insight magazine

Finding Direction on Diversity and Inclusion

The accounting and finance profession must find a new path forward if it’s ever to achieve lasting diversity and inclusion across organizational levels. By ANNIE MUELLER | Winter 2018


First, the good news: The accounting and finance industry, as a whole, is serious about the need for diversity and inclusion. “An entire industry is getting focused and ready for change,” says Gloria Castillo, president and CEO of Chicago United, a corporate membership organization that advances multiracial leadership in business. There’s an ongoing transition from national directives, such as the AICPA’s decades-old Minority Initiatives Committee, to region-specific, focused initiatives, such as the Financial Services Pipeline Initiative out of Chicago.

This transition — from national to regional, from theoretical to practical — signals a change from discussion to action. “Real strategies are the focus,” says Kari Natale, director of Planning & Governance for the Illinois CPA Society, whose endowment fund supports a variety of diversity and inclusion programs and initiatives. Natale recently led the Society’s third-annual Diversity Forum. “The profession understands the business case for diversity,” she says. “It's how to take action and how to personally take ownership where work still needs to be done. What we’re striving to do is share more practical things that people can do to create a diverse and inclusive workplace.”

A cohesive, practical approach to driving diversity is a desperately needed step forward: Despite ongoing efforts, diversity lags in the accounting and finance world. A 2017 data analysis from the Financial Services Pipeline Initiative shows diversity trending in the wrong direction: Promotion rates for African-American and Latino talent became consistently lower from 2014 to 2017. In fact, the Financial Accounting Foundation will tell you that 75 percent of professional accounting positions, and a staggering 90 percent of partner positions, are still held by non-minorities — and the numbers are nearly as bleak for women when looking at gender disparities alone.

Exiting Employees

“Even in large accounting firms, which promote diversity and have higher numbers, there’s still a gap,” Natale affirms. “I get feedback all the time from interns that completed our Mary T. Washington Wylie Internship Preparation Program that they’re the only person of color on their team. It’s hard for them not to feel different, which often means feeling out of place.”

The frustration that diverse professionals feel — at being a very small minority in a large profession, and at facing evident limitations for advancement — negates the benefits they could bring. Frustrated employees become former employees; without diverse employee retention, no one benefits from diversity efforts. The lost benefits are significant, and so are the lost dollars in half-hearted initiatives.

“It's becoming almost indisputable that well-run organizations that have diversity in their senior leadership and in their practices are outperforming other companies,” Castillo states. “It's really about the sustainability of your business; if you want your business to grow and be profitable and be sustainable, then diversity and inclusion is a business imperative.”

An important linear relationship exists between diversity and inclusion and better financial performance, as proven by McKinsey’s ongoing research: “In the original research [‘Why Diversity Matters’], using 2014 diversity data, we found that companies in the top quartile for gender diversity on their executive teams were 15 percent more likely to experience above-average profitability than companies in the fourth quartile. In our expanded 2017 data set [‘Delivering Through Diversity’] this number rose to 21 percent and continued to be statistically significant. For ethnic and cultural diversity, the 2014 finding was a 35 percent likelihood of outperformance, comparable to the 2017 finding of a 33 percent likelihood of outperformance on EBIT margin; both were also statistically significant.”

Pointless Paths

Lack of diversity is an obvious dead-end road. But not every path toward diversity leads somewhere. Incomplete, ineffective efforts create endless loops, using resources without bringing real change. A historical focus on diversity, and diversity alone, without a concurrent understanding of the need for inclusion is one of these pointless paths.

“We know that diversity is being invited to the dance, but inclusion is being asked to dance,” says Suri Surinder, CEO of CTR Factor, an advisory services firm specializing in leadership, diversity, and inclusion.

To waste time on diversity initiatives, do this: focus solely on diverse hiring, and ignore the need for inclusion in company culture. It won’t take long for diverse candidates to get fed up and move on.

“We talk a lot about attracting people into the profession. We talk about how to recruit. But once we have more diverse employees, we're not doing our best to keep them,” Natale stresses. Up goes the turnover rate, down goes the diversity. It’s an industry-wide seesaw, and it prevents diversity from expanding beyond minimum requirements and entry-level positions. To fix this problematic pivoting, most fingers point at organizational leadership; partners and senior members are tasked with understanding and initiating the change needed.

“Those in leadership generally understand the business imperative for a diverse and inclusive business culture; and the younger ranks, which are generally more diverse, are cheering on the efforts, “but somewhere in that middle it gets stuck,” Castillo explains. “Most mid-level managers haven't been given the training to be inclusive managers. They don't know how to do it, even if their heart is in the right place. And they're not generally rewarded for building inclusion competency.”

Corporate Congestion

Corporate traditions, still strong in the more conservative accounting and finance industry, add to the issue. Many norms of corporate culture steer people away from inclusion. “The way that many corporations operate and promote and raise their employees creates a highly insecure professional who can’t be away from the mainstream,” says Illinois CPA Society member Tim Jipping, CPA, CGMA, founder of Journey Advisors and CPAs and a CPA Practice Advisor 2018 40 Under 40 honoree. “Promoting diversity and actually demonstrating inclusion in the workplace is extremely uncomfortable at first, particularly when the culture and environment is not used to it.”

It’s a paralyzing combination — traditional corporate culture begets workers who feel insecure if they move out of prescribed boundaries and ingrained behaviors. To embrace diversity and inclusion at every level of an organization, however, everyone must stretch out of comfort zones and familiar traditions. “It’s important to realize that people don’t fear change; they fear loss,” shares Jude Rake, founder and CEO of consulting firm JDR Growth Partners and author of “The Bridge to Growth.” “Many change initiatives threaten their competence, relationships, territory, security, sense of direction and control, and in some cases, their livelihood. They need rational and compelling context.”

Meaning, it’s imperative to provide clear, practical training and tie real rewards to inclusion competencies. For instance, an organization’s competency model can demonstrate a clear path toward promotion based on each competency. “If people are not being rewarded for their inclusion competencies, they're simply not going to focus there. But companies are really successful in diversity and inclusion when they ensure that inclusion practices are in their competency models,” Castillo confirms.

Significant Shifts

The need for change in the middle levels of accounting and finance organizations does not give higher levels of leadership a free pass. Ultimately, driving diversity and inclusivity in any organization depends on those who make the rules and hand out the rewards. “The bottom line is that the culture of the organization, the responsibility for that culture, never leaves the CEO's desk,” Castillo says.

“Leaders need to help the other leaders at all levels of their organization paint a compelling picture of future success that is meaningful, and they must communicate it long after they think the workforce embraces it,” Rake adds.

Leaders must also be willing to shift in mindset and leadership style. “Preserving active diversity requires a different leadership mindset,” Surinder teaches. Leadership that promotes awareness and empathy as a social nicety, rather than as genuine connection and respect, is not enough.

“Every manager should be thinking, ‘I’m not just your boss, I'm also your mentor,’” Natale urges. “That’s the missing piece.”

“Authentic leaders with a strong sense of self-awareness and a commitment to the long view will fight through any initial discomfort of a mentor-focused approach,” Jipping says. “They will realize and promote the fact that it creates intentional effort to create a diverse and inclusive culture that stays.” To change corporate culture, the accounting and finance industry needs authentic leaders who act as mentors and lead by example, forging human connections and demonstrating practical inclusion.

Long Term Leadership

The long-term view is key. “Most leaders want the change they desire for their organization to happen like a light switch. Unfortunately, workforce reality is more like a journey than a light switch,” Rake says. The accounting and finance profession excels at being results oriented and focused on the long-term success of its clients, whether internal or external; now it also needs to focus on the long-term success of its people. A diverse and inclusive workforce may not attract more clients or skyrocket profitability tomorrow, or even next year, but it will have a lasting impact on an organization’s viability. Incorporating diversity and inclusion into business strategies and measurable competencies will help foster the cognitive diversity future-minded organizations need. McKinsey’s research posits that more diverse companies are significantly better at key business operations, such as winning talent, relating to customers, and making better strategic decisions; all of which can lead to a “virtuous cycle of increasing returns.”

“There has to be some understanding of where people are coming from,” Natale says. “You can't just hire diverse people, then require that everybody conform.” When minorities and women feel that conformity is the only way to succeed in the workplace, individuals and organizations lose.

To achieve cognitive diversity, leaders must assess their own adherence to diversity values, and take that mentor-focused approach to leading their team. That means setting an example, and it also means drawing hard lines when needed. “The best leaders don't avoid the brutal facts,” says Rake. “They embrace tough discussions. If coaching with candor fails to yield improved results, they have the courage and compassion to guide poor performers out of their organization with dignity and support.”

The Right Road

Perhaps the greatest need is for those entrenched in current culture to understand and acknowledge where the current standards fail, and how their individual choices and behaviors might contribute to that failure. “Self-awareness is critical,” Jipping stresses. Individuals who take personal responsibility for their own attitudes and actions, and whether they help or hinder cultural inclusion, are the ones who will lead their organizations down the right path.

Of course, leaders are not the only ones who can make internal changes and subsequent shifts in outward behavior: Anyone who takes personal responsibility becomes a leader, in whatever position they fill. In the end, the entire accounting and finance profession — the entire business world — is a collection of individuals, all with unique ways of seeing, experiencing, and contributing.

“You can be a connector,” Castillo says. “You can look for the skills that your diverse colleagues have and promote them. You can demonstrate how to be supportive of other people.” That’s a road everyone can walk.

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