Overcoming tribal challenges
The LSE’s new Inclusion Institute
The most successful species on this planet revels in the comfort of conformity. Just think of the boost and subsequent bonhomie that comes from a ‘successful’ meeting where everyone agrees. Yet with instability as the defining condition of our times, executives must evolve to become comfortable with discomfort.
Who, in the City, would hire someone who had failed a Maths O level? Twice. Yet that is the case of Sir Robert Stheeman, one of the most successful and trusted CEOs of the Debt Management Office, which is responsible for issuing UK government debt. It didn’t seem to affect the £2 trillion – give or take a few billion – that he has issued over 17 years in the job.
He is not alone in believing that a contributory factor in the 2008 financial crisis was the increased conformity in the hiring of talent. ECB President Christine Lagarde famously quipped that if Lehman Brothers had been Lehman Sisters the crisis would have looked quite different. Studies from business consultants like McKinsey and respected academic institutions like Harvard Business School conclude that better business decisions result from more diverse and inclusive companies.
And yet how laborious and demanding it is to create this change. The overarching reason is biology. Humans are wired to align individual with group interest, to achieve hyper-sociality, in the words of Mark Pagel, head of the Evolution Laboratory at the University of Reading. Arguably as powerful as the Darwinian natural selection gene is culture, “that software collection of ideas, routines, rituals and behaviours written into our brains – it is the most successful way there has ever been of making more people.”
We are programmed to accept and celebrate the culture of our birth, our tribe, even though it is an arbitrary accident – not to mention the resilience of culturally defined emotions which range from healthy nationalism to xenophobia and racism, notes Pagel.
It is no coincidence that Ursula von der Leyen mentioned Winston Churchill, Soho bars and her discovery of the British sense of humour in the first speech she gave on British ground this year. Titled “Old friends, new beginnings: building another future for the EU-UK partnership,” the EU Commission President reminisced about her time as a student at the London School of Economics, suffusing the room in the warm glow of cultural unity, before delivering the harsh message that “the more divergence there is, the more distant the partnership has to be.”
So how to achieve the cognitive diversity that is necessary to deliver better company returns in a transformed digital marketplace? It is most likely to occur when you mix gender, generation, ethnicity and sexual orientation on boards and teams, and ensure they feel accepted, or included, and thus able to speak up. An uncomfortable meeting is more likely to deliver innovation.
The Financial Services Skills Taskforce report which was published at the end of January was damning of the City’s talent recruitment and retention. Mark Hoban, a former City Minister who chairs the FSST, put it bluntly: “There is no doubt that the financial services sector is facing an existential skills crisis.”
Alarmingly for a sector that depends on talent and innovation, it has the third lowest training spend per employee and the second lowest spend per trainee compared to other sectors of the economy. Meanwhile, fewer than 40% of students associate creativity and a dynamic work environment with working in banks, but highly value these in any future employer.
The demand for talent already exceeds supply and this trend is set to become more acute. “The lack of gender and ethnic diversity is both a social issue and a skills issue. Talent that the industry needs is not being utilised,” argues the independent review commissioned by HM Treasury.
A number of firms are working hard at changing this. Charles Martin, Senior Partner at City law firm Macfarlanes, is clear about the value of hiring a more diverse workforce. “Firstly, it feels right. It doesn’t feel sustainable to work in a market where we don’t look like our clients or the world around us. Secondly, more diversity makes for more balanced decisions and less group think. Thirdly, we need to have the best people working for us. If we are failing in diversity, we will fail in business terms.”
MI5 plans to hire 50% more behavioural scientists in 2020 to help it analyse the vast amounts of online data generated by terror suspects. Marrying psychology and the increasing amounts of data available on diversity and inclusion is just as relevant for City firms.
These are the reasons why, with Associate Professor Grace Lordan, I am co-founding The Inclusion Initiative institute at the London School of Economics. In association with some of the most advanced City institutions we seek to merge data and behavioural science to help change culture for future success.
The City is responsible for well over 10% of the UK’s tax revenues and continues to be one of the global go-to centres for finance. With just a bit of hyperbole, Byron’s lines about the importance of the Coliseum to Rome come to mind: “When falls the City, London shall fall; And when London falls - the World.”
Can I take the opportunity to invite you on the 5th of March at 6pm to come to the LSE and join me for the launch of the Inclusion in the City report, which I am co-authoring with Dr Grace Lordan. This will be a panel discussion event, chaired by Dame Minouche Shafik, and feature four senior leaders from the City of London giving reactions to the messages in the report.
The 5th of March event is ticketed and part of the LSE Festival. This year's Festival will bring together global leaders, innovators and change makers to investigate how we can learn lessons from the past, tackle the challenges of today and shape the future. You can get a free ticket online now by following this link.
It is also the night The Inclusion Initiative will be announced, a new institute at the LSE which I am co-founding. It will bring behavioural science insights to the City of London in partnership with City firms. Do get in touch if your company might be interested in exploring working together. Here is the pamphlet.