- Kay Formanek
Will Bachman 00:02
Hello, and welcome to Unleashed the show that explores how to thrive as an independent professional. I’m your host will Bachman and I’m here today with Kay Formanek, who is a former partner and managing director at Accenture. She’s an expert advisor to McKinsey and she is the author of beyond DNI leading diversity with purpose and inclusiveness. That’s coming out in November 2021. In the US, Kay, welcome to the show.
Kay Formanek 00:33
Thank you. It’s great to be here. We’ll
Will Bachman 00:35
so Kay, I was, I’m so excited to have you on the show. Today, we’ve talked about diversity and inclusion on several episodes in the past. But I’ve never had a guest on the show to talk about diversity inclusion, who’s based in Europe. And I think that you also were born in South Africa, you live in, I believe, in Europe right now. And so love to hear that perspective, which is, you know, often on kind of very US centric. So maybe just give us a bit of a background. I know you’ve been working on diversity and inclusion issues for a long time. Tell us a bit about the background to the book and what what caused you to write it?
Kay Formanek 01:14
Okay. Well, thank you very much, because, in fact, there is a journey, often there is a personal journey. So as I mentioned to you, I was born in South Africa, and at a time of apartheid. And certainly when you grew up in a legalized discrimination environment, it really impacts you. And I, we had the privilege of attending one of the few multiracial boarding schools in, in South Africa. So on the one hand, you’ve got legalized discrimination. On the other hand, you your closest family, your fellow students are people of color for many countries. And that really created a very deep interest, curiosity, but also passion about diversity and inclusion. And certainly, as you’ve referred, as I journeyed through my professional career, I started at Accenture. In South Africa moved to Accenture, the Netherlands became an industry leader. So so many aspects of diversity in our organizations that we served in Accenture itself. And I was once again very interested in terms of what do we even mean by diversity? Who are the beneficiaries, who are the people who need to make it happen? And after 25 years, at Accenture, I started an organization diversity and performance. And what I was interested is really to get behind the science of diversity. What is diversity? When do you have diversity performance? What are the prerequisites to be driving this performance? And that has led to collaboration with a number of business schools. And now in this book, where I really put forward the experiences of 50 organizations that I’ve been working with, and also some models?
Will Bachman 03:10
Fantastic. What do you believe about diversity inclusion, that we’re going to learn in your book that would be different than the commonly received wisdom? I mean, there’s a lot of books and thinking about diversity inclusion, what where, where would you maybe differ from from some of the other perspectives out there?
Kay Formanek 03:34
So I think the key difference is the various strategic axes and lens that I bring to diversity. As I navigate with different organizations around the world, so many organizations say to me, Kay, can you work with us on our diversity journey? And the first question that I asked is, why is diversity important for your journey? And to how do you even define it? And so the whole book is about the strategic narrative for diversity. What I’ve seen through my career is that so often, diversity is a side pillar, or it’s almost like oil on the top surface of water, you know, it is not getting traction. And really my hypotheses and confirmed by research is that if diversity is not anchored into the very strategy of the organization, that it is not going to take flight. The second thing and building on that is I’ve been able to identify through the research, five evolutionary phases of diversity in terms of why organizations pursue diversity. You know, it could either be compliance, I don’t want to have class actions. It could be a better do diversity, to be satisfying my stakeholders, I’ll be penalized or and we’ve seen a lot coming from McKinsey and Credit Suisse and others. What is the business case, I need diversity, because I believe it’s going to impact my bottom line. But increasingly, there are two other evolutionary stages that are really highlighted in the book. And this is those organizations that are pursuing it to be agile and transformative in terms of their model. And the last one, which our organizations are pursuing it, because they believe it is connected to their ability to deliver on societal value, and specifically the sustainability Development Development Goals. So it is a very strategic focus on what is diversity? Why are you pursuing it? And what are the capabilities that need to be in place to reach your aspired level of diversity? Okay,
Will Bachman 05:55
so let’s say you’re talking to a CEO, who says, I think that we need to do something more on diversity. Walk me through that conversation you’re going to have with the CEO, on helping them figure out where in that sets of five stages they’re at and developing a practical kind of action plan for going forward?
Well, let me actually replied to that with a case study that I described in the book, I was invited to meet with the CEO, who is a CEO of a software organization that had a merger of four different entities. And so it was a multicultural entity, and they delivered, in fact, enterprise software to a client base. The CEO said, Okay, we want to have assistance with our diversity journey. And my question to him was, so what do you mean by diversity? And he said, Well, you know, okay, I’m talking obviously, about gender. So I said, Well, that’s fine. Many organizations are speaking about gender diversity. But tell me about the transformative journey that you’re on. And he explained to me that their client base is changing to young entrepreneurs average at age of 28, that their salespeople were all around 48. They talked about going into China not having the skills there. They talked about needing to move from the more standard ERP to iCloud skills, etc. And when he described this strategic roadmap that they were going through, it was clear that the gaps in diversity related yes to woman, especially in terms of the leadership positions, but it was also a cultural element, specifically, hands and feet in China and knowledge of China. It had to do with age, and it has to do with specialization, ie moving from ERP to iCloud. So when you looked at it again, the question was, No, it wasn’t just about agenda, it was about other dimensions. Our next question to him is that if you had to develop a strategic narrative for diversity, what would it be? And he started saying, it is about creating agility as being able to anticipate our customer requirements as being able to to to have a more affiliation type leadership style. And we identified that actually, he wanted to go what we call the transformation stage of diversity. The next question is, so where are you now. And what he really identified is that there were pretty much on baby steps in the diversity. They had a zero discrimination policy that highlighted that they wanted to do something with gender. But besides that, there was very little in place. And so the next step is saying, so you’re wanting to go to the stage. But you’re currently at stage one or two. Let’s now see what capabilities need to be in place, and where you’ve got the biggest gap. And that was very important, because it started by talking about this is where we want to go to this is why it’s important to us. And these are the critical things that were good or good to put in place and specifically for them, it was being very clear about the talent they wanted to attract and identify how they were going to get it into the talent into that. So those are the practical stages. It is starting once again, what is your strategic narrative? Why is it important for you? What are the dimensions of diversity that are important? And what is the gap and how are you going to Create a journey that addresses that gap.
Will Bachman 10:02
Let’s talk some about that first question that you asked, which is kind of what do we mean by diversity? Like, what dimensions of diversity are we talking about? Sometime, because so often we might be using that term, but different people have different definitions or dimensions in mind. For some people. In the US, it might be primarily thinking about racial diversity, trying to get more black and brown people in the organization, people of color, and other cases it might be focused on gender diversity, and other cases might be something else. I’m very curious from your perspective in, in Europe, but in the US, it’s so often, race, you know, and gender are the key aspects that people are thinking about it. They’re not so often incorporating like socio economic diversity, or we want to have political diversity on the team, we want to have, you know, Republicans and Democrats or conservatives and liberals on the team, it but there’s obviously, you know, multi dimensions that you could be be trying to encourage, from a European perspective, tell me, what are the kind of discussions people have in Europe when they talk about diversity? And what are the dimensions that are top of mind?
Kay Formanek 11:25
So so it’s a very important question, because I think around the world, we first looked, I did some research, which was looking at how the definition of diversity has changed over the last 50 years. And whether you’re in the United States, or in Europe, or elsewhere, we have defined diversity as we’ve defined it, say, for example, in chapter seven, in the constitution of the USA, you know, Thou shalt not discriminate on the basis of race, gender, abilities, etc. And that has actually stuck for a long time. And yet, in addition to that, and we often call these items, you know, the internal damage, since it’s been inherited, inherited, these are things that you don’t have much control of. But increasingly, there’s been a great deal of focus in Europe. And certainly, I see us in the United States and South America and Asia, on what we call, the more external dimensions, these things are things that are acquired during your life, I’m talking about your specialization, your educational background, your cultural background, it even goes to your recreational habits, etc. And why these have become more important is as organizations are looking at what is really the value of diversity. Now, one of the dimensions that is driving the need for data diversity is simply being able to have what we call customer, Congress, you know, understanding our customers, our patients, our citizens. Can we even anticipate what their requirements are? It’s also associated to, you know, the risk management. And so certainly in Europe, given your question is there there’s been the focus that on the one hand, we need to measure in order to drive equity and more equality, the demographic items that you spoke such as gender and race, but in addition, we need to look at education specialization, cultural richness, and quite frankly, also, we need to look at the organizational dimensions. So many organizations even the one that I came from being a Accenture if you have a cradle to grave sort of model, where you’re building up analysts to seniors, to consultants, to managers, to partners etc. There is a point which you recognize that you have to start attracting experienced hires to to to to have a better view of your customers. So I think we are looking at demographics, we are looking at what I call the external dimensions, the acquired ones, but we’re also looking at the organizational dimensions of diversity, different organizational experience.
Will Bachman 14:39
Okay. So, what are the walk me through so, we get you gave me a case example of a conversation or you know, one one client example, what are some of the, you know, organizational aspects that a company should think about having in place to really drive just to drive success here. So should you have a chief diversity officer? Or is it really the role of the CEO? What are some of the practical ways that a company can set up to get these sorts of initiatives implemented?
Kay Formanek 15:19
Okay? So my reply would be that it depends on the evolutionary stage of diversity that you’re going for. If you are at the level, that you want to be at a level four, which is about facilitating transformation, agility, that it is actually, diversity is a strategic anchor of your ability to survive in a rapidly changing environment. Well, quite frankly, right from the chair of the board, into the CEO, into the business unit heads, and endorsed by the organization itself. And in those situations, you will have an enabling board, like a chief diversity board or chief diversity officer. But in fact, it is something that is right at the boardroom. If I can give you an example, if you look, for example, at Unilever, it’s an organization that I would classify as stage five, if you look at Unilever, it talks about diversity is one of our three strategic anchors. Diversity is critical for us not only to understand our customers, and respond to their needs, but because through what we’re doing in our supply chain, we are actually fostering access to economic opportunities, we’re fostering gender equality, etc. So at that stage, you have a focus on diversity very strategically, at all layers, and certainly right at the top. On the other hand, if you’re saying, Look, quite frankly, the only thing that is important for me is I know, quotas are coming. As you know, in Europe, we have lots of countries with quotas, and I don’t want to have discrimination class actions. And actually, that’s fine. That’s all I need to do. Well, then you won’t be looking at it as strategically, you’ll be looking at it more lack of compliance or legal. And then very often we see diversity, and these compliance being within your risk management, division, within your legal division, sometimes within HR compliance. So this is why it’s so important to understand, what are you trying to get out of diversity? And what we see as you come on these evolutionary stages, that more and more, the diversity agenda is elevated, both in accountability and responsibility.
Will Bachman 17:58
Okay, can you maybe either take the Unilever example and go a little deeper at work or another case example, and walk us through some of the impact that companies have seen from a successful diversity journey? In terms of what’s what’s some of the positive business impact that you’ve seen?
Kay Formanek 18:22
So we’ll, if it’s okay with you, I’m going to actually take an organization that saw the negative impacts of not having it and the positive ones. Is that fine? Sure. Okay. And I’ll take because you were talking about the interest also, in, say, a case study in Europe. And I would like to put my attention to the Central Bank of Ireland, and I write about it in the book. So on the eve of Lehman Brothers collapsing, the Central Bank of Ireland was asked how well positioned there were to manage the risk that was sort of blowing over the financial risks that was blowing from the shores of the United States. And as you know, the central bank of any country has a mandate to do risk management and protect the risk profile of its citizens. So it’s a very important one. In that interview, before Lehman Brothers collapsed, the central bank said we are very well positioned to manage the risk the next day. In fact, Lehman Brothers collapsed. Two of the critical banks in Ireland collapsed, had to be bailed out. And there was a commission that was organized by the parliament to evaluate how could this occur? Why would a central bank not be able to anticipate and manage this financial risk? And obviously it was complex, it was the time where we had a lot of derivatives and different instruments and clearly Island was One leg in the UK in terms of the currency and the other leg into the European currency. Now, what was so interesting is what the commission came up with. One of the key reasons that they explained and put forward as why there was this collapse of responsibility is what they call groupthink. What they effectively said is that when they look at the composition of the bank, they’re had too many people with the same educational background, at the same age, mostly older, mostly men. And, and as a result, they did not have a 360 view on the risk that was blowing on the shores. And what the central bank then said, this is going to be critical to our survival. They’re really defined there. Ever evolutionary stage, we have to be at stage four, we’re going to have to better anticipate risk. And there started a view of talking about so what does this mean in the dimensions of diversity, we need different specializations, we need different education’s, we need to have different organizational diversity, we certainly need to have more gender diversity, and they started a road that was really accesed. On a strategic narrative. The result is, and it has been shown by research, that there is an a better ability to predict risk. There’s a better listening to citizens, there is a better ability to have dialogue. And when they are concrete voices, that they’re given voice, and, and so this has been very important. So when we now cast our eyes, so even from the central bank to say, an organization, any organization, what you’ll see, and there’s been some amazing research is that there is a strong correlation between diversity and inclusion, the equity that needs to be present. For better innovation, there’s in fact, a direct linkage, more engagement, especially for your generation said, you’re up and coming younger generations, there is a better understanding and satisfaction by clients. So there are many things that come down to bottom line. But I think the story of the Bank of Ireland is a very important one.
Will Bachman 22:36
What’s your perspective on mandates for diversity? So I think one example is not sure if I got the details. Right. But I think the NASDAQ recently put out a rule that the boards of companies that are on the NASDAQ have to have a certain number of either women or minorities. Or if they don’t they have to report what they’ve been doing to try to get to that point or why they don’t. Right. Do you think those kind of mandates help diversity in the company? Does having a woman or one or more women or more diversity on the board actually flow down to the company and have an impact? What’s what’s what’s the research show? What’s your perspective on that?
Kay Formanek 23:33
is such an important point, because it’s an emotional point. And what I try to do is just bring some of the fact and the researchers you’ve been asking. And you will know that in Europe, we’ve gone quite far with the mandates in terms of quota. And in a number of countries, if you don’t satisfy the quota, actually, what happens is you can’t present a recruit other board members, or you lose certain subsidies, or you’re not allowed to supply in terms of the government in being a vendor for the government. So in Europe, we’ve got a very hard quota, and their bottom line results if you don’t deliver. And we certainly see that there are some countries that have the quota, and have achieved on it, and other countries. So for example, the Netherlands will only be Institute has just instituted one, but for a very long time resisted a quota. And in fact, the Netherlands unfortunately, is one of the most low ranked countries in terms of gender diversity at the boards and within professorships and things like that. Now, so people will respond emotionally. But if you look at the research in terms of what have these mandates, It’s done. In fact, it has resulted in many positive things. Now, before I talk about it, I just want to underscore a to highlight why the NASDAQ and others are taking this. And it is because we look back historically. And we look at what the progress has been until now. And it is not sufficient. If you look at the data in terms of COVID. In fact, there has been a regression in terms of representation of underrepresented groups during this time. So it seems like that you need to be a little bit more strict, in order to say that you need to do something, and you need to be accountable for it. The research that has been done, Rutgers has just bought brought out a research shows actually, that for those organizations that are considering it, there is a lot of agitation, and people feel emotional and feel it’s a bad thing, and will be bad for quality, which is not true. And those that have actually embraced it, say, Wow, we should have done this earlier. So that is what’s happening. But it’s still an emotional topic for many leaders and many organizations.
Will Bachman 26:21
And what’s been the impact? What does the research show? Does having more diversity in the boardroom actually lead to companies having more diversity broadly? Do they do a better job of getting diversity throughout the organization? Does it lead to better business results over time, I imagine that some economists have done some kind of difference in differences. studies looking at how different companies have implemented the regulations at different points of time and analyze the impact on on the companies that were affected.
Kay Formanek 26:56
Yes, so what the research is showing is that when you have greater gender diversity at the board, and by the way, this was similarly done for ethnic diversity at the board, the top quartile organizations will be showing a greater return on equity return on investment. But very importantly, they also show in terms of better risk management, and a better continuity in terms of the board. So there’s that research that is showing what you saw originally, for the organizations that implemented these type of metrics or countries, at least, that you use, you had a result of a great deal of diversity at the board. But it didn’t seem to trickle down into all the layers of the organization. And that has been a learning for the organization now. So in order, it’s not sufficient, just to put the matrix or the mandate, at the very highest level, it’s important to also say, so what is your pipeline? Is that a healthy pipeline building? Otherwise, what many organizations do is they say, Oh, my goodness, we’ve got a mandate at the executive level, let’s pluck a few, and leadership woman, or ethnic diverse people at that level, but they’re not really doing the building of talent at every level of the organization. And at least what I see doing a lot of work is organizations are now taking a longer term view. They’re saying these mandates are coming, these metrics will be in place, sometimes even quotas. So let’s now take charge of this. And let’s ensure that we’ve got the recruitment, and that we’re retaining the people, and that we’re promoting the people so that we have a good and healthy pipeline.
Will Bachman 28:58
Let’s talk a bit about your practice right now. So in addition to the book, I think you’re you’re running a practice now our firm. Tell us a bit about the kind of clients that you serve and the work that you do. So
Kay Formanek 29:13
the work around EDI Equity, Diversity Inclusion, which it’s often now called, so everyone’s looking at the area of equity. The last three years has become so serious and so focused. And what is interesting will it is not just in terms of commercial organizations. It includes government institutions, NGOs, a full range of organizations. So the work that I’m doing would be for example, the armed forces of a country which might have a large percentage of men within the Marines, the Navy Within all positions, and they are looking at how can we ensure that women and ethnic groups are represented, because quite frankly, even our military is changing. It is no longer a ground battle, a lot to do with technology, and drones and things like that, where you just need more specializations and different perspectives, etc. But at the same time, many commercial organizations during COVID, a lot of pharmaceutical companies have needed to be very agile in terms of how they’re developing the vaccines. It’s required a global collaboration, which has relied on diversity and respect, and how do we really work together. So And certainly, what you’re seeing in supply chain, which is greatly impacted by COVID, is that I’m working with many organizations during their supply chain, because they’re saying the old models are not working for us. Simply filling up tankers and sending them across the sea is not going to do it. It takes a different way of thinking about how we’re going to source how we’re going to distribute products. And it means that we’re going to have to have diversity of perspectives. And I would say that in terms of Black Lives Matter, many people still think that this has been something of the United States, really, Black Lives Matter, has has has swept onto the shores of Europe, into Asia, South America, Africa. And so race as a dimension has become very important. So a lot of organizations are looking at race, I think for the first time and too late in terms of how do we even deal with it. And it hasn’t been a discussion that we’ve often had in Europe, and I’m very thankful that we’re doing more of that.
Will Bachman 32:06
Okay. For listeners who want to read your book, we will include a link in the show notes. For listeners that are interested in learning more about your work, or following up with you do you want to share any any links that we can provide for people that want to visit the firm’s website or connect with you?
Kay Formanek 32:27
Thank you. So the organization that I developed to really look at diversity performances, a organization which is called diversity and performance, and anyone can send a note to me at K at diversity and spelt out nd and performance.com. And the book indeed, is beyond diversity and inclusion. Really speaking to what we’ve spoken today that diversity and inclusion are important elements, but my goodness, we got to have to have the equity, the leadership and the purpose to deliver the benefits.
Will Bachman 33:08
Fantastic. Kay, thank you so much for joining us today. I really appreciate this discussion.
Kay Formanek 33:14
Well, thank you and thank you for everything that you do with your amazing organization.