Research shows that people who feel comfortable at work are up to 32% more productive than those who don’t. And businesses that embrace diversity and inclusivity – as accountancy firms, particularly at the top end of the market, have discovered – are likely to outperform the competition. McKinsey & Co’s 2018 diversity report reveals that businesses with a good gender mix are 15% more likely to see financial returns above their national industry medians, while those in the top quartile for racial and ethnic diversity are 35% more likely to outperform the average.
The rationale is even more marked in the UK where greater gender diversity on the senior executive team “corresponded to the highest performance uplift” in the consultancy’s data set: for every 10% increase in gender diversity, the researchers found, EBIT (earnings before interest and taxes) rose by 3.5%. They concluded: “The unequal performance of companies in the same industry and the same country implies that diversity is a competitive differentiator shifting market share toward more diverse companies.”
Ensuring that the business reflects the demographics of its client base makes commercial sense. World Economic Forum estimates put the global “pink economy” at $4.6trn while black purchasing power in the US alone is projected to reach $1.4trn by 2020.
These statistics have been registered up by the largest accountancy firms. Over the past few years they have focused on changing their traditional white, middle-class male profile and long hours culture to make themselves attractive to a more diverse workforce. They have established award-winning schemes, including national support networks for various groups; role models and mentors; flexible working; and revolutionised their recruitment processes to address bias. As KPMG states: “We want to bring about a positive integration between work and life that not only promotes career achievement but also provides an environment that enables everyone, regardless of gender, ethnicity, age, disability, religion or sexual orientation, to feel valued for being themselves.”
The government’s promotion of the Women in Finance Charter, which commits firms to supporting women into senior roles in financial services, boasts 205 businesses and organisations, and since the Davies Report was published in 2010, listed companies have increased the percentage of women on boards from 12.5% to 27.9%. The Big Four are doing rather better with women partners at well over 30%, while the top 10 firms average out at 28.4%. Nevertheless, and despite the fact that the profession accounts for more than 1% of the UK’s employee population, improvements in diversity and inclusion in general have not been as fast or consistent as campaigners would have liked.
ICAEW-sponsored research by Cardiff and Warwick Business Schools, published in February, suggests that progress in the UK has been slow and patchy, particularly outside London. If the profession wants to be seen to be truly inclusive, they say, more needs to be done, including sharing best practice. “The outcomes of diversity initiatives are uneven, especially around change management at senior levels,” says Carla Edgley, senior lecturer at Cardiff Business School. “Interviewees said they hear diversity talked about more than they see practical changes in the workplace, while promotion processes are still experienced as something of a black box. Many of our findings will not be a surprise. However, a central and previously underexplored finding is the importance of tension between beliefs about merit and diversity. This appears a key barrier to change and creates diversity anxiety.”
The report revealed that only 42% of respondents were positive about the effectiveness of diversity policies, while 27% described them as “a smokescreen that disguises inequality”. More than half (58%) had witnessed discrimination in the workplace and 18% had experienced it personally. The research found that part of the problem with implementing diversity policies was confusion over what diversity meant. There was a tendency to view the definition narrowly within a legal context without recognising the need to clearly communicate diversity awareness and experience throughout the firm. And while the firms’ leadership had embraced diversity, this had not filtered down to middle management. Stumbling blocks in working relationships were particularly obvious for individuals from ethnic backgrounds who reported that managers may not be prejudiced but “probably just don’t know how to be comfortable with you”.
This is something that chimes with Anna Purchas, KPMG’s head of people. The firm has recently introduced a reverse mentoring scheme with black colleagues from its African-Caribbean network. “It just opened our eyes to how you cope with difference at KPMG – the emotional energy it takes just to get through the day to achieve the same as a white colleague,” she says. “This is something we have to acknowledge and drive change through so that our people feel more comfortable and know they are absolutely part of our firm.”
On the back of their research, the Cardiff and Warwick academics have come up with a series of best practice recommendations and are now calling on professional networks, regions, firms and diversity champions to share and spread good practices in the wider accounting field. And they urge professional accountancy bodies and larger firms to work together on the way forward. “There is scope for stronger, collaborative leadership and joint efforts to tackle deeper, systemic barriers to change,” Edgley said.
It’s a challenge that ICAEW vice president Fiona Wilkinson is keen to meet. She chairs ICAEW’s diversity advisory group (DAG) which is establishing a group of diversity champions regionally and launching an online diversity community open to both ICAEW members and non-members. “Recognising the benefits of diversity was an important step for the modern workplace,” she says. “The challenge now is to create an environment that fosters diversity and inclusion and to be thorough in embedding these values in a meaningful way. This cannot be about ticking boxes; it needs to be a cultural shift that everyone buys into. That means being open to a number of approaches, not just the obvious steps of the odd training course or candidate quotas. It also means recognising true diversity goes beyond visible characteristics.”
ICAEW has been involved in the diversity debate for the past five years, both on its own account and on behalf of the profession, but much of the impetus for its current work was down to current president Nick Parker, who headed the DAG for two years. A “passionate” believer in diversity, equality and inclusion in the workplace, he instigated ICAEW’s annual dinner for the Professional Services LGBTQ+ Group, which draws together representatives from accountancy firms around the UK, and, together with ICAEW executive director for member services Sharron Gunn, has spoken extensively about the need for better representation of women at senior levels.
Wilkinson meanwhile was responsible for ICAEW hosting the launch of Stonewall’s 2018 Equality Index for the first time at Moorgate Place in January. She has identified disability as the next key area to tackle and has organised a helpsheet aimed at employers. “Opening the lid on disability is huge,” she says. “In fact, I think it’s bigger than all the rest – gender diversity, LGBTQ+ and BAME – put together.” She points out that one in seven people in the UK has some form of disability, and that the profession itself suffers from a high level of mental health issues. According to CABA’s 2017 Wellbeing Report, 34% of ICAEW members are worried about their physical and mental health and 31% have experienced mental health issues. Stress is a key factor with 13% of members taking time off work due to stress.
Last year, in response to 1,100 requests for exam access arrangements, ICAEW made adjustments ranging from sourcing a suitable venue for a breast-feeding mother to express milk to organising for a scribe, reader or sign language interpreter to support students in the exam room. It is also working with a number of disability organisations, including one supporting young people with Asperger syndrome, who often have unique skill sets that the larger firms are keen to tap into.
Social mobility is another significant area of work. How difficult it is for disadvantaged youngsters to enter the profession was highlighted by last year’s research from the Bridge Group, commissioned by Access Accountancy, the pan-accountancy profession social mobility initiative. It found that applicants who came from independent schools had a higher success rate (one in 14) than those from state schools (one in 17) while Oxbridge candidates had a one in 10 chance, compared to graduates from the Russell Group with a one in 14 chance and those from other institutions at one in 30.
As well as the work it does with its BASE game for school students and financial literacy, ICAEW has recently set up a £100,000 social mobility fund with money from disciplinary fines. The money will target projects encouraging people in black communities to gain increased social mobility through academic achievement, including professional qualifications.
KPMG head of corporate affairs Rachel Hopcroft, who has recently taken over the chair of Access Accountancy, says that in the four years since it was launched, the unique collaboration between firms and accountancy bodies has made good progress. “There are few other professions where everyone involved has put aside their brands to work together and we’ve had some really good outcomes.” The organisation has set itself an ambitious target of 3,750 work experience placements by 2019.
At KPMG, Hopcroft says, the number of Access Accountancy students taking up permanent jobs has risen year on year. “In 2017 we saw 48 of our Discovery work placement students offered a place on our KPMG360 apprenticeship programme. About 70% of our Discovery work placement students are from a low-income background.”
Ask ICAEW’s Gunn where she thinks the profession has got to on diversity and she will say as far as women are concerned, it’s gone quieter because the focus has moved to other areas like ethnicity, disability and LGBTQ+. But she is excited about the gender pay gap disclosures, which she thinks will have a bigger impact on diversity than the Equal Pay Act 1970, which made equal treatment of men and women a legal requirement.
Peter James, ICAEW’s head of regulatory policy and joint chair of its LGBTQ+ network, says that there is a huge amount left to do, but is optimistic, having managed the first year of mandatory diversity disclosure among ICAEW’s 105 probate firms. The exercise was invaluable in bringing diversity issues to the fore and ICAEW is now considering rolling out disclosure on a voluntary basis among the audit firms it regulates and firms in its practice assurance scheme.
Brooke-Marciniak has no doubts about the future whatsoever. “We have made great progress,” she says. “I love the fact that at EY we just appointed a woman leader of our Americas Area, and her replacement is a woman. We just appointed a new global head of tax and she is a woman. And her replacement is a woman. And on our global executive we have four women retiring within 12 months and they will be replaced by five women. And that is just an example of what is working.
“The number of women running for political office has gone from hundreds to thousands. Having said that, the MeToo moment is just that. It is a moment. And we need to make it a movement. A public cry for more women in all aspects of leadership. To reach the proverbial tipping point, where we finally create a balance of power so that the dynamics and structural impediments that have held women back are finally gone forever. Having said that, where do LGBTQ and BAME fit? Where they always have. It is women… And.”