Cognitive bias exists in the very fabric of the business world and is a key element holding back its progress, according to Sudhir Roc-Sennett, head of thought leadership and environmental, social and governance for Vontobel Asset Management’s quality growth boutique.
He says companies and the institutional investors analyzing their potential should be concerned with the myriad ways in which bias can hinder optimal outcomes.
Bias can create scenarios whereby factors play into business processes where they aren’t relevant, says Roc-Sennett, referring to a study performed in 1952 with the Boston Symphony Orchestra, which was predominantly comprised of men at the time. Instead of the conductor selecting new members, the orchestra began holding blind auditions, which led to a significant increase in the number of women who were picked to join. The study was a landmark example of how factors that are totally irrelevant to a candidate’s abilities can lead to their being discounted.
Read: Unconscious gender bias preventing women from leadership roles: survey
Looking at hiring practices, Roc-Sennett points out it’s extremely rare for the people responsible for seeking out new talent to have taken any training where race or other potential points of bias are concerned. This blind spot can create a reality where minorities consistently remain outside of what he calls a “wealth vortex.”
“Each person who succeeds creates a network of people who can benefit from their mentorship. That can affect a lot of people,” he says. “If someone succeeds, their children are going to have better advice, their nephews and nieces, the friends of their children, their brothers and sisters. There’s a large network around individuals and we want to create the role models both in society and also for hiring inside of companies, where that is more evenly spread.
“If you grow up and you know more than one person who’s actually worked in a corporation then you’d have quite an unusual benefit when starting, compared to a lot of kids who grow up in minority families who don’t know anybody and won’t know anybody unless they crack it themselves.”
Read: Accenture rolls out inclusive leadership, unconscious bias training for new staff
While hiring practices are important, their improvement doesn’t do much if employees don’t then stay at the company, says Roc-Sennett, noting this is where mentorship comes in. Employers should take the time to make sure senior leadership and board members understand and account for a variety of perspectives so conflicts that arise in the early stages of someone’s career are surmountable and don’t drive them out.
“If you don’t have senior people who can understand the effort and energy and the intensity of these minorities who’ve managed to crack into these companies, the risk is you lose the potential future leaders because of a breakdown in communications in their career earlier on,” he says.
This starts at the top, he notes. “You need open-minded leadership. It starts with the chairperson, it starts with the chief executive officer and it works from there. If they don’t get it, it won’t happen.”
Apart from removing barriers to an individual’s potential, there’s evidence that diversity — where race is concerned — is correlated with better business performance overall, says Roc Sennett. Indeed, recent research by Vontobel examined the largest 150 companies listed on the S&P 500 index.
It found the 25 companies with the most diverse board membership outperformed the 25 with the least diverse membership in multiple areas, including revenue, international shares and earnings per share growth rates. Companies in sectors that rely heavily on rapid growth and innovation, such as health care and information technology, tend to favour more diversity, the research found.
Read: Manulife investing $3.5M in workplace diversity, inclusion