Why Diversity Is More Important Than Meritocracy: Quotas, Talent, Wall Street | Sallie Krawcheck

TL;DR

Middle management is where diversity often fails to thrive, despite CEOs and boards recognizing its importance for financial results and reaching different customer bases.

Transcript

In my experience, most CEOs and boards “get” the power of diversity. There may be some who are giving it lip service still out there but in my travels these individuals understand that not only is it the fair thing to do, and it’s really the tenet upon which our country was built, but it’s really the smart thing to do.Financial results, reaching di... Read More

Key Insights

• 🖕 CEOs and boards generally understand and value the power of diversity, while middle management often resists it.
• 🖕 Diversity is worse in meritocratic environments, where middle managers have limited hiring opportunities.
• 🖕 Overvaluing familiarity and existing products hinders diversity efforts in middle management.
• 🥅 CEOs should prioritize diversity by implementing metrics, quotas, goals, and sponsorship programs.
• 🖤 Lack of diversity in Wall Street contributed to the severity of the financial crisis.
• 😤 Homogenous teams tend to misprice markets, and testosterone influences trading risk.
• 🖤 The Trump administration's lack of diversity may contribute to inefficiency and missteps.

Questions & Answers

Q: Why is diversity often lacking in middle management?

Middle management has limited opportunities to hire and tend to prefer working with people like themselves, avoiding the discomfort of true diversity.

Q: How can companies overcome the lack of diversity in middle management?

CEOs should override meritocracy and implement metrics, quotas, and goals to drive diversity. The tired mentoring program should be transformed into a sponsorship program.

Q: Is the lack of diversity a pipeline or talent issue?

No, there are plenty of talented women and individuals with diverse perspectives available. The issue lies with organizations working against diversity.

Q: How does diversity impact financial crisis risk?

Homogenous teams tend to over-trust each other, leading to mispricing in markets. Additionally, trading risk is driven by testosterone, which is less present in women.

Summary & Key Takeaways

• CEOs and boards understand the importance of diversity in terms of fairness, business success, and reaching different customer bases.

• Middle management tends to resist diversity due to a preference for familiarity and overvaluing existing products and environments.

• Diversity is worse in meritocracies, where middle managers have limited opportunities to hire and tend to retreat to their comfort zones.