Lies, damned lies and statistics: digging beneath the numbers on DEI.
This is one of a series of reports from Padda’s DEI round-table discussion with a panel of renowned insurance-sector DEI experts in January 2024. You can read biographies of our experts and find the other reports here.
The exact nature of the FCA/PRA’s new framework for diversity and inclusion is not yet finalised, but targets are very much part of the narrative.
However, statistics were a notable challenge for our DEI experts. Not because statistics are a bad thing (they’re unequivocally not – and boards won’t budge without them!). The issue is that statistics – and especially targets – are easy to get wrong, misinterpret, or apply ineffectively.
The reason to have targets is not just to have something to aim for, but also to focus the mind on the practices which lead to more robust, objective decision making – which inevitably increases diversity – but it’s also important to have some consequences for ignoring them.
Mark Lomas FCIPD, Head of Culture, Lloyd’s of London says, “Targets can be a fairly crude mechanism, so why do they work? They work in the Lloyd’s context because progress towards them is measured in the oversight process and are public commitments. You don’t have to hit the target (because that would just become a quota) but management must move in the right direction. At the Corporation Culture KPIs are 20% of the Executive Leadership scorecard.”
But targets must be supported by insight – a meaningful statistical analysis. Mark says there are two crucial pieces of data. “First, have data at every single point of the recruitment process. So, we can ask: where in the process are diverse groups dropping out? This tells us where people are being turned away, and means we know exactly how many people we’ve got to get to interview to fill a job in a meaningfully diverse way.
“Second, is turnover rates – we need to know who is leaving the business. Right now, at Lloyd’s for example, this helps us understand the movement of diverse groups and why they are moving.”
Sandra Lewin, Founder and Podcaster at 100 Women in Insurance agrees. She says that while recruitment gets most of the attention, it’s a focus on retention that allows pioneers in diversity to push through and deliver the targets financial services institutions are looking for: “I think we’re getting significantly better at getting more diverse people through the door”, she says. “But in conversations I keep hearing, when they get into the business, the culture is not what is ‘on the poster’. And they leave – especially people from diverse backgrounds. I’ve always been a big fan of targets because I thought I could get through the door and then I’d get to change things from the inside. But not everyone wants to be the changemaker. Lots of good people just want to do a good job.”
Businesses must mandate collection of data on both these axes to move towards something approaching true diversity – whether the regulatory mandate includes explicit targets or not.
Without the data, it’s just guesswork; but the process alone will be challenging. Mark adds: “The difficulty is, a lot of even larger organisations don’t have anywhere near the data sophistication to do the modelling properly. And therefore, it becomes a finger in the air.”
David Flint, Founder & CEO, Blue Mountain Capacity continues, “The whole process is going to be difficult – and that’s for an organisation like Lloyd’s that has clearly invested huge amounts into getting this data and setting appropriate structures up. Most companies don’t have that degree of insight – even the larger ones which will be covered by the legislation. The broker market is way behind the bigger companies in this respect.”
Pauline Miller, Chief Equity Officer, Dentsu International underlines the complexity and sees further issues: “The real challenge is the infrastructure that allows you to have the sophistication to appreciate where people drop out through the recruitment stage. That’s not an easy task if you don’t have a good applicant tracking system. But there’s more. What if those HR systems don’t talk across the whole organisation – to the people who do the recruiting and hiring? And how will you translate the recruitment experience back into onboarding when somebody joins?
“There’s a good parallel with the legislation for EU pay transparency, which is being implemented in the coming years. Nobody knows how they’re going to measure basic pay, variable pay and so forth. So, I think there are some real challenges with regulators being divorced from the practicalities of what’s needed to deliver the outcome.”
Key takeaway: Data is essential for DEI success and will now be essential for DEI compliance. But collecting it will be hard; interpreting it meaningfully will be even harder. Suneeta Padda says “It’s no surprise that the FCA is focusing on targets – we all need numerical evidence that diversity initiatives are working. But if the FCA really wants to move the needle, they should also be prioritising support and guidance for organisations in creating inclusive cultures that retain diverse talent, ensuring that diversity efforts translate into real and lasting impact.”
