Diverse workforce pays dividends
LOS ANGELES — Hiring a diverse workforce isn’t just the right thing to do, it’s good for business, according to panelists at the Bond Buyer’s Public Finance conference.
There is a growing body of work that proves that greater diversity in the workforce delivers better business performance and better results for clients, said Katherine Koster, managing director at Piper Jaffray & Co.
“There is a penalty for opting out,” said Koster, who co-chairs Piper’s Diversity and Inclusion Panel. "Companies in the bottom quartile for both gender and ethnic/cultural diversity were 29% less likely to achieve above-average profitability than were all other companies in the data set."
Companies in the top quartile for gender diversity on the executive teams were 21% more likely to outperform on profitability, 27% more likely to outperform on profitability, and 27% more likely to have superior value creation, according to Koster’s presentation.
Just having women working at the company is not enough, however, to affect the bottom line. To gain the greatest impact, women need to be in positions of power and in revenue-generating roles.
“The highest-performing companies on both profitability and diversity had more women in line (i.e. revenue generating) roles than in staff roles on their executive teams,” Koster said.
And it’s not just gender — the same could be said for ethnic and cultural diversity.
Companies in the top-quartile for ethnic/cultural diversity on executive teams were 33% more likely to have industry-leading profitability.
“That this relationship exists strongly suggests that inclusion of highly diverse individuals — and the myriad ways in which diversity exists beyond gender — can be a key differentiator among companies.
"We are discussing diversity here — but it is on the very last day, in the very last hour, at other Bond Buyer conferences, they aren’t even talking about it," said Gary Hall, chair of the board of directors of the Municipal Securities Rulemaking Board. "Bulge bracket firms see decreasing amounts of minorities and women."
Hall is also a senior managing director and national head of investment banking and an equity partner at Siebert Cisneros Shank & Co. LLC.
Though Harriet Welch, a partner with Squire Patton Boggs LLC, is seeing more women in the workforce than when she graduated from law school, said she is not seeing the advancements to partner that she would have expected by now.
"You may be able to show overall there are a lot of women and minorities in firms, but you start to look at the numbers moving up the ladder, the power imbalance hasn’t reflected true diversity of the population," Welch said.
Promoting women and people of ethnic and cultural diversity increases the likelihood that other people more reflective of a diverse workforce will want to work for the company, Koster said.
"We have a three- or four-member hiring panel — there is always a woman on that panel and a woman of color on the panel," said Teveia Barnes, executive director of the California Infrastructure and Economic Development Bank.
I-Bank has a diverse team — including in management — Teveia is African-American and Jewish and she is not the only person of color in management at the government agency.
"Some folks came to IBank because they knew the management team was diverse," Barnes said.
Natalie Brill, debt manager for the City of Los Angeles, said her office is very diverse among both department heads and employees.
"It has to be at the first level," Brill said. "You can't create a diverse office if you are not opening the door at the top level."
Panelists not only discussed diversities within their own offices, but efforts by California governments to include minority-owned businesses in bond deals.
Brill said when she was first named debt manager, more than a decade ago, the only firms Los Angeles dealt with were the bulge-bracket firms.
"And I said why not bring in a small amount of diverse firms," Brill said. "They can’t grow in experience, so that they can handle a large deal, if they aren't in the room. It’s not just being in the room, but being able to have the opportunity to move to the next level."
Brill said they create those opportunities by having co-broker-dealers and co-bond counsel on the city's bond sales.