The fascinating book Chasing Stars analysed more than a thousand US equity analysts ranked in the top 3 for their sector - the ‘stars’ - who were poached by a rival firm. Often though, the star cannot replicate their success at the new firm. Their success is environment specific.
"Evidence strongly suggests diverse groups make more ethical decisions than homogenous groups. Diversity challenges group think.”
The strength of colleagues, the depth of the firm’s franchise, the way information is shared or debate conducted; all impact an individual’s success.
When hiring, just like in investment, diversification delivers results. Adding attributes which a team doesn’t currently possess will likely improve performance. Yet when we hire, we often recruit for narrowly defined skills with the criteria matching the previous incumbent. We don’t diversify.
This year’s theme for International Women’s Day - Balance for Better - recognises the important role we all play in creating a world where women have opportunities to thrive.
When I was growing up it was common practice to speak about difference with gender being one form. Often we spoke about it in ways which were designed to separate and tribalise.
Then, particularly in western society, we moved to a standard where you couldn’t talk about difference at all. Everyone was to be treated the same. Yet difference doesn’t disappear. More often we fall prey to unconscious biases, for example recruiting and promoting in our own image.
What we need to do, given the benefits of diversification, is to recognise this difference and see it as the positive force it is. A new skill set, a different perspective, a way to escape unconscious bias, a way to challenge the status quo.
In my field, economics, women might be likely to have an interest in different topics to men. One of the most read pieces of research we have ever produced at ANZ was on the economic effects of same-sex marriage - written by one of our senior female economists. That piece nearly didn’t get published because it didn’t feel like the sort of research a bank should do.
This work had a different perspective and taught me something about what other people find valuable.
There are also important ethical benefits from diversification. Evidence strongly suggests diverse groups make more ethical decisions than homogenous groups. Diversity challenges group think.
This is an opportunity for the finance sector. One particularly strong feature of diversity-driven ethical guideposts is they don’t rely on process. They are an example of the wisdom of the crowd where multiple propositions are tested by multiple minds drawing on diverse data.
Soberingly, economics is the least diverse of the social sciences, even of the hard sciences.
In Australia (and the US) only 15 per cent of professors are women. In high school, two thirds of economics students are boys - and most come from high income families. Worse, once qualified, much of the raw bias in STEM disciplines appears to diminish. But in economics there are still apparent biases in hiring and promotion decisions.
The ripple effects can be significant, particularly when you consider that, of all the social scientists, economists probably have the most influence. So how can we expect to deliver policies for the whole population if half the population lacks appropriate policy representation?
One response when trying to deliver a diverse economic research team is there simply aren’t enough women. I don’t agree. In statistical terms, you are not trying to hire the entire ‘population’; you are just after a ‘sample’ - a small slice.
There are more than 28,000 women in Australia with economics degrees, representing about 40 per cent. At ANZ in Australia, we have 15 economists; a fraction of the total talent pool, which means that aiming for gender balance is both realistic and achievable. You may even find that people who go into a discipline in which their gender is under-represented show more drive, and aspire to some higher goals, than the average.
Even if it is the case that everyone addresses gender imbalances in their teams, and hence there is pressure on the entire talent pool, the market for the skills you are after will adjust. You might find women who study economics but drift into other disciplines start to come back. Difference won’t seem so different.
As difference becomes more widely recognised as valuable in the workplace, other attitudes and perceptions are likely to adjust. One of those is our implicit sense of what success looks like.
One study from the US shows the more ranks used for performance reviews, the wider the ranking gap between women and men. For example, when a 6 point scale compared to a 10 point scale was used. This implies a structural bias against women in the top echelons – which becomes more obvious the more ranks we use.
Two US academics recently combed 20 years of genetics papers and found that based on the attribution standards of today, women were often in acknowledgements when they should have been listed as co-authors. They were literally footnotes.
There are a range of reasons we celebrate International Women’s Day. Our sense of fairness demands it and it’s good for business. But as an economist I also see the benefits for the economy.
Australia is feeling the limit of two growth constraints – one financial, the other physical. Household debt is now 200 per cent of income. More debt can no longer be a source of economic growth. Meanwhile political support for maintaining immigration rates is waning.
However, there is another source of growth: ensuring full and active female participation in the economy is the most obvious, and perhaps only, large untapped driver of economic growth.
Howard and Heidi
Read Iris Bohnet’s book What Works: Gender Quality by Design. It doesn’t necessarily do what it promises on the cover or give a recipe to follow. But it expanded my perspective.
The discussion of why people like “Howard” more than “Heidi”, two silicon valley entrepreneurs who are identical in every way except name and gender, is an extremely powerful and ready rebuttal to the phrase ‘oh its ok, I only make decisions on merit’.
The economic benefits of diversity are obvious and demonstrable.
Diversity is not just the right thing to do; it’s rewarding. The data tell us we are indeed “more powerful together” – and we can put a number on it: growing the share of women in the workforce could increase GDP by more than 10 per cent.
Richard Yetsenga is Chief Economist at ANZ