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The S in ESG: The priority areas of diversity, equity and inclusion

 

August 2022 | Episode 2 | 19 min

 

What are the diversity, equity and inclusion priority areas? Join host Nick McClelland, Mercer’s Chief Growth Officer and Michelle Sequeira who leads Mercer’s DEI consulting practice for the UK and Europe as they cover more of the S in ESG, and the topic of diversity, equity and inclusion with a focus on pay disparities.

Meet your podcast host

Nick McClelland

Chief Growth Officer, Mercer

  • The S in ESG - Podcast transcript

     

    Podcast host:

    Nick McClelland: Chief Growth Officer, Mercer

     

    Guest speakers:

    Michelle Sequeira:  UK Diversity, Equity & Inclusion Consulting Leader, Mercer Marsh Benefits

     

    Nick McClelland: Hello, and welcome to the second episode of Mercer's ESG Insights podcast. In this new series, we will be addressing ESG issues from a people, purpose and profit perspective. I'm your host, Nick McClelland, Mercer’s Chief Growth Officer. And each month, I'll be joined by guests from Mercer and beyond who will share ideas, experience and actual insights to help you on your ESG journey. On today's episode, we're going to be discussing more of the S in ESG, and the topic of diversity, equity and inclusion with a focus on pay disparities. And I'm absolutely delighted to be joined by my colleague, Michelle Sequeira. Michelle, it would be great if you could say hello, and give a little introduction.

     

    Michelle Sequeira: Thank you, Nick. Thank you for having me on. And it's great to see you again today. I lead our diversity, equity and inclusion consulting practice for the UK and across Europe. And what we typically do with our clients, and indeed, for Mercer internally, is threefold. We diagnose current states to articulate what an organisation's priorities are. We help them with their strategies and their action plans.  And then we also help with implementation on the other end to ensure that it's a success. Really pleased to be on here today. Thank you.

     

    Nick McClelland: I'm delighted you could join. And we have had lots of very good conversations, Michelle, in the past, I know. But I think this one in particular is very of the moment. And I want to get straight into it. So we both attended an event quite recently for clients, which, you know, again, key themes throughout the day came across, but specifically what arose through the day was how organisations are getting to grips with the broad topic of diversity, equity and inclusion. And I want to get specifically into gender and ethnicity pay disparities a bit later, but could we start, perhaps on the priority areas that HR teams should be focused on right now, with regards to D, E and I.

     

    Michelle Sequeira: Absolutely, I will focus on three key things. The first is creating equitable, transparent and rewarding partnerships for employees. And we just elaborate on that for a second.  56% of employees will only work for and join a company if they can work remotely or in hybrid. Yet, 73% of HR leaders actually are worried that remote working will affect their culture. So there's a real need to ensure that hybrid working does not negate any DEI wins that they've had to date. And they really need to ensure some credible opportunities for all.

     

    The second is to take action and to really create a DEI strategy that resonates across the employee experience. Recent talent trends focusing on the UK, show that only 17% have a DEI strategy, and that's appalling given this day and age. And this is similar to the event that we had recently, right. And often this is because firms don't necessarily know what to prioritise when they're thinking about their actions or their priorities and their strategy. So wherever an organisation is on the journey, it's important to understand the current state using quantitative and qualitative data. And I can go through that in a second, if that would be helpful.

     

    But then the third piece, if I could really quickly, is accountability and engaging senior leadership. There's a real need for organisations to think about engaging every stakeholder on the journey. So our recent studies showed that (a) males are less likely to see progress and also engage in DEI, but then (b) that middle managers just don't engage. And if our first line leadership aren't actually engaging, and it's our managers that are the make or break of a relationship, we really need to engage more. And then on that note, is the accountability piece, what gets measured and actually rewarded, gets done. So we need to focus on that a little bit more.

     

    Nick McClelland: Michelle, you mentioned a couple of statistics in there, I think. Am I right in thinking that it’s from our global talent trends research recently?

     

    Michelle Sequeira: Yes, that's right. Most of them are.

     

    Nick McClelland: And has that been released already?

     

    Michelle Sequeira: It has.

     

    Nick McClelland: Excellent. Well, we'll make sure we have the links in the broadcast webpage. Let's talk a little bit about some of the points you raised there. Just about making an impact. So you talked about some key areas there. You talked about equitable partnerships. You talked about the employee experience, and you talked about accountability. Is there any practical things that you could tell our audience today, which would be a mixture of leaders and HR leaders in particular, is there any practical tips you can divulge, give away the secrets a little bit, obviously without compromising the great work you do for clients as well, but is there anything you could give to the listeners today to just focus on that making an impact piece?

     

    Michelle Sequeira: Yeah, of course. So let me start with leadership. Let's start with the top. Actions that would really help make a difference there is awareness sessions and collaboration sessions and being authentic, because if our employees and our first line managers see our senior leadership on board and truly activating, they’ll start to do it themselves. So really simple, now I say that it's not quite simple, but it's really powerful.

     

    The second thing with the DEI strategy, we really need to consider making a difference by way of capability building, by way of robust pay equity practices, change management and communication. And this leads to the third piece, because when I'm talking about accountability, we need to be considering measuring results. So let's talk about metrics shortly, we need to demand accountability. And that's not just from our senior leaders, but all employees need to be held accountable for their actions and their behaviours. And we really need to be considering dashboards and rewarding behaviours.

     

    Nick McClelland: So I want to go back to just a point about authentic leadership, because in research I've seen and I know this is probably from last year, actually, around some work we did with REBA, the Reward and Employee Benefits Association, which showed that disconnect. Where at leadership tables, boardrooms around the country and leadership tables, there is a clear focus on DEI. I'd say it's, from memory, is above 50%. So it's not where we want it to be, but it's at least up there in focus. But you talked earlier about that management disconnect. And that actually, incredibly, the manager focus on this was incredibly poor in the research that we carried out with REBA. So that authentic leadership piece, do you think that's the key secret to making this work, to getting management bought in, if they see that visual, authentic leadership, then managers start to take up and notice and realise this is important, I do need to focus on it?

     

    Michelle Sequeira: Yeah, I think that's really important. I listened to a TED talk, now this is a while ago, but it's stuck with me, that talks about everyday leadership. And irrespective of where you are, as an employee, you still have leadership capabilities, or somebody will see you as a role model and will have some actions that they're inspired by. So I think that we all need to be a little bit more authentic, and we sometimes aren't within the workplace. So authentic leadership is super important.

     

    There is a real need to focus on ensuring that our purpose is understood and felt by all employees. So when we're talking about leaders, when we're talking about managers, it needs to be, you know, authentic enough that it's relatable and felt by all employees otherwise it defeats the purpose, and it really needs to be brought to life by everyday experiences. So for example, we often talk about moments that matter. So if I'm having a really hard day, I've just come back from, I don't know, bereavement leave or something. Can I turn around and actually have support from my leaders, from my colleagues, from my people, it's those moments that matter that really bring it to life and ensure that people feel like they belong.

     

    Nick McClelland: Absolutely. I couldn't agree more. And I think that comment you just made about the relatable organisation resonates so strongly, because again, at the event, we heard how much pressure is on organisations now, because there’s been a role reversal. It used to be that employees needed to impress the employer. And what we heard from nearly every client at the event was, no, it's the employer now out to impress. In fact, as far as the employer is on probation, whenever organisations need people to join. So that relatable, authentic organisation, I think is such a crucial point.

     

    I do want to move us on to get specifically to gender and ethnicity pay. You've been carrying out some research in this area. And I know we want to get talking about metrics in a moment as well, but I just wondered, where are we at today in the UK on this particular topic?

     

    Michelle Sequeira: Yeah, absolutely. So our annual pay gap survey captures priorities and concerns. This year, it had more than 130 employers, over a million employees. And it showed that sadly, limited progress has been made. Right, so 49% had made little or no progress with narrowing that pay gap. And this is disappointing because pay gap regulations have been out since 2017. And only one in three reduce their pay gaps by 2%.

     

    When I often talk to clients, to truly make a difference we really need to think beyond pay gaps, right? Because a pay gap is typically due to your workforce profile, so on average of all of the organisations we work with, between 70% and 97% of a pay gap is due to an organisation's workforce profile, where people sit as opposed to equal pay risks. So ensuring the equitable access to promotions, to high potential opportunities, stripping away bias from talent management and performance management, that's where the difference is.

     

    So really to just reiterate that, to truly make a difference, employees really need to go beyond pay gaps and create that genuine, inclusive workforce with equitable opportunities, progression and pay.

     

    Nick McClelland: So again, I want to explore this further in terms of the – I'll come back to that in a moment, in terms of the risk that this presents to organisations, but again, just trying to think about practical tips and advice we can give to the listeners. You know, we've talked there about there being little or no progress since 2017, which is quite shocking. You said, you've given us a few areas there of things that are maybe the root cause, but if you're going to advise, again, an organisation to focus on two or three key things that really make a difference, what would those be?

     

    Michelle Sequeira: Know your starting point, right, that's my first key thing, because unfortunately there's no silver bullet. So understand what is driving your individual pay gap, whether that is a specific grade within your organisation, whether you have a bottleneck and people are not progressing and therefore leaving, so understand where that priority area is, and then be intentional with your actions. So a lot of the time people will say, but is this positive discrimination? No, because we're still promoting the right people, we're opening access to allow everyone to apply for those opportunities. So be intentional with what you're doing to unbias some of the principles and processes that we've had for many years.

     

    Nick McClelland: Two areas I want to explore before we close off today. So the first is, again, big theme that came out of the event recently was this idea that I think it's more the emergence and more firming up of this concept of people risk. So I guess for the audience, this is really about the fact that people are still central to many organisations. But of course, with everything we've been through, whether that is the P word, the pandemic, or whether it's what we're facing ahead with economic turmoil, that people still carry a huge risk for organisations today, in terms of how you treat them, how you look after them, not least the challenges we're facing on retention and recruitment alone at this moment in time. Should organisations be considering this pay issue, this pay disparity issue, as a key people risk?

     

    Michelle Sequeira: The short answer is yes. So it's been a few years now, I've already talked about the gender pay regulations, right, yet a significant proportion of employees, around two thirds of them, still look at an organisation's pay gap and the pay gap narratives before they either apply or before they accept a job. So that's a significant amount. And that's a huge way of attracting and actually retaining our talent. And yet, with increasing consultations right, to mandate ethnicity or disability pay reporting, I don't think the pressure is actually going to subside. So organisations need to focus on this.

     

    Considering just on our earlier piece of the conversation, considering pay gaps are workforce related, organisations need to consider what the impact is of some of these macro trends, right? So if we're thinking about automation and AI, what roles are actually being automated? And what impact will this have on our workforce? And some of the skills that we can get from these really talented people. Consider the impact of hybrid working. So our recent talent trends show that 72% of executives are concerned about promotion prospects for remote workers. So here too how might this impact? So I think there's a huge risk.

     

    Let me just leave you with one other stat to this point. Employees in the UK say that feeling valued and feeling a sense of belonging are the top one and three most important for UK employees. So I think this sums up that if they want, you know, if we're thinking that they need to feel a sense of belonging, it is a huge people risk and we just have to get it right.

     

    Nick McClelland: I want us to project forward a few years and think about where we are today, you've talked about little or no progress, you know, and I think that is a warning sign. But if we were to go forward, maybe three, four or five years, where do you think we'll be in the UK market at that stage, and what are the things that need to happen for that to change in your mind?

     

    Michelle Sequeira: I'm a very positive person and I would like to say that things will move forward a lot faster. I do think the last two years has helped put an emphasis on the need for a focus for inclusion and a focus on diversifying our workforce. I do think to your point, the employee has more of a say in how things go these days. And I think that's really making a difference. So I'm hoping that in four years’ time, pay gaps would have reduced and inclusion stats and indices would have increased a fair bit.

     

    Whether that's a reality, or that's my rose hued glasses, I'm not sure. But to make it a reality, I do think that organisations have the opportune time. They're thinking about transformation. They're thinking about changing their workforces now. So what better time to actually embed DEI into the whole DNA of the employee experience, right.

     

    To get it right, I’ll go back to my accountability piece. I think there's a huge need for organisations not just to come up with beautiful strategies, but actually to hold themselves accountable, to measure their results, to demand accountability from our leaders and to share transparently, employees want to see that there's progress or not, being made and what to do about it. And I think we really need to be a little bit more accountable to make that progress.

     

    Nick McClelland: So that's one final thing that I really would like to cover today, is a bit around that accountability and metrics. So actually, on the last podcast, we talked to our guests then about some practical tips to leaders on holding the organisation accountable for progress broadly across all the ESG metrics. And we're very much focused today probably on the S of ESG in this particular topic; is there any advice that you can give to employers and leaders on measuring the impact? What are those metrics that maybe need to be considered? Because again, for some of our listeners today, this might be the start of their journey and they haven't thought too much about this, for others dare I say it, maybe they’ve been measuring the wrong things. So I guess, as an expert in this area, and you know, I know that you can help so many organisations with this. Are there some key metrics in areas that you would be focused on in terms of measuring that impact and creating accountability at leadership level in the business?

     

    Michelle Sequeira: Yeah, absolutely. So from a DEI perspective, as it does fall into the S, organisations should consider including metrics surrounding representation. That's an easier one, right. So for example, female, and racial and ethnicity representation at board level, or hiring rates, promotion rates, but we need to do that, as I say, intentionally and focused on the right metrics. So you're not looking at the percentage that are hired, but actually, potentially, the candidate slates, so that we're opening up access.

     

    The second type of metric I would look at, is inclusion indices. And this is sometimes a little bit more nuanced, but definitely very impactful for organisations. So looking at whether people actually feel like they belong, whether they feel like they have the right career opportunities. As that starts to open up questions to how we are treating our employees. And we do know that people are being treated differently, irrespective of the industry that we are operating in.

     

    And I would say you know, to that piece is linking it to reward. And I know you talked about metrics there, but if we were to link it to reward, our ESG report last year suggested that 21% of organisations currently link to DEI metrics, and short term incentive plans and around 20 link it to long term incentive plans. So organisations had already started it, the conversations we're having this year show that that number is increasing. And I would recommend to all our listeners to get on board and start ensuring there's a link to actually make a difference.

     

    Nick McClelland: Excellent. Michelle, thank you so much. We do talk a bit and I know the impact you're having for organisations on helping them on this journey. And I know that many progressive organisations have benefited from your advice and guidance in this area. So huge thanks for coming on the podcast today. I have a sneaking suspicion that you will be in high demand to come back in the future because there are so many areas we could unpick further on this.

     

    Michelle Sequeira: I would love to.

     

    Nick McClelland: Good, I would love that to happen as well. And look we have some fantastic episodes planned, on everything from sustainable investments, but also how to improve sustainability through your people strategies, something that this topic today is very linked to. But if there are other issues that the listeners would like us to cover on the series then please let us know via the podcast website. We hope you've enjoyed today's episode. Thank you for listening, and we will see you next time.

     

    You can subscribe to keep up to date with our latest podcast episodes and if you have any questions, please do not hesitate to contact us.

       

 

Guest this episode

Michelle Sequeira

Diversity, Equity and Inclusion Consulting Leader

Mercer UK


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