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The Equity Effect: Businesses who treat employees unequally based on race report better results

23 June 2021

Story by
Sarah Rice

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This headline might not quite read right the first time you view it. In fact, it might not make sense after a few run throughs. That’s because it’s counter intuitive – after all, isn’t equality about treating people, well, equally?

However, when you think about it there is something inherently impossible about achieving equality by treating everyone the same. Every person comes to the party with a completely different set of needs, life experience and expectation.

This has been borne out in research we have conducted at Henley Business School called ‘The Equity Effect’, which looks at how to make equality truly equal when it comes to race.

This is because when it comes to racial discrimination the problems are well known, but the concept of racial equity less so.

Targeted support

While we are seeing an increase in the amount of targeted support UK organisations are providing to employees from ethnic minorities, some are struggling to come to terms with the idea that policies which advocate racial equality may no longer be the fairest way to support their employees.

Equality is achieved by treating everyone the same, but equity means that all employees are valued and treated fairly (even if this means being treated differently) irrespective of their race and culture. This sits in the belief that strength comes through true diversity.

Fostering racial equity is not about providing the same opportunities to everyone, rather the elimination of policies, practices, attitudes, and cultural messages that foster racial discrimination and providing additional support and services to balance out inequities.

Black Lives Matter

Following the rise to prominence of the Black Lives Matter movement, and the COVID-19 pandemic which significantly impacted Black and minority ethnic people, attention was drawn to discrimination in areas beyond law and policing.

The purpose of The Equity Effect was to explore the relationship between businesses and racial inequity, specifically why it still exists in the workplace, what the barriers and challenges are to overcoming it, and the benefits for those that achieve this.

Our research included a survey of more than 1500 business leaders and employees from a range of ages, genders, ethnicities and industries. We found that 30% of business leaders and almost a quarter (24%) of employees feel that racial inequity exists in their organisations.

Moreover, 22% of employees say they have personally experienced or seen discrimination of some sort in their workplace, with many citing race as the primary pretext (55%). Factors such as perceived cultural differences (cited by 56% of employees and 52% business leaders) and a lack of diversity in leadership (33% of employees) are driving racial inequity and systemic racism within businesses.

Economic inequalities

As HR practitioners, it is high time to advance our understanding on the mechanisms by which inequalities are translated into economic inequities. Never before have organisations needed more a hard-headed HR boss.

Fostering a climate of diversity and inclusion has positive implications for the bottom line as revealed by our data. This shows that if businesses actively confront inequity and racism with practical measures, they can expect to see an improvement in their employees’ job satisfaction, loyalty, creativity and, ultimately, value, recording an average revenue 58% higher across three years than those which did not.

We believe this is an opportunity for HR to realise there is much more to learn about diversity and inclusion and take the time to enact upon these learnings. Achieving true racial equity can make a real difference to an organisation.

Successful intervention

Racial equity needs to link to core business strategies. Too often leaders implicitly frame their solutions as “we’re doing this because we are supposed to” or “this is a CSR initiative”, and it has nothing to do with the business priorities, mission, or vison. It is possible to do much better. Successful intervention goes beyond raising awareness and involves useful knowledge of HRM, which could inform and support management practices.

To effectively address racism in businesses, it is important to build consensus around whether there is a problem (our empirical evidence shows clearly, there is) and, if so, what is it and where does it come from? A good place to start is with your data, to see if and where you may have an issue.

To strive towards racial equity, one thing you could consider is focusing on it in a more systemic way. Examine critically how your systematic approach toward people management is designed to be inequitable. And ask yourself – is your organisation committed to removing barriers that keep people of colour and ethnic minorities out in the first place?

Show up personally

Prioritise racial equity efforts across the business. Identify where biases are represented in your organisation right now – in the hiring, retention, or career development of employees of people of colour and other ethnic minorities – and fix those issues systematically and thoroughly. Encourage engagement and advice from people of colour and other ethnic minorities themselves in this process of change.

Importantly, you need to show up personally. HR bosses have a crucial role in boosting ongoing racial equity initiatives and investing time and assets to ensure they become integral parts of organisations’ strategic priorities. Otherwise, we will be back to status quo in no time.

To build a new, more inclusive culture, we need to see the values and practices in our businesses that advantage white people, to the exclusion and oppression of people of colour.

Racial equity efforts must flip that premise on its head. Instead of trying to provide equal opportunities to everyone, we must focus on transforming our organisations and providing additional support for those who need it.

For those companies that are able to achieve this, it will pay dividends in terms of improving creativity, employee satisfaction and loyalty, and ultimately financial performance.

Dr Washika Haak-Saheem is an associate professor in Human Resource Management at Henley Business School. She holds a PhD in International Business Management from Leuphana University in Lüneburg/Germany. Her research focuses on the intersection between global migration and international business management, refugee workforce integration and expatriates’ voice. 

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