By Richard Reeves Friday, 30 August 2013

Worth not Birth: Why the workplace is going backwards in class equality

Many firms pat themselves on the back for their diversity policies. In fact, social mobility is in steady decline in Britain - and it's stifling our competitiveness.

Sometime during 2009, when I was running the think-tank Demos, I received an email request from a distant professional contact. Could I take on somebody as a summer intern? (It was somebody she was very close to.)

I replied - politely - that the young person in question should apply through the usual competitive intern selection process and expect no special treatment. That person did not and I never heard from my contact again. Her name was Cherie Blair.

I don't blame her for asking. We all do it, all the time. 'It's not what you know, it's who you know', after all. And if Demos hadn't been so fiercely egalitarian on this front, I may well have said yes.

Countless sons and daughters of clients, funders or patrons are awarded valuable opportunities for work experience, internships or paid work.

By some estimates, half of all jobs are filled on the grapevine. Many firms offer a bonus to someone who brings in a new employee. So why does this matter?

The problem is that the natural, commendable desire to help out kith and kin can tilt the playing field to a dizzying angle in favour of those who already have all the advantages of class, schooling and money.

This is bad news for one of the main priorities of the Government - and especially (my old boss) Nick Clegg: addressing the UK's dire performance in terms of social mobility. But it might be bad news for business, too, if it means that human capital is not being deployed optimally.

James Caan, of Dragons' Den fame, personifies this tension. Immediately after being appointed a social mobility 'tsar', Caan instructed parents to let their children stand on their own two feet in the world. All very well, but it turned out that he had directly employed at least two of his own offspring. Cue Fleet Street's favourite story: the hypocrite politico.

Whatever his shortcomings as a part-time politician, Caan knows a thing or two about making money. And his comments acknowledged an important, hard truth, which businesses are waking up to, slowly but surely. If they run a PLU (people like us) strategy when it comes to talent, they will not only be cementing social inequality, they risk blunting their own competitive edge.

Because, contrary to exaggerated reports, class is not dead. One hundred and sixty-five years after The Communist Manifesto first rolled off the presses, class rhetoric has resurged in British politics.

And it's within the Conservative party that class war is raging most violently. In the wake of the death of Margaret Thatcher, the state-educated grocer's daughter, David Cameron is being assaulted by the upwardly mobile ranks of his own party for being posh and out of touch. John Major's hopes for a 'classless society', inherited by Tony Blair, seem quaint.

The economic destruction of 2008 and consequent austerity have put issues of class back on the political map. The gap between what one wag labelled the 'have-nots and the have-yachts' is more painful when, for the average worker, just treading water for a decade will represent great success.

Class is also rising up the business agenda. After decades of promoting diversity in terms of sex, race and (latterly) sexuality, many firms are coming to realise that accommodating people of different class backgrounds may be more important, and more difficult.

To be blunt: it is perfectly possible to look 'diverse' by hiring and promoting, in sufficient numbers, posh women, posh ethnic minorities, and posh gay men and lesbians. All of which is better, for sure, than a monopoly of posh straight white men. But the standard diversity agenda misses the more subtle inequalities of class background.

Trevor Phillips, former chair of the Equality and Human Rights Commission, believes firms need to take a deeper view of diversity.

'In essence, there's no advantage, other than a cosmetic one, of getting non-white folk in who think and behave exactly the same as everybody else around the table,' he says. 'So working harder to establish difference of background - particularly by family income or status and geography - is a great plus for leadership.'

While there has been some progress on gender and race - not enough, but some - the class story is going backwards. The allocation of the best university places, best graduate jobs and best promotions to a narrow section of the class structure is a quiet crisis. And we can't afford it.

The new economy is supposed to be open, fluid, meritocratic. Over time, the markers of class - the right accent, the right college, the right handshake - were supposed to be replaced by a market that rewarded raw ability, not surface gloss.

But it hasn't worked out like that. As the economy has shifted steadily towards the provision of services, the markers of social class have become, if anything, more important.

Grammar schools, like Manchester Grammar School (pictured), have been seen as ladders out of the working class into the professional classes

Grammar schools, like Manchester Grammar School (pictured), have been seen as ladders out of the working class into the professional classes.


Lindsay Macmillan of Bristol University has studied the careers of people born respectively in 1958 and 1970 (see upper graph). She finds that professionals - lawyers, doctors - were from richer families in the later cohort. For example, a future lawyer born in 1958 was raised in a family with an income 40% above the average. For the 1970 lawyers-to-be, the gap was 65%.

Of course what matters - or should matter - is not how posh solicitors or doctors are but how clever they are. But Macmillan has bad news there. IQ tests conducted at the start of secondary school show that, relative to the average, almost every profession was being filled with less bright people.

Her conclusion: 'The top professions are increasingly being filled by individuals who look less different from the average in terms of ability and more different from the average in terms of family income.'

In England, at least, grammar schools have been seen as ladders out of the working class into the professional classes. And, anecdotally, almost everyone can think of a 'grammar school boy' (it is usually a boy) who has made it to the higher echelons of business, politics or journalism.

There's some indirect support for this view. The 1970 cohort, most of whom went to comprehensive schools, had slightly lower upwards mobility rates than the group born in 1958 - the last grammar generation.

The main reasons for the drop in mobility were an increase in the class gap in exam results at 16 and in the chances of going on to higher education.

What we can't tell is whether the benefits of grammar school for the small number of lower-income kids who went to one are outweighed by the downsides of lumping all the rest of their cohort into less academic schools.

It may be that the inequalities of class turn out to be more stubborn than those of skin colour, sex or sexuality. As a rule, the Brits are a fairly socially liberal bunch. We do not suffer the racism of the US or the sexism of Mitteleuropa.

So long as people are of the 'right sort', we are likely to overlook their ethnicity or sex. But, from a business perspective, it is more important to have more diversity in terms of social class, if that is the way to ensure the brightest and best.

Back in 1975, US economist Arthur Okun famously posed a 'Big Trade-off' between efficiency and equality. Okun's presumption was that actions to promote greater equality - higher taxes, more redistribution, more state intervention in business - would lower productivity and competitiveness.

But if fairness means social mobility - if the equality we are talking about is equality of opportunity - then the trade-off may not be so big after all.

Efficiency is served by those with the greatest ability doing the most complex and important jobs. Equality is served by everyone, regardless of background, having a fair shot at getting those jobs.

If that's right, social mobility is not a sub-category of social responsibility. It is a core business imperative. Hire the best, promote on the basis of merit, win in the marketplace.

This is what the 'war for talent' should be about. Unfortunately, it isn't working out that way. Louise Ashley, lecturer in human resources management at Kent University Business School, believes that 'talent' is becoming a codeword for PLUs, rather than an objective measure of merit.

'The "war for talent" is an artificial construct that enables knowledge-intensive firms to perpetuate an appropriate image of exclusivity,' Ashley says, adding: 'This has a negative impact on social mobility.'

Ashley and her colleague Laura Empson have spent the past few years studying professional services firms in particular. Their research suggests that 'homology' - to you and me, hiring people in your own image - is a response to apparent market pressure to present well.

Ashley and Empson conclude their latest study, on the legal profession, in stark terms: 'Leading law firms seek to project a "high-class" image by appointing graduates with the requisite forms of social, human, cultural and reputational capital.

Many less privileged people are unable to access some or all of these forms of capital and as a result are excluded from the profession, no matter how great their intellect.'

The trouble is that in many jobs it is actually quite hard to discern how good somebody really is. This may be particularly true towards the top. Most of us can see how well somebody can garden or wash a car.

It's much harder to truly evaluate the skills of an accountant or lawyer. Ashley and Empson refer to the 'ambiguity of knowledge' around senior roles. In other words, you can bluff quite a long way.

The top end of the corporate pyramid, in this analysis, is like a reality version of Catch Me If You Can, Steven Spielberg's film about a teenage confidence trickster.

Ashley and Empson are fond of one of La Rochefoucauld's maxims dating back to 1633: 'The world oftener rewards the appearance of merit than merit itself.'

Harry Enfield made much the same point with his 'Tim nice but dim' character: somebody with an expensive education and honed manners, but not much going on upstairs. Dim Tims are to be found across all kinds of organisations, in all sectors: a standing affront to any ideal of meritocracy.

So what's to be done? Just as with alcoholism, the first stage is admitting the problem. Managers need to look hard at the assumptions in their recruitment and promotion strategies.

Is there an in-built class bias? Robert W Fuller, former physicist and university president, has pioneered the study of 'rankism' - discrimination based on position in a social or economic hierarchy. Try this: My name is X and I'm a rankaholic.

Step two is to incorporate social class into standard HR tracking procedures. The UK civil service, prodded by activists within the Government, is now doing so. Just as most forms include information on race and gender, they should try to capture social background. There's no need to make this too complicated: finding out whether or not an individual's parents went to university is a good enough proxy.

The third step is to start sharing data on class diversity in annual reports. Corporate reporting has evolved to include a rich seam of social responsibility data, including information on, for example, gender and ethnic diversity. Firms must keep reporting on these dimensions - class does not 'trump' race or sex - but should capture class too.

Fourth, change your policies on informal access to opportunities for internships and work experience. Again, the civil service is providing a lead here. One of the offshoots of the Government's social mobility drive has been the creation of a voluntary Social Compact, already signed by more than 150 firms. Signatories promise to recruit fairly and openly, to support local schools and communities, and allocate other opportunities fairly. Specifically, the compact states that firms will 'advertise work experience opportunities in local schools rather than filling them through informal networks; and offer internships openly and transparently and provide financial support to ensure fair access'.

Fifth, and finally, companies interested in raw talent rather than polished mediocrity will work hard to maintain their internal labour markets: real internal competition for the best jobs, and a ladder with rungs from the bottom to the top. One of the unexpected downsides of the expansion of higher education is that 'graduate' is now used as a simple, binary selection criterion - whether the job requires graduate skills or not. Career success has become more like the high jump - get a degree and you're OK - than hurdles, with more chances to succeed or fail.

Since the UK's universities have been overrun by the sons and daughters of the middle class, a vicious circle has been generated. College equals posh. Post equals talented. So only graduates need apply. Then the poshest firms simply recruit from the poshest universities.

Too many firms in effect operate as caste systems. Graduates on track to become partners; paralegals and associates doing all the real work; and administrators and receptionists keeping the machine purring.

In many of these quasi-feudal cultures, the idea that a receptionist could work her way up to the boardroom would be treated with incredulity. This is one area where grittier service firms are more enlightened.

One of the attractions of McDonald's or Starbucks is that employees have a genuine opportunity to get trained, work hard, get better, and get promoted. It is not stretching credulity too far to wonder if this is one factor behind their success.

Becoming fairer and more open should not become a new, onerous box-ticking procedure. The five rules of fairness outlined above ought to be sufficient, so long as they are undertaken in good faith. Meritocracy should not equal bureaucracy.

But companies should see themselves as engines of mobility as well as enterprise. Indeed, they'll need to if they are to succeed.

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