Do diversity quotas and targets succeed in achieving D&l needs?

Linda Stewart, Diversity and Employment Law Specialist at EW Group, explains what diversity quotas are, how they differ to diversity targets, and how targets can help organisations achieve their D&I goals.

The business case for diversity is well established. Diverse companies have consistently out-earned their industry peers, maximised and retained valued knowledge and expertise whilst attracting fresh perspectives and the best talent.

Diversity targets and quotas, and their respective merits as strategies for promoting diversity in the workplace, have been much debated. There is often confusion surrounding the difference between diversity quotas, targets and goals and what the law says about them.

Organisations obviously want to recruit the best people, but the key challenge is that the patterns in labour markets demonstrate that collectively we are not currently recruiting on merit but rather recruiting people who are like the people already in the most senior positions. Specifically, only 6% of CEOs in the UK’s FTSE 100 are women, and according to the 2017 McGregor-Smith Review, Britain loses £24 billion annually in failing to bring talented Black, Asian, or minority ethnic professionals into the workforce.

Terminology

It is important to get the terminology right around diversity quotas, targets and goals as each has a very different role to play.

• Diversity quotas – Quotas are time bound, measurable objectives usually set by an external body with authority to impose penalties for non-compliance, i.e. Parliament. For example, Italy’s 2011 quota law required 33% of each gender on listed and state-owned boards by 2015. Penalties included warnings, fines and forfeiture of board members’ positions.
• Diversity targets – like quotas, targets are also time-bound, measurable objectives which focus the business on taking key actions to achieve them. They differ from quotas in that the individual business is responsible for setting its diversity targets alongside any penalties for failure to achieve them. An example might include, ‘A commitment to increasing by 30% the number of Black, Asian and Minority Ethnic people in leadership positions over the next five years’.
• Diversity goals –  are broad, aspirational statements of intent adopted by the business. They needn’t be time-bound nor measurable although they often are. For example, ‘We strive to be an equal opportunities employer’ or ‘We want our staff team to represent the diverse client base we serve’ or, ‘All our managers are to attend diversity and inclusion training within the next 12 months’.

Diversity Quotas

Norway, France, Germany, Spain, Italy and Austria are among many EU countries with quota laws. In 2006, Norway introduced a 40% minimum quota for each gender for public companies and achieved this by 2008. There’s no doubt that quotas work relatively quickly, forcing diversity issues to the top of the business agenda. They also encourage a wider search for candidates thereby increasing the talent pool, but whether this helps to overcome the stereotypes and biases affecting underrepresented groups in the longer term is debatable.

The UK takes a different approach. Setting quotas in the UK is, of itself, not unlawful. However, the problem lies in how to fill them. ‘Positive discrimination’ is prohibited under the Equality Act 2010 so an employer cannot choose to hire a woman or someone of a particular ethnic heritage simply because they’re in an underrepresented group. To do so would place the business at risk of a discrimination claim pursued by the unsuccessful candidates.

Arguments that quotas really are necessary to drive an organisation’s diverse representation may be compelling. However, in practice, there would seem little point in UK businesses introducing them given the threat of legal challenge.

Leaving aside the legal barriers, it’s difficult to imagine a candidate being pleased to learn they were chosen for a new role or promotion because of their gender or ethnic heritage, or indeed, for any reason other than that they were the best, most qualified person for the job.

UK equality law already permits ‘positive action’ which allows employers to take proportionate steps to address obstacles faced by under-represented groups. For example, a business might offer additional training to help staff in under-represented groups develop in their careers. And when two equally qualified candidates are eligible for a position or promotion, the business can lawfully choose the candidate from an under-represented group over the other.

In themselves, quotas do little to remove the barriers facing those in under-represented groups. Attaining seniority through a quota-mechanism could, in fact, lead to the further marginalisation of women, people of diverse ethnic backgrounds and staff who are disabled. Nobody wants to hear the words, ‘You only got the job because…’

Nor would forcing change through quotas necessarily guarantee inclusivity, especially when workplace cultures are constantly shifting, emerging and adapting to internal and external demands. To stay on top, businesses need to take all reasonable steps to create more inclusive workplace cultures by setting realistic and achievable goals and targets.

Diversity Targets

Unlike quotas, diversity targets can be tailored, monitored and adjusted by the business to ensure they remain appropriate and responsive to the environment in which it operates. Targets set by internal agreement as opposed to externally imposed quotas also increase buy-in and the chance of success.

A voluntary 25% target for women’s board membership by 2015, established for the FTSE 100 by the Davies Report and supported by amendments to the UK Corporate Governance Code, led to an increase in the share of women holding directorship roles to 26.1%, exceeding the target within the specified time frame.

Target-driven change may take longer than mandatory quotas, but it’s clear that diverse talent really does exist ‘out there’. Setting achievable targets may be just the incentive HR and recruitment teams need to bring that talent on board, e.g. by pro-actively advertising roles in wider places to reach a more diverse pool of potential candidates.

Not sure where to start? A diversity audit will help inform you of the current status of your organisation’s diversity and inclusivity and provide a basis for setting realistic targets which are both achievable and measurable.

Diversity Goals

A diversity goal is the equivalent of an aspirational statement, e.g. ‘to have a culture where everyone can feel their voice is heard’. Organisations may be reluctant to set goals and targets for fear of failure to meet them. Linking specific diversity goals to overarching organisational goals helps to embed diversity and inclusion into company culture.

Organisations that take account of diversity and inclusion in every decision they make and in everything they do enjoy increased productivity and profit; maximise and retain the best talent; nurture creativity, innovation and flexibility and foster committed, motivated staff who feel fairly treated and respected.

Leading the way with supporting organisations with their diversity and inclusion goals, EW Group works closely with our clients to define their diversity goals and targets and practical ways of achieving them.