The unintended consequences of your redundancy plan

Hasty decisions risk undermining long-term diversity and inclusion goals.

by Stephen Jones
Last Updated: 16 Jun 2020

Over the past few years boards have paid increasing heed to the importance of diversity and inclusion in the long-term success of their businesses. But the crisis we now face could undermine those efforts. 

As many as a fifth of firms have made or are planning to make redundancies by the end of July as the government begins to wind down its furlough scheme - and there are strong reasons to think these will disproportionately hit women and minorities.

A widely-referenced Cambridge University study found that women were more likely to have lost their job in the first month of lockdown - 17 per cent reported unemployment compared to 13 per cent of men. At the same time, McKinsey research reveals that, while women and non-white workers were slightly more likely to lose their jobs in the comings months, younger and part-time employees were significantly more at risk.

Some of these differences correspond to the distribution of work - women, for example, are over-represented in hard-hit sectors like retail and tourism, while young people are less likely to be in jobs that allow them to implement home-working.

There is a risk that a lack of diversity among the people making the decisions could exacerbate the problem, however. In the FTSE 350, women hold just over a third of board positions, though a far lower proportion of executive director roles. No fewer than 47 of the FTSE 100 have no BAME representation at executive director level, according to Green Park’s Leadership 10,000 study.

Studies show that when under stress we’re more likely to jump to decisions (especially when they’re goal-orientated), more inclined to revert to gut instinct and less likely to change a decision once it has been made. 

Given the pressure companies are under to make cuts, it’s easy to see how in this context a lack of diversity at the top could allow biases about different groups to seep into those decisions.

The government’s controversial but temporary suspension of gender pay gap reporting will not have helped firms to keep on top of the issue either. 

None of this is to say that board members - particularly of the white, male variety - are bigots. Executive decisions will reflect urgent, short-term business needs, and it’s hard to keep an eye of the horizon when your house is on fire. 

But beware - in the rush to act quickly and decisively now, there is a risk that you inadvertently and avoidably sacrifice long-term goals around inclusivity, access to talent and diverse thinking.

Image credit: RUNSTUDIO via Getty Images


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