The Stupid Curve

By Chloe Drew

The recent announcement that Goldman Sachs and MetLife, two of the largest figures in the business world, will begin to release annual diversity data from late 2012, could have an important impact on women in the corporate community. This decision came at the behest of the New York City Pension Funds, large institutional shareholders of both companies.

Previous attempts to track diversity data were not made available to the public, so past diversity data has done little to create true accountability. Internal data gathering by firms hasn’t provided us a sector-wide picture, and even a recent diversity report commissioned by a financial services trade association was not for public release. Organizations such as the Council of Urban Professionals and others have attempted to capture diversity data, but these results are not comprehensive.

Only when companies publicly report actual diversity figures will their ongoing progress be accurately measured. It should create increased incentive to improve these numbers. Companies become accountable to employees, shareholders, customers and the general public. Yet, only 12 Fortune 500 companies were run by women last year, down from 15 in 2010.

The “stupid curve” – a phrase coined by Mike Cook, former Deloitte USA Chairman– refers to the overrepresentation of men in senior management. Companies waste a significant amount of internal talent by hiring 90 percent of their senior management from just 50 percent of their talent base. When companies track these numbers, the stupid curve reveals itself for what it is.

When diversity improves, the corporate sector will benefit.  Numerous studies have found that firms with senior management and board diversity outperform their competitors for a variety of reasons. Plus, a recent report on women in fund management shows that from January 2000 through May 2009, women who ran hedge funds delivered nearly double the investment performance of their male counterparts.

Reporting on current numbers is only the first step. Once the data has been gathered, the results must be examined closely to determine what is and isn’t working in the areas of retention, leadership training and success planning. Most companies don’t do this adequately. CUP’s cross-sector LEAD program, for example, was developed in response to CUP’s 2010 Financial Services Survey of Wall Street professionals, which indicated a dramatic need for this type of training among women and people of color.

Nearly half of all respondents said their workplace was not providing sufficient leadership development and opportunities for growth. Over 75 percent said they would devote at least 3-4 hours per month to professional development if presented the opportunity. Further research has highlighted the prominent gaps faced by diverse professionals across industries, such as the lack of strategic networks, consistent feedback and sponsorship. The LEAD program was designed to address the unique challenges faced by professionals of color and women in the worlds of finance, business, law, media, entertainment, advertising and consulting.

Reporting, as it has in other sectors such as law, will create a climate of accountability. But we also need to spur the development of more effective and targeted programs that truly enable the development of a more diverse and representative workforce. This is especially significant at the highest levels. Only then will we see true impact on corporate diversity.

Lord Kelvin, a Scottish physicist said, “to measure is to know – if you cannot measure it, you cannot improve it.” Information is power, and transparency around diversity data is the first, most crucial step toward improving the representation of women at decision-making tables.

Chloe Drew is executive director of The Council of Urban Professionals (CUP), a nonprofit, nonpartisan membership organization whose members are leading professionals of color and women from across the finance, law, business, real estate and media and entertainment and digital sectors.