousand studies it comes out that people soon forget the right answers on bias trainings. In fact, there was an article in HBR just the other day by Frank Dobbin, which basically points out that the positive effects of diversity training rarely last beyond a day or two. It can actually activate bias or spark a backlash.

There are a number of different things. What does tend to work, and what I advise companies to do, is appoint diversity task forces. Make it their job to hit their targets, such as the ones that Lord Bilimoria has been setting for UK businesses. Of course, many businesses are beginning to expand their recruitment to minorities. Mentoring. Mentoring seems to work, and not every organisation has that. Turn those mentors that you have into champions, reward them on how well their mentees do.

Integration seems to work. Integration, and this evidence is as old as the Second World War. You know, there’s a very interesting story in the Second World War, the Americans were not expecting many casualties. So they were not sending black people into active combat to begin with. When they experienced a higher level of casualties than they were expecting, they started to send some black people into active combat. What they discovered very quickly was that battalions where blacks and whites were fighting as equals for the same goal, or for the same cause, the level of racism came down substantially in there. So exposure matters.

Working together matters. That decreases these bias and tendencies of discrimination. Transparency, social accountability matters. At the end of the day, we have to make it all meaningful, right? We cannot just invite a consultant in to do a diversity workshop, or do a diversity training workshop, and then off we go back to business as usual. We need to engage our people in organisations, in these conversations and make them champions of inclusion.

Julia: I was mentioning earlier about the conversation about retrenchment. Which I think is a show, in and of itself. I don’t really want to get into the details of that, but there is something that deeply concerns me. It’s a question I’m putting to all our guests. As we head into economically tough times, there is a risk that diversity and inclusion will fall down the corporate agenda. What I’d love to hear from you as we go into literally the last few minutes of the show, is to inspire us with reasons why diversity and inclusion must remain high. Kamal, let me come to you, first of all.

Kamal: I think Lord Bilimoria already pointed out that McKinsey study, which shows that diverse corporates, corporations actually tend to do better, even financially. There’s a business logic to doing that. Of course, there’s a social and moral logic to doing that, because what we also know from research is that inequality hurts everyone. Societies which experience a higher level of inequality tend to have greater level of social and health problems. The levels of incarceration are high, or the levels of depression are high. The level of lack of trust in society are high, so we have to rely on more policing and more coercive methods, and so on.

But we also know that downturns do tend to hit the more vulnerable harder. We must take steps to protect them. Again, strategic colorblindness is not the answer. These people, the more vulnerable, are the people, their economic position in society tends to coincide with your race, at least in the UK. What we saw was a higher level of vulnerability to COVID as well amongst the BAME populations. That is something that we must really keep on the agenda, because COVID has lifted the lid from a number of problems that we have been living with for a long, long time. Now that the lid is off, let’s actually do something about that.

Every poll is showing that the sentiment is with positive change amongst people. They think that racism is a problem, they think discrimination is a problem. Let’s strike while the iron is hot.

Julia: It does feel like now is the time, as you say, the awareness is high, organisations are really paying attention, and thinking about how they remain competitive and outperform. Also considering the most vulnerable, which I think that is a very interesting point you were making there. Thank you for your thoughts on that. Lord Bilimoria, if I could ask you for your final thoughts on why diversity inclusion must remain high on corporate agendas.

Lord Bilimoria: Now more than ever, diversity and inclusion has to be paramount. This is not the time, if we look at the past, in previous economic downturns, diversity and inclusion efforts have stalled. That’s the reality. But currently we’re seeing the opposite trend. Nearly four in 10 firms have told us, at the CBI, that they have either slightly increased or significantly increased their focus on diversity and inclusion over the last 12 months. While the remaining 60, 62% reported no change. So this is not a time to be complacent at all. If we’re seeking to, as I said, right at the outset to come out of this really strong, well if we want to build back better, then diversity and inclusion needs to be at the heart of the recovery agenda.

The health issues we’ve seen, as Kamal has said, how much more susceptible the ethnic minorities have been to the COVID disease. Those are facts. It’s twice as much, if you look at the statistics. Whether it’s access to finance, we’ve got to make sure the whole issues about British Business Bank have conducted some revealing research on access to finance for ethnic minority businesses. We’ve got to be on top of all of this. We’ve got to champion diversity and inclusion because it’s good for British business.

My colleague, Ruby McGregor Smith in the House of Lords, the McGregor Smith Review highlighted that the benefit to the UK economy by having diversity and inclusion and ethnic minority representation in British business would see an estimated 24 billion pounds a year added to the economy. That’s 1.3% of GDP. I think, by the way, that’s an underestimate, it’s much more than that.

Julia: Gentlemen, it’s been a fantastic discussion. Thank you both for joining us. Kamal, it’s been a joy to have you on the show.

Kamal: Thank you very much for this opportunity to be with you and Lord Bilimoria.

Julia: And Lord Bilimoria, thank you for your time.

Lord Bilimoria: Thank you Julia, thank you Kamal.

Julia: And as always to all our listeners of DiverCity Podcast, I’ve been Julia Streets, thank you for listening.

Kieron: This episode of DiverCity Podcast was produced by me, Kieron Yates, on behalf of Julia Streets Productions. Thanks to Cynthia Akinsanya for her insights.

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