The Search & Recruitment Industry – Solution or Problem?

by | Jul 11, 2019 | Diversity recruitment, Organisations, The Inclusion

 

 

With the ONS ethnicity pay gap data front of mind, we investigate the ability of the Search and Recruitment industries to help businesses recruit ethnically diverse candidates.

What’s the problem with search & recruitment?

Almost all leading FTSE businesses declare a desire to become more ethnically diverse. Yet both at a leadership level (Search) and more generally (Recruitment) things don’t seem to be moving forward.

Source: Report into Ethnic Diversity of UK Boards recommends FTSE 100s go “Beyond One by ‘21, EY.

The search industry

It’s almost two years on from the much-heralded Parker Review, in which a central recommendation was that “Each FTSE 100 Board should have at least one director of colour by 2021, and each FTSE 250 Board should have at least one director of colour by 2024.” 

But progress seems to be going backwards. Anthony Simpson, Head of Media Practice at Global Exec Search firm, Savannah Group, states “There’s no chance the goals set in the Parker Report will happen within their timeframes.”

Regular Inclusion contributor Patricia Hamzahee expressed her frustration like this. “Nothing has moved forward since the Parker Review. Headhunters aren’t speaking to any of the top black business leaders I know, so who are they speaking to?”

Where does the problem lie? Is there simply a lack of diverse talent ready to take on leadership roles?

The Parker Review again. “One of the common refrains … is that “there are not enough capable and qualified candidates”. We do not believe that such a conclusion is accurate. Such assumptions are outdated.”. There have been several reports published (incl. Green Park’s) that highlighted hundreds of high-calibre, “Board-ready” candidates.

Hamzahee expands further “The Search sector isn’t even at the stage where they’re trying to understand how to change. I was at an event recently designed to address Black representation on FTSE Boards. The Search firm who organised the event, didn’t even bother to ask those present, who were the cream of black business leaders, the UK diversity brain-bank, about the challenges they face or the potential solutions. But instead, suggested they “polish up their CV’s”. How about that for losing a room?”

Table: A selection of the overall representation of Directors of the colour of the FTSE 100, end of July 2017 as reported in the Parker Review.

Company Number of directors Ethnic Minority Directors
BT 13 0
Lloyds Banking Group 12 0
Legal & General 10 0
Whitbread 10 0
BAE Systems 9 0
Rentokill 9 0
EasyJet 9 0
Informa 9 0
Royal Mail 8 0
Hargreaves Lansdown 7 0

 

Why is the change in search needed?

Some highlights from the McKinsey ‘Why Diversity Matters’ report. 

“In the US, for every 10% increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes (EBIT) rise 0.8%. Also, companies in the top quartile for racial and ethnic diversity are 35% more likely to have financial returns above their respective national industry medians.”

The Parker Report also sets out the commercial opportunity: “The FTSE 100 derives more than 75% of its sales from outside the UK. Between 2015-2050, one-half of the world’s population growth will be concentrated in nine countries, five of which are in Africa and three in Asia.” And with estimated lost revenue of £48B due to lack of languages, it seems an obvious commercial case.

Yet “UK directors of colour represent only 2% of directors in FTSE boardrooms. 51 out of the FTSE 100 companies do not have any directors of colour. Only six people of colour hold the position of Chair or CEO as of end-July 2017.” 

Why isn’t the situation changing?

Two reasons: 

Access: To be effective at Search you need to have built a network, which takes time. Search firms in the UK are almost entirely run or owned by privately educated white people. Unless they started investing in building a diverse network some time ago, they just won’t have diversity in their network. Expecting them to find diverse candidates is unrealistic. 

How Businesses choose their Search Partner: The search process can last a long time and involves a close working partnership between client and search partners. Understandably businesses will choose search partners they feel comfortable with and who ‘get’ their culture. Which often leads them to choose people who are like them to conduct their Search Briefs. Those people are unlikely to have diverse networks. 

 

The Recruitment Industry 

Businesses say they want talent with an entrepreneurial spirit, learning agility, resilience, proactiveness and creativity – qualities perceived to be lacking in traditional talent pools these days. Yet these qualities are found in abundance in diverse, state-educated communities. So why does BAME talent struggle to get into great early years’ roles? 

 

Why isn’t recruitment changing? 

Recruitment is mostly a high volume, low margin, process-driven business that is pressurised and target driven. Recruiters, therefore, tend to present what they think the client wants.

The recruitment model rewards those who present clients with candidates who ‘fit’ the brief. But the really successful recruiters present clients with candidates who fit the brief AND fit the culture. If clients are not demanding change and crucially, when presented with different candidates do not hire them, because they don’t ‘fit’, there is no incentive to change. 

We spoke to recruitment specialist, Richard Tyrie, Founder, and CEO of GoodPeople on the subject.

“The model is broken and will remain so until the incentives change. It’s only rational for a commercial organisation to put forward the most likely applicant to get hired. Biases exist in the employer as well as the recruiter. Unless the client starts to be more proactive about embracing the benefits of difference not much will change.” 

 

What’s the solution?

People claim that tech will be the solution. And no doubt it represents the future.  But with AI in the press recently for built-in bias, tech promises much but may not hold all the answers. 

In our opinion, it starts with the client. There are already lots of examples of good practice, such as being explicit about your expectations on the diversity of candidates on shortlists; setting incentives or penalties if those aren’t met; interview panel coaching and training; ensuring diverse panels and exposing decision-makers to diverse talent outside of the formal processes etc. 

However, all this the explicit positive work will be undermined by the ‘Culture Fit’ if not overtly dealt with. The important idea here is this.

Businesses have to become more comfortable with the much-needed benefits that different sorts of talent bring over the discomfort caused by their lack of cultural fit. Or as Hamzahee pointed out in her previous article, ‘cultural add’.

The danger of hiring for cultural fit is that search and recruitment tend to find people who will ’fit in’ but not necessarily talent who will drive the business forward or have cultural impact. E.G. Do they really want to hire a brilliant tech-savvy Somali graduate, or will they be too uncomfortable working around his afternoon prayer needs and his lack of polish/London accent etc.

Solution: Cultural add over cultural fit

Businesses could recruit for ‘values fit’ or ‘cultural add’ over ‘cultural fit’.

The great thing about ‘values fit’ is that it is more inclusive and significantly widens the net of interesting and different sorts of talent. Talent that could both fit the explicit and declared values of the organisation, but also help drive and prepare the organisation for a different future.

Move forward with your diversity recruitment strategy

Send this now to your HR teams and decision makers. We work in partnership with top firms to attract and progress the best diverse talent. 

Did you enjoy the read?

Sign up for our newsletter below to get our monthly insights email The Inclusion.