Diversity – More than just a temporary Rainbow?
Just a few months ago, the logos of numerous companies across various industries were shining in the brightest rainbow colors. While the Covid-19 crisis, with its drastic impact on the economy, pushed the topic into the background in recent weeks, this does not change the general trend: diversity is increasingly entering everyday working life as a cool, liberal, and cosmopolitan attitude, giving the impression of an established, everyday matter of course. This seems obvious—but is it actually true?
Constantin Trapp and Dr. Karl-Heinz Weiss-Trapp spoke in detail with Prof. Dr. Carmen A. Finckh, who focuses on diversity management and diversity controlling at Reutlingen University, about her findings.
Frau Prof. Finckh, do companies actually take diversity seriously, or is it simply a topic they cannot ignore due to public social discourse?
Prof. Finckh: Companies approach the topic very differently. Roughly speaking, four corporate archetypes can be classified and identified:
In the first type are companies that have diversity on their agenda and manage it professionally. They implement a wide range of measures and succeed in creating improved framework and working conditions for diversity. Despite this, many of these companies still struggle to place more women in top leadership positions.
Then there are companies of Type 2, which showcase many of their activities externally. However, when you look behind the facade, you have to ask yourself how seriously it is actually being pursued. In my experience, employees always sense this. This blind spot not only damages the credibility of management but also undermines all initiatives surrounding the topic. Genuine change can hardly take place under these conditions. There is simply a lack of sincere, honest interest from key decision-makers.
Type 3 companies have nothing to do with the topic and are doing just fine without it. They only feel embarrassed when asked about it, which stirs up their conscience that they might be missing or overlooking something. Sometimes, self-organized groups within the company—such as women’s networks organizing to push the agenda—begin to "bother" them. Over time, a change in ownership or top management can shift their attitude toward the topic.
In Type 4 companies, diversity is a matter of course. It is simply lived without ever being actively talked about. This is occasionally observed in small family businesses and startups.
How do you assess the general attitude toward diversity?
Prof. Finckh: As the Equal Opportunities Officer at Reutlingen University, I worked as an implementer in a Type 1 institution. It was highly educational for me to find out how change can actually be achieved.
An interesting phenomenon can be observed in all companies, as well as in the general population. Although diversity issues have exploded due to globalization, migration, and populism, we are already seeing "diversity fatigue" at all levels. Many initiatives, projects, and groups that have been advocating for change for 20 or 30 years are realizing that the overall situation in Germany has only improved in isolated cases, but not systematically, over the last 10 to 20 years. For instance, we have still not broken into the top 10 countries in the Global Gender Gap Index. To find better conditions for reconciling career and family, one would logically have to live in Iceland or Scandinavia during the family phase, not in Germany.
Yet, people seem to have grown accustomed to the situation here in Germany. Furthermore, the topic is being replaced by others. At the university, for example, we discuss digitalization almost exclusively as the topic of the future. Interestingly, this also includes many diversity aspects—such as gender in social media or in AI—which are still discussed far too little. These are truly crucial issues regarding our future society.
Where do you see genuine effort and progress in diversity management?
Prof. Finckh: The question is always how people actually recognize the need for change and act accordingly. Is there an understanding of the necessity to act, and a willingness to change? People are fundamentally different in this regard, especially concerning this complex topic, about which many have only a rudimentary understanding. Many managers do not have diversity seriously on their radar. And why should they, when growth and profit are still the dominant performance metrics? Moreover, the topic is neglected during university and professional education. When a shift in thinking does occur—against the mainstream of traditional management theory—it is highly likely to provoke corresponding counter-forces. We all know how difficult it is to sustainably change established corporate cultures. Diversity always requires a change in leadership and corporate culture.
Since diversity issues are closely and directly interwoven with a country's political, social, and economic developments, I believe these challenges can fundamentally only be solved on these broader, macro levels. There are many institutions and organizations driving this change, as the Scandinavian role models demonstrate very impressively. The question is how this will remain possible in the future, given the polarization of our society and its reflection in the political landscape. This touches upon the debate over fundamental rights to participation and the basic values of living together.
Can industry-specific differences be observed, for example, regarding women and careers?
Prof. Finckh: Yes, the situation in banks and management consultancies is truly astonishing.
Despite a balanced gender ratio in the financial sector—with women making up 52% of total employment—the proportion of women in second-tier management (just below the executive board) stands at only 21%, compared to 40% across all other industries. Specifically, these figures translate to a 2.7-fold disadvantage for women in reaching higher management positions. Consequently, no other sector has such low female representation in leadership positions as the financial and banking sector.
We tried to identify the deeper reasons for this. In banking, we concluded that this has developed historically and is part of the industry's DNA. It is dominated by a male-centric leadership culture and strong male networks utilizing an informal "crown prince" succession model, coupled with a highly pronounced face-time culture. Nevertheless, I regularly meet ambitious women in financial services who assert themselves very well in these companies. However, they are still in a critical minority, and I often wonder how well they can sustain this on an individual level.
Another hypothesis is that it is fundamentally tied to finances and women/families. In my view, the larger issue here is the financial situation—and perhaps financial independence—of women over their life cycle, viewed across different lifestyles. For example, when studying work-life compatibility and the gender pay gap, we should analyze the family as the subject of research rather than the individual woman in family structures.
How do you evaluate the development within management consulting firms?
Prof. Finckh: First, to look at a few sobering facts: A 2014 study of large consulting firms with over €10 million in revenue showed that while the share of female consultants was still at 33%, the share of female partners was a mere 4%. No positive trend is visible. In a term paper, our students took a closer look at six very successful management consultancies with revenues between €190 million and €600 million. The results are startling: the share of female partners ranges from 0% to 10%, with an average of around 5%.
Two questions arise: first, why is this the case, and second, what are the consequences? In management consultancies, all the typical obstacles that generally keep women from top positions certainly apply—but in an intensified form.
Furthermore, a student survey showed that 52% of male students but only 28% of female students can envision becoming a partner at a German consulting firm. In contrast, 84% of male and 67% of female students can envision becoming a leader in a company in another industry. This clearly highlights the relatively lower attractiveness of consultancy partnerships compared to other leadership roles from the students' perspective. Female students rate both their chances of becoming a partner in a consultancy and their chances of holding a leadership position lower than their male peers. Here, universities need to take action regarding the mindset of students.
Which aspects are therefore particularly important?
Prof. Finckh: I wonder, for example, whether management consultancies can really afford to ignore female talent at all levels.
Diversity is a decisive criterion for Millennials when assessing the attractiveness of a company. While major consulting firms like McKinsey, Boston Consulting Group, and Bain & Company historically topped the list of most popular employers for business students in Germany, they have now been replaced at the top by automotive manufacturers and tech companies like Google, Apple, and Amazon.
At the same time, major management consultancies score poorly in diversity rankings based on employee surveys. In the Financial Times "Diversity Leaders" ranking, only three management consultancies were among the top 100 out of 600 European companies evaluated. The majority of consulting firms ranked near the bottom.
From a financial perspective, the high growth rates and profits of recent years seem to suggest they can afford it. But if representing and living diversity is not financially necessary for consulting firms, I wonder what the broader implications are. I think it is worth discussing how consultancies can genuinely support other companies in their efforts to anchor diversity if they do not have it in their own repertoire, and if it is not lived or experienced within their own organization. How can that work? I consider management consultancies that do not have diversity—as well as other aspects of sustainability—on their radar to be outdated. Shouldn't consultancies be modern pioneers in this area?
How can job applicants recognize how seriously a potential employer treats the topic of diversity?
Prof. Finckh: First of all, it depends on how important this topic actually is to the applicant. Is their employability high enough to make demands? What does the job market look like in general? A study of our students showed that diversity actually plays only a subordinate role for graduates when choosing their first entry-level job. This certainly changes later on.
Awareness of this issue only truly begins after a few years on the job. Graduates only have a limited view of the challenges and assume they won't be affected. If they are already more reflective, we see different ways of dealing with the issue: they might avoid industries, companies, and roles known for not promoting women. Some scale back their career goals beforehand because they do not believe work-family compatibility is possible. A willingness to challenge existing conditions and imagine changing them is rarely seen. This is, however, not surprising.
To find out whether a company actually supports women, actively combats homophobia, or approaches people with migratory backgrounds without bias, the only thing that helps is to listen closely and research on social networks if you don't know anyone inside the company. Obvious indicators—such as the share of women in top management, the number of diversity measures, or certificates—are only of limited value. It stands and falls with the lived practice of managers. If you have to demand basic standards first, it's already difficult. As a female applicant, I would ask directly about the options for reconciling family and career. Why wait until you are already on the job?
Where do you see the greatest diversity potential in companies over the coming decade, and with it, a further reduction of societal bias?
Prof. Finckh: I ask myself three questions about the future:
First, what do we need to master our political, social, and economic change processes in the coming years?
Second, how do we manage the signs of erosion (political landscape, world trade, environment, social tensions, etc.)?
Third, what do we need for this?
We have to challenge traditional diversity concepts and ask ourselves what is required right now. Surely, we need people with different perspectives and shared values working together.
In new collaborative networks, the question is not what gender or nationality you are. The question is: What contribution can and do you want to make to improve the world? Together with people who share this vision for change, we can then tackle the issues. In other words, diversity must be reinvented on a higher level to truly work for the benefit of our world.
Thank you very much for this interview, Professor Finckh.