Business management

The ethnicity pay gap

The number of workers from black, Asian, minority ethnic backgrounds are significantly under-represented in leadership roles in UK businesses. We look at the impact of this on the economy and what can be done to get more BAME executives on boards.

The evidence

Was it a breakthrough? Yes – and no. Despite the fact that about one in seven British residents are from a black, Asian and minority ethnic (BAME) background, UK people of colour make up just 1.5% of FTSE 100 boards. In SMEs, that number is thought to be even lower. But why is that, and how can we change it?

These figures don’t make business sense either. A recent government-backed report reveals that if BAME workers were able to progress through their careers at the same rate as their white counterparts, it would add £24bn to the UK economy every year. Another study by McKinsey & Company found organisations with ethnically diverse management were 35% more likely to outperform the national industry average. And with half of all FTSE 100 boards are exclusively white, critics say opportunities for international trade are restricted.

“BAME workers are less likely to participate in and then less likely to progress through the workplace when compared with white individuals,” says former Mitie Group CEO Baroness Ruby McGregor-Smith, author of the recent government-backed report. “This is not only unjust for them, but the ‘lost’ productivity and potential represents a huge missed opportunity for businesses and impacts the economy as a whole.”

This missed opportunity frustrates Melanie Eusebe, co-founder of the Black British Business Awards (BBBA). “Organisations have a detailed strategy to achieve other goals that further their business,” she says, “so why do most have no coherent strategy or insufficient resources committed to ensuring a fairer ethnic representation of people at the top?”

There’s a wealth of data around the disparity between the numbers of BAME managers and their white counterparts. As well as the McGregor-Smith and McKinsey reviews, the Institute for Social and Economic Research at the University of Essex found that BAME graduates lag behind their white peers as quickly as six months after leaving university. Meanwhile, an independent report into the ethnic diversity of UK boards published by Sir John Parker said that “successful corporate leadership benefits from diversity of thought”, and both the CMI and British Academy of Management this summer urged the UK’s biggest companies to publish a breakdown on their BAME employees.

The solutions

“A key barrier to BAME representation at the top of business is that when recruiting, organisations tend to use nebulous terms like ‘fit’ or ‘chemistry’ – which is often shorthand for ‘people like us’,” says Sue Coe, head of economy and employment at the Equality and Human Rights Commission. “A large proportion of senior recruitment is done using personal networks, which has that same drawback. Let’s drop the nebulous terms and use measurable selection criteria. Then draw on the widest possible candidate pool – build up a pipeline in your own company, identifying talent, targeting, training, shadowing.”


What gets measured gets done. We need to ask: ‘What does good look like?’ We have targets for every other key performance indicator in business – if we’re serious, we need them also to measure BAME progression

Melanie Eusebe
Co-founder at the Black British Business Awards

Eusebe believes companies need to have what she calls ‘courageous conversations’ to understand ethnicity. “It’s not like addressing the gender pay gap,” she says. “We can learn lessons from that, but gender is binary, whereas ethnicity is wrapped up in colour, race, culture, tradition, religion. The discomfort of discussing race in the workplace causes avoidance to the point of stifling, if not preventing, progress. People don’t even know what terms are appropriate when discussing race, so they don’t discuss it at all. But we need to have those courageous conversations.”

And she says they can often be started by looking at existing employees who have already taken up the banner of ethnic diversity. “The strongest BAME advocacy group in most companies is quite often the employee resource group who are doing this ‘for free’ – they do it as a matter of course but tend not to have the mandate or access to opportunity to influence strategy. You need to seek out these people in your organisation – they could be BAME employees themselves, or very strong advocates – and invite them to have input into strategy discussions,” Eusebe says.

“BAME staff are so diverse that we need to let go of the idea of the importance of quantitative data and quotas – they’re not going to work for a business with five staff in a white rural area. Data needs to be more qualitative, to reflect where the barriers really are within an organisation.”

Coe agrees, adding: “You need transparency, quality reporting of figures, and aspirational targets – these have all helped narrow the gender pay gap.”

While Eusebe believes quotas are impractical, she agrees aspirational targets are vital. “What gets measured gets done,” she says. “We need to ask: ‘What does good look like?’ We have targets for every other key performance indicator in business – if we’re serious, we need them also to measure BAME progression.”

Most of all, the reports agree that an increase in the number of BAME managers can only inspire greater numbers to follow their example. “The greatest driver is role models,” says Coe. “There’s a phrase: ‘If I can see it, I can be it.’ Nothing motivates more, all the way from school, through university and into business, than seeing someone like you who has already achieved.

“That way, we can unlock this £24bn. Proper, equal BAME progression is not just about the fundamental moral and legal reasons – it will give our organisations, and our country, a huge business advantage.”

Seven action points

  • Ensure your recruitment is based on measurable skills – what you know, not who you know
  • Widen your talent pool by broadening your range of recruitment methods
  • Wet aspirational targets to promote BAME recruitment and advancement – with a clear strategy of how to achieve them
  • Establish accountability at board level for diversity – make sure it’s owned
  • Have ‘courageous conversations’ about race in the workplace
  • Create an effective pipeline to the top, through individual mentoring or training
  • Have visible BAME role models to whom others can aspire

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