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Diversity – not just because it’s nice or fair

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In the second part in a series of articles focussing on diversity in the industry, Kirsten Tisdale, principal of Aricia Limited, explains how gender equality is better for business.

Kirsten Tisdale.pngEveryone who knows me knows that I'm a ‘facts & figures’ person and it’s no exception when considering diversity. In my previous article I showed how desperate the logistics sector is for people to come and join it, how low margin the industry is, and how it’s not perceived as inclusive by the people who already work in it.

None of this is intended to be anti-men, it’s about what’s good for business – it’s certainly not intended to be a lecture when the whole industry is under duress, but it is about why looking outside the traditional channels will be part of the solution. What we also saw in the previous article, based on a presentation I gave to the Cold Chain Federation’s People Week recently, was just how few women there are in the industry at all levels – nothing like the proportion employed across the rest of UK plc.

Better for business

My own thinking on diversity has been moved on by research I did in this area for another presentation I was invited to give, in this case to CILT’S International Centenary Convention a couple of years ago. It’s not just about whether it’s nice or fair, although plainly that’s important, but diversity is provably good for business.

I think we can all see that diversity is good for innovation – if you have a group of people with different backgrounds, upbringing, ages and life experiences, they are going to come up with more varied ideas. But it also helps to avoid groupthink – it’s not good to be surrounded by clones, people who look and think just like you. A US neurologist, Dr David Rock, has written about how diverse groups make better decisions. If the person you are with is not quite like you, you spend longer justifying your position to them. Diverse groups look at more evidence when making decisions and examine that evidence more thoroughly.

And better decisions result in better outcomes for businesses. Better corporate governance through better risk assessment feeding through to better company reputation and attractiveness to investors. The asset management company BlackRock, which invests trillions of dollars, votes against men-only boards and here is quoted by Reuters: “Board diversity, particularly in terms of gender, is important from a sustainable investment perspective, given that diverse groups have been demonstrated to make better decisions”.

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But what about the hard cash?

The example I used in my recent presentation came from the Credit Suisse Gender 3000 report, which examined the number of women in management and on the board for over 3K companies (hence the report name) and tracked the movement in share prices for those businesses from 2010 to 2019. It showed that the share price of companies with a greater number of women in management increased more than those with a lower number. And similarly for women on the board.

The example I like best though, because it is comparing like with like, one of the three that I used in my CILT ICC presentation in 2019, is a slightly older study from Gallup. It examined 800 outlets in two companies in the US and showed that the gender-diverse business units made more money than those which were predominantly a single gender. In the retail company this resulted in an average of +14% comparable revenue, and in the hospitality company an additional 19%.

At the CILT convention, I also presented two other studies. One from McKinsey, looking at wider diversity, showing that companies in top quartile for ethnic/cultural diversity in executive teams were 33% more likely to have industry-leading profitability. The other study, again of many companies, was from Catalyst – companies with three or more women board directors in 4 out of the previous 5 years had better return on sales (+84%), better return on capital and better return on equity when compared with companies with no women directors.

As I say, I like the Gallup study best because it is comparing like with like, comparing business units within the same companies – no room for any arguments about, perhaps, successful companies employing more women or people of different ethnicities. And it’s important to note that it’s the diversity that’s important, not the number of women per se – it just happens that for historical reasons, many senior positions in companies in the West are held by white men.

So, does it all matter and what can we do?

I hope I’ve showed you that this does all matter. Logistics has staff shortages right now, and 50% of its key managers are due to retire over the next 6 years. We’re a very low margin sector. We employ way less than the normal proportion of women. There are proven benefits from having diverse teams.

To me the answer is obvious, but with logistics not even perceived as inclusive by the people who already work in it, how can we move forward? In my next piece, I’m going to look at actions we can all take, along with an update on the gender pay gap now that the extended deadline of 5th October for this year’s submissions has now passed with a continued flurry of activity. As we all know in logistics, there’s nothing like needing to meet a deadline!

Kirsten Tisdale is principal of Aricia Limited, the logistics consulting company she established in 2001, specialising in strategic projects needing analysis and research. Kirsten is a Fellow of the Chartered Institute of Logistics & Transport and has a track record helping companies with logistics decisions.

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