Recent protests against racism and police brutality, along with the #MeToo movement, have increased pressure on businesses to measure and improve their recruitment and promotion of women and people from underrepresented racial groups. Chicago Booth’s Marianne Bertrand, the Chris P. Dialynas Distinguished Service Professor of Economics and Willard Graham Faculty Scholar, and Mekala Krishnan, a senior fellow at the McKinsey Global Institute, discuss with Caroline Grossman, executive director of the Rustandy Center for Social Sector Innovation, how businesses use data to track diversity and inclusion.
Editor’s note: To mark the 50-year anniversary of Milton Friedman’s influential NYT piece on the social responsibility of business, we are launching a series of articles on the shareholder-stakeholder debate. Read previous installments here. The following is an edited and condensed transcript of a panel discussion held during the Corporate Social Responsibility Revisited conference hosted by Chicago Booth.
Caroline Grossman:
Research and data must play a role when it comes to implementing Diversity and Inclusion (D&I) strategy that actually moves the needle on equity. If you don’t collect data, it’s hard to diagnose how your company is performing. If you don’t track data, you won’t know how you’re improving. A necessary complement to putting a diversity and inclusion plan in place is using research and data to ensure change is actually happening. Our two panelists today offer that complementarity a two-way lens: Chicago Booth Professor Marianne Bertrand and Mekala Krishnan, Senior Fellow at McKinsey Global Institute.
Much of Marianne Bertrand’s research on this topic uses data to quantify the effects of racial and gender bias and to understand which mechanisms work better than others. Because many firms are in early stages with these topics and may not have great data, it’s also useful to have Mekala’s voice on what this looks like in practice today.
One possible lever to pull that may make sense for some industries more than others is the question of quotas. On the topic of hiring, quotas have been adopted in a few countries, especially here, for those of us who are in Europe as they’re tuning in, and recently in the US in the State of California. Proponents see quotas as mechanisms to increase gender and racial diversity, but they can also lead to concerns like tokenism. Research, including some by you, Marianne, suggests that quotas aren’t a panacea. Based on the data you’ve seen, what’s your take?
Marianne Bertrand:
We studied, a few years back, the first gender quota policy that was adopted in Europe, and that was in Norway back at the beginning of the millennium. I think the main way to summarize what we saw in the data is that quotas didn’t really do anything bad, but they are not the kind of transformative tool that I think companies may be looking for if they’re really trying to improve diversity.
Just so everybody’s on the same page, Norway—very similar to a lot of other European countries after it—passed a law that forced publicly traded corporations to have 40 percent of women on their board. There was a lot of pushback by corporations that were basically saying, “We’re never going to be able to find women with the kind of talent that is required to be on those corporate boards.”
What we found was that corporations were clearly wrong when making that statement. We were able to document the qualifications of the women that were appointed to the board once the companies were forced to find 40 percent of women on the board. These women were, if anything, more qualified than the very few women that were on the board prior to the quotas being put in place.
So those companies managed to find highly qualified women to serve on these boards, which means that once you force the companies to look beyond the standard network that they have, let’s call it the old boys’ network, there are a lot of qualified women to fill in those positions. So that’s really, I think, the good news about what we found in the context of this quota reform.
What is, I think, the less optimistic message is that if you believe that this is a policy that is really going to make a difference, that’s going to be transformational for women’s opportunities inside of corporation, you really have to hope that there will be spillovers of these quotas beyond the corporate boards. Corporate boards are very, very few individuals. So the idea theoretically is by appointing movement to the boards, you may have more women joining the C-suites, more women rising in the operational ranks of the organization. And then what we do is basically check the data to see whether that was happening. And there was really no sign of that.
So the bottom line is: by forcing companies to look for women, they’re going to be able to find highly qualified women to serve on the board. But you should not expect that this kind of policy will be transformational in terms of bringing more talented women at the top of organizations. So the main takeaway for me is that there was a sense in a lot of European countries that, “Okay, we have these quotas in place. That’s it. Our job is done, and we’ve achieved gender diversity in the corporate sector.” And that would be a really, really big mistake.
I think gender is quite different for me than racial minorities and their representation. When it comes to gender and the representation of women in the corporate sector or in the higher-paying jobs, in many ways I think that the key difficulties are not so much biases but really have to do with the structure of work, really have to do with what just happened today. Kids are walking around the home and the other responsibilities that women may have that make it very difficult for them to succeed at balancing the work and the family responsibilities.
Mekala Krishnan:
Just to add a couple of thoughts, Marianne, because I completely agree with what you just said. I feel like with quotas, people arrived at quotas as a panacea, as the silver bullet. And it’s great that it has led to increase representation on boards, but that’s really not had the kind of spillover effects that people had hoped. And in fact, our research would suggest two things that I think are of interest to this conversation. The first is there is a lot of work out there including boards that correlates representation in leadership positions with corporate outcomes. And of course, it’s correlation, not causation. But interestingly, that correlation is not as strong compared with women in top management positions when you look at women in boards. If you think about appointing women in boards as a corporate performance driver, it may be less helpful than having women in top management positions.
“People arrived at quotas as a panacea, as the silver bullet. And it’s great that it has led to increase representation on boards, but that’s really not had the kind of spillover effects that people had hoped.“
Mekala Krishnan
I think the second is when you look at the corporate pipeline, it’s really interesting to see that as quotas have been implemented, you see this funnel go down way from entry level to C-suites and then a jump up at the end for boards as we’ve put quotas in place. But really, that funnel, if you look at the data carefully from our survey of North American companies, where you see the funnel drop off is really that first promotion. So from the entry level to that first manager role is where you see most women fall off. And of course, for some companies, it might be the end of the funnel. But on average, if you’re focusing your efforts at the end of the funnel, you’re not really solving the issue, which is enabling women to make that first promotion.
I think the second thing that was really interesting with that data is that that first promotion, people came to us to say, “Okay, the reason that women are dropping off at that first promotion point is that that’s the age where they want to leave the workforce to have children, and so it’s women leaving companies.” But actually, when we looked at the data, attrition rates for women and attrition rates for men were essentially the same. It was the promotion rates that were quite different. So what’s happening is that women are getting stuck at that first entry level. They aren’t progressing through the funnel, whereas the common zeitgeist is that women want to leave the workforce to have kids. But we aren’t really seeing that, at least when we look at data in North America and Europe. It may be different than other countries, but in those two regions, we aren’t really seeing that in the data. And this, again, emphasizes why data is so important.
Marianne Bertrand:
So that’s super interesting, and this is about data to study diversity and inclusion. This is the call out for more corporations to make the study of the funnel and how it evolves available because absent the ability to look inside of corporations and see the funnel that you’re able to see by your consulting work, it’s really hard for us researchers to bring additional insights. One more thing I will say is that what you described is somewhat different from what I’ve seen in other data set. So there’s a lot of really, really good research that documents that it’s not so much women want to leave the workforce to have children, but really documents the dramatic effect that having children, the birth of a first child has on the career opportunities of women. So it is not being done, unfortunately, focusing solely on the kind of woman that would have the potential to lead corporations. It’s done on a much broader side of the populations, but the data is remarkably striking You see the career of men and women evolving really in parallel with one another up to the point of the birth of a first child. And this is really the point where women start experiencing very rapid losses and really never fully recover.
Mekala Krishnan:
I completely agree with that, actually. We’ve done some work— again, simple correlation analysis—but it correlates the time that women versus men spend on unpaid care work, what we call unpaid care work, things like childcare and household work, and correlate that with labor force participation rates, correlate that with relative rates in leadership positions. And there’s very, very strong relationships between the two. One of the things that our surveys of employees have also found is the number one challenge that women cite is what they call the double burden syndrome or the fact that they’re working both in the workplace as well as in the home. So I think it is significantly impacting women’s experience in the workplace. I think it’s just that the idea that women prominently drop out is not true it’s that they are struggling to manage both work in the workplace, work in the home. It may be limiting how many hours that women work. It may be limiting the types of opportunities they reach out for. It may be impacting their own aspirations for their career.
Marianne Bertrand:
And the point that you just made about this double burden and not being able to work as long hours I think also ties back to another fact that is in the data, which is that in the corporate sector there is massive reward, financial reward, for the ability to work very, very long hours. So that’s really the massive difficulty that women face is that in order to succeed, you have to work these long hours.
Caroline Grossman:
I actually want to go back to something you said on quotas Mekala, you said that data doesn’t indicate that having more women on boards actually has an effect on corporate performance. What is the time horizon on that? We know performance is measured on a quarterly basis, but when would you expect to see the impact of diversity on boards on corporate performance? I know this is an issue we talked about a lot relative to the environment, that if a company makes decisions around sustainability, will you see it on a quarterly basis? Maybe not. Well, is it an important long-term strategy? I think certainly. So how do you see this play out?
Mekala Krishnan:
A corollary to that question is also, if companies are putting in certain D&I practices, when do you actually expect to see those practices pay off in representation data? So maybe with something like hiring, you expect to see it relatively near term. But on inclusion practices, for example, promotion practices, maybe it takes time for things to actually peter through the dataset. We haven’t really looked at timeline analysis of this kind just because these data sets are all relatively new. What I will say is that when we work with corporations—not so much on this topic—on broader organizational transformations, so culture shifts that kind of work in companies, what we find is that for change to really start to peter through the organization can take anywhere from five to seven years.
So really, true culture shifts, mindset shifts, norm shifts, practice shifts happening in a way that the entire psyche of a company changes can take time. And so I agree that maybe this is, again, a plea for more research and data as these data sets become available, that the ability to do more analysis that is over time and allows us to do timeline analysis is super important.
So as we think about data, there’s almost two flavors of data that we need more of. The first is data on actual outcomes, gender-disaggregated data on outcomes both in labor markets more broadly but also within corporations. And then data on what works. How do you actually drive change?
Marianne Bertrand:
When I think about the relationship between the diversity inclusion agenda and corporate performance, I think there’s really two ways I think about it. And that also ties back to Friedman, which is what this event is all about. There may be really value having more diversity in management for corporate outcomes. So there’s just more ideas, different ideas. People are going to talk about different things, and that’s valuable. It is just remarkable to me that that’s an argument we hear very often, that diversity per se is going to help corporate outcomes. This is an area where there’s essentially no research that I can think about. There’s really not a good piece of research that can point out that convincingly shows that diversity is valuable for corporate outcomes.
But there’s another angle to it, which is that if you are focusing all of your recruitment on one half of the population because you’re only looking at men, there’s absolutely no way that you’re on the frontier in terms of the talents that you bring within your organization. And that in itself I think doesn’t even need to be demonstrated in data. That seems pretty sensible that by limiting your search to half of the labor market you cannot be at the frontier. So I just want to make this point because they’re really the two ways I think about the relationship between diversity and inclusion and corporate performance and why there would be a positive relationship. The second one is pretty straightforward to me. The first one is one that we hear a lot of corporations talking about, that diversity is good for corporate outcomes, that we really don’t have the kind of research I would like to be able to point at to say, “Yes, here’s the proof of that.”
Mekala Krishnan:
Yeah. And I think the other argument you were making, Marianne, it’s especially true in a world where in many developed countries now women are graduating from college at exactly the same rates, maybe higher rates, than men. So it’s not on just innate talent. It’s also learned skills that women are actually possessing at maybe higher rates than men. So it’s just such an economically inefficient argument to not be tapping into that talent pool. So fully agreed.
Caroline Grossman:
One place I think there is some data is on parental leave policies and the effect that those have. Marianne, could you speak to that?
Marianne Bertrand:
There’s lots of discussion about the value of giving women longer maternity leave to be able to have children but remain in the workforce. The research there, I think, says pretty clearly that longer maternity leaves are not going to be beneficial to women, especially the more educated women.
What you find in the data, which is typically put all of UCD together, study economic outcomes for women, and look at the correlation with these economic outcomes and the lengths of maternity policies that these countries have in place, you will find that among the more educated women, longer maternity leave policies associate with a bigger gender wage gap, so lower wages for these educated women compared to men.
I think what is behind this result is really that as you make this maternity leave longer, women become kind of separated from the labor market for longer, and there’s a price for that. Companies like to keep their employees. They want to have them kind of continuously, and the longer you let the mothers out of the labor force, the more difficult it is for women to reenter these corporations on the same track as the one they were in before.
That’s, I think, one of the explanations. The other one is really just strategically, corporations may not want to put women, single women, in important positions knowing that these women will leave the company for an extended period of time when they become mothers.
That is, I think, kind of a really important finding which sometimes people find counterintuitive, but longer maternity leave policies are not a silver bullet to help women in labor force, especially the more educated women.
Now, what is, I think, much more promising to the extent that children will keep on appearing is policies that try to change the norm, moving away from maternity leave policies to parental leave policies and paternity leave policies.
In this regard, the Scandinavian countries, I think, have been the most frontier in terms of trying to put in place policies and incentivize fathers to stay at home and share the burden with mothers when kids are born. It’s still to be determined whether these policies will make a difference, but in many ways, I see them as really the directions we need to go into, because those policies are about trying to change the norms, trying to change the norms that say that the mother is going to have a disproportionate share of the burden when it comes to child rearing.
Mekala Krishnan:
You know, I think that your last point about changing the norms, I actually think these policies are important for such vital reasons. The first is the fact that they change norms about who actually bears this “burden”. It actually signals that this is not just the woman’s burden.
I think the second thing it does in terms of changing norms is in the company, now, you have both men and women taking leave. It’s not just the women taking leave, so just from the equality that it creates in terms of career progression, in terms of norms related to performance reviews in terms of some of the mindsets that you talked about, about how companies perceive single women, it changes those norms, and I think that’s also incredibly important.
Then, I think the third thing it does is for women, themselves. In one of the surveys we did about two, three years ago, surveyed employees about if an employer has maternity leave practices, they have flexible leave practices, a whole set of policies, what’s the adoption rates? They were abysmal, like 10 percent.
I think the third thing it does, it actually makes it okay to adopt some of these policies, because people don’t feel like their careers are threatened. I think it’s important on multiple fronts to think about these not as women policies but as people policies and make them ones that everyone in the organization feels comfortable adopting.
Marianne Bertrand:
I just cannot reinforce that last point you made enough. In many ways, when I think about good policies in that environment, they are not women’s policies. They are human policies. The more we take gender out of these policies, the more we make them policies for all employees, the better it will be.
“When I think about good policies in that environment, they are not women’s policies. They are human polices. The more we take gender out of these policies, the more we make them policies for all employees, the better it will be.”
Marianne Bertrand
Caroline Grossman:
Marianne, earlier in the conversation you said women are one side of it, but this is different when we talk about issue of race, and I want to come back to that question. I first want to ask, as you think about diversity and inclusion, and you think both about the questions of gender and race, what are some of the common themes you look at across, and where do you see them diverging?
Marianne Bertrand:
When I think about issues of race or ethnicity, thinking about Europe and European audience that we have here where they may not just be issues we have with African Americans in the US and compare that to women, in my mind, where I am right now based on my research and the research that I’ve read is that I think that bias and discrimination is a much more important force when it comes to thinking about the under-representation of racial minorities in corporations than it is with respect to gender.
I am not saying that there’s no gender discrimination going on, but I do believe the force that we just talked about are much more important than just discrimination per se to explain why women are underrepresented. I think when it comes to racial minorities, bias, whether it is implicit or explicit, is a much more important force.
I think the other big difference when I think about women versus racial minorities is that there’s a lot that comes with being a racial minority in America or in Europe that is not associated with just being a woman. When you think about racial minorities in the US that goes hand in hand with economic disadvantage. That goes hand in hand with access to lower-quality schools, lower-quality public services, and lower quality amenities because of residential segregation.
Obviously, that’s not for gender. Boys and girls are born in equally rich families. They are very different conversations in my mind at least when I think about what we do in terms of improving women’s representation compared to when it comes to improving racial minorities’ representation.
Caroline Grossman:
One complement to this conversation is the question of individual responsibility and action and Booth Professor Jane Risen teaches a course on this topic, and she weaves in research from behavioral economist Dolly Chugh from Harvard by really digging into the book, The Person You Mean to Be, How Good People Fight Bias. Chugh encourages us to acknowledge unconscious bias, take a stand, get involved, and be a builder.
What are things that each of us can do, and this is a question for Marianne, Mekala, the things that each of us can do in our day-to-day work, particularly in a virtual world where we’re feeling more disconnected, to check our unconscious bias, be advocates and allies, and drive forward meaningful change?
Mekala Krishnan:
I think the main unconscious bias lever that we see companies implementing, and then I think employees and individuals can complement that, there’s a variety of trainings that companies do related to unconscious bias. It’s to create awareness of unconscious bias.
I think the corollary here is step one—actually recognizing that you have unconscious biases—but I don’t think it’s necessary that every unconscious bias you have is a negative thing. The reason we have these biases is this is how it’s helpful to process the world in some ways, but recognizing where they exist and where they are really biases, so I think step one starts with that.
Just recognizing that you have your own world view and there may be others that are experiencing real challenges that you may not be seeing or be aware of, so that’s kind of step one.
I think step two is having the conversation. As we’ve been surveying employers and employees, it’s really stark to me how much sometimes employers put in place policies and practices that employees don’t really care about or want. One of the funny examples is we’ve done a survey now of Covid practices, and one of the things that so many companies have put in place is practices around open forums with senior leadership to create encouragement and lift morale, but when we surveyed employees, they don’t see it as a high priority.
I’m using that as a silly example, but the idea is I think we often make assumptions about what people want and what people need and what is helpful, which may completely be a flawed assumption. I think really asking the question and having an authentic conversation coming from a place of curiosity and spirit of learning I think is really important.
Then, I think there are a bunch of things that you could do structurally even as an individual. If you’re a manager ensuring that a performance review has an unconscious bias check. If you think about all the activities you engage in on a day-to-day level, finding ways to embed that check on your biases through those day-to-day activities I think is important, too.
Marianne Bertrand:
Yeah, I agree with kind of all that Mekala said. To go back to your original question, Caroline, I’m inspired by the work of psychologists that have studied particularly implicit bias and kind of tell us about the particular situations under which it is more likely to creep in and drive our decisions. We know the implicit bias is more likely to drive our decisions when we are rushed, when we are stressed, when we are angry, even when we are happy. So, when we are more emotional, we have more implicit bias.
Just that suggests that, and taking it back to the corporations, taking it back to the HR process, the more we can move away from HR decisions being made under those kind of, say, time pressures, the better probably it will be in terms of having HR managers really taking the time to review applications or be thinking about promotion decisions.
There’s also lots of work, again in psychology, that tells us that we can train ourselves to be less biased. Same way that we have this increased association between seeing a black face and feeling frightened, we can teach ourselves to engage in contrary to stereotypical thinking.
There’s good evidence from the lab, fairly short-term, that by forcing yourself to associate positive thoughts with a black face rather than the negative thought you would have, you can make a difference. You can make people kind of less biased. We don’t know how long this lasts, but this matters.
Another thing that I think comes strongly from the debiasing literature in psychology is to really move away from thinking in categories. That goes back to the point we were making, Mekala. It’s not about men and women. It’s about people.
One of the kind of methods that psychologists would use to debias people is to get them to think about the person, individuating. Thinking about not this black guy, but think about him: What’s his life like? What does he do? Thinking beyond the category and trying to imagine the person, putting yourself in the shoes of the person.
There are lots of tools that have been shown, again, in lab experiments, to help in reducing bias. I’m going to make the same call as the one I made before. As Mekala said, I’m sure there’s lots of corporations that are using those kind of training to try to improve bias inside the corporation. It would be fantastic to allow researchers to take a look at whether or not this makes a difference.
Besides the work in the lab, we really don’t have the kind of data to assess whether those kind of training programs matter.
The other thing that I would stress, and I think Mekala also mentioned that, is that if you don’t believe that those kind of training are really going to make a long-term difference, I think the other important step is really to have formal processes in place.
When I think about my own organization and how we do recruiting, I feel like over the two decades I’ve been doing it, we are moving slowly towards having more and more structure. As much as we dislike structure, because it feels like it’s bureaucratic and academia shouldn’t be bureaucratic, structures really help.
The most common examples that I always come back to is just rejecting someone for a promotion or for a job because he or she’s not a good fit. That is just not the world that we should still be in. We should have explicit criteria ahead of time when we decide what are the kind of skills that we’re looking for in a person and not deviate from those, because we don’t like the person that emerges after we’ve gone through these criteria. So I think formalizing a lot of the HR structure, even though it means more bureaucracy, is also, I think, another way to reduce the extent to which we have biases creeping in.
Mekala Krishnan:
Yeah. Just on the company training on unconscious bias, I mean, what we’re seeing, similar to the quota crutch, this is becoming the crutch where a company does an unconscious bias training with their employees once a year. And then they think they’re done and people are all set for the year. When really, I mean, it’s such a process. So you need to think about continuous nudges. You need to think about structural change, but it’s what I worry about is that this is now kind of the buzzword that everybody’s using and it’s going to be the quotas of 2020 is going to be unconscious bias training.
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