Diversity, Inclusion and Competitive Advantage in The Ideas Age

Every once and a while I like to jump in on a discussion thread on LinkedIn.  It’s fun and can be quite thought provoking.  I’ve never done this before, but I wanted to share a discussion thread from today from the Harvard Business Review® LinkedIn group.  It was in reference to an article from the HBR entitled, “We Approach Diversity The Wrong Way”.

The issue of diversity, and especially, inclusion, has never been more important than it is today. We live and work in a new economy; the economy of ideas. Unfortunately, management practices and leadership philosophies often lag behind fundamental shifts in economic drivers.

Today, economic value is created through the efficient commercialization of intellectual property (IP). Whether the industry is IT, biotech, pharma, electronics, professional services; even old world, heavy industries are doing business in ways they never could have imagined ten or fifteen years ago. Human beings, and their creative capabilities, are the new raw material for value creation. Yet, 7 out of 10 employees are disengaged, both emotionally and cognitively, from their employers. Further research demonstrates that, for many firms, upwards of half of their payroll delivers little or no ROI.

If Henry Ford had a scrap rate on his raw materials approaching 50% I have to believe he would have addressed it in fairly short order! Yet that’s what we’re seeing today. In a time when we need highly cohesive teams of knowledge workers that bring broadly diverse experiences, perspectives, and cultural orientations into our organizations, we still trapped in the old language.

D&I is a strategic imperative for creating and maintaining competitive advantage in the 21st Century. The key to broadening diversity, and more importantly, ensuring the passionate inclusion of every perspective at the table, requires a fresh approach to leadership. Leaders can no longer rely on extrinsic values and goals (money, image, status) to motivate and engage today’s highly diverse, multi-cultural, multi-generational workforce. We must migrate to embracing intrinsic goals and values (personal/professional growth, authentic relationships, service to our fellow human beings). We must find the adaptive, middle path!

Extrinsic values are heavily shaded by culture and a person’s generational orientation to the world. Intrinsic values transcend these differences because they speak to the nature of what it is to be human. These values and goals speak to us all because these values resonate with our Core Mammalian Emotional System, of how we are all anciently hard-wired for survival. We’re wired to cooperate, care and support one another. When we leverage these natural, neurological attributes as leaders we support biochemical coherence, psychological flow and cohesive entrainment. All keys to our abilities to tap into our creativity and cognitive abilities.

Exclusively leveraging extrinsic goals sparks envy, greed and anger, eventually triggering an amygdala hijack amongst workers. Our amygdala, the ancient sentinel of our brain, cannot discern between a real threat and a symbolic threat. This has shown up today on this thread. When we enter into this biochemical state our HPA axis flies off the charts and our entire neurological system focuses maniacally on the threat. Our ability to access higher cognitive function is taken offline for at least four hours. Again, no ROI on that four hours of payroll in an ideas-based economy!

The adaptive challenges we all face today require every voice to be heard and included in the conversation. We must discover and co-create solutions that can only emerge through mindful cooperation. It may, in fact, be the key to our survival as a species.

 This was met with a question from another member, questioning the validity of my comment on payroll and ROI.  He also asked me, if this is true, why hadn’t this been addressed during the recession with all of the layoffs and focus on lean management?  Here’s my response:

More than happy to do so! One study by Gallup appeared in the HBR entitled, “Manage Your Human Sigma”. Gallup also conducted another study entitled, “Engaged Employees Inspire Company Innovation ~ National survey finds that passionate workers are most likely to drive organizations forward”. You can find them on a Google search.

In addition, The Chartered Management Institute and the Society for HR Management also released studies confirming the 70% disengagement rate.

Speaking directly to upwards of half of many firms’ payroll delivers little to no ROI, here’s what we found. Within the Gallup studies, they identified that only around 29% of employees showed up with any passion for their work. They went on to state that 54% are passively disengaged, meaning they’re sleepwalking through much of their day. Not good if you require creativity and engagement to drive innovation. They also stated that 17% of employees are actually working at cross-purpose with their employer and fellow associates (we’ve all met them, haven’t we?). They are actually destroying economic value in the organization, so their contribution is, in fact, costing fellow associates their own productivity.

We ran several models based upon real-world payroll data from our clients and our observations of workplace behavior. We gave the sleepwalkers the benefit of the doubt that they are contributing economic value half the time, recognized that the 17% are a wash in and of themselves, and in fact are disrupting value creation the equivalent of at least one day a week through passive-aggressive behavior towards the sleepwalkers and the engaged, we came to this conclusion.

Sleepwalkers delivering ROI half the time (54% x -0.5) = – 27%

Actively disengaged destroying value creation (-17% x 1.2) = – 20.4% (let’s just round this to – 20%, this isn’t an attempt at calculus)

Engaged consistently delivering ROI = 29%

Basing our assumptions on the published literature and basing our modeling upon our observations, client feedback and payroll, we estimate, that for many firms, upwards of half of their payroll is delivering little to no ROI… or approximately 47%. And that’s giving the passively disengaged the benefit of the doubt they’re contributing value half of the time.

As to why business leadership didn’t address this during the recession? I think a study issued by McKinsey & Co. may shed some light on that issue. It’s entitled, “Do You Have The Right Leaders For Your Growth Strategy” and it was published in July, 2011. In looking at 5,560 “C” level and “one step down” executives they reported only 1% scored “excellent” in five of eight core leadership competencies. Nearly 90% scored “below average”. The worst part about this is I’m not sure the competencies they were testing for are still even relevant in today’s economic and multi-cultural landscape.

In addition, the 2010 Global IBM CEO Survey reported that the single most important leadership attribute CEOs were looking for in future leaders was creativity and their ability to cultivate creativity throughout the organization. Yet, a peer-reviewed study from Cornell and published in the January, 2010 edition of the Journal for Experimental Social Psychology reported that high potentials that demonstrate high degrees of creative thinking are sidetracked on their way up the corporate ladder. They go on to state this was a heretofore unreported, hidden bias towards creative thinkers. Senior leaders are saying one thing, and doing another. Incongruent behavior that kindles disengagement. And quite frankly, why most D&I initiatives are little more than window dressing.

The problem lies in the approach of transactional leadership which is an artifact of the Industrial Age. The Ideas Age requires transformational leadership; leadership that embraces and understands the power of intrinsic goals and values.

I hope this was helpful!

Best,

Terry

© 2012, Terry Murray.

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Filed under Health Care, Leadership Development, Organizational Culture

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