Earlier this year Baroness McGregor-Smith conducted a review of issues faced by businesses in developing black and minority ethnic (BME) talent. The CIPD responded to the review, drawing on the knowledge and experience of senior HR professionals.

What are the advantages of having an ethnically diverse workforce?

One of the largest garages of a global car-rental company was based opposite a mosque in a town in the North of England. Customers that had rented a car for the weekend would typically pick them up on a Friday afternoon, which coincided with Friday prayers at the mosque. The clash created a huge amount of traffic in the local area.

Employees at the garage suggested to the company’s managers that customers with weekend bookings collect cars on Thursday instead, at no extra cost. With many more free spaces in the car park, they also decided to open it up to those attending Friday prayers in the mosque.

The idea was trialled, and it was a success. The company saw a rise in sales among the local Muslim community, and as its reputation improved, it also became a more attractive employer to the community too.

Being aware of the different needs and priorities of different groups of people can be hugely beneficial to business. And one of the best ways to achieve that is by having an ethnically diverse workforce because it instils diversity of thinking, where the workforce has a broader perspective and is open to different opinions. It also leads to diversity of behaviour, where employees with different personalities and cultural backgrounds work in different ways, which can improve decision making.

Diversity of thinking and of behaviour gives organisations and its leadership access to fresh insights and perspectives to operational activities; product and service design, and can help them to improve their competitiveness and delivery to customers and clients.

In the private sector, having an ethnically diverse workforce means an organisation can better connect with a larger customer base, spot new market opportunities, and develop more tailored goods and services. In the public sector, it means that new policies and programmes and reviews of existing ones undergo more intensive scrutiny and can take into account the impact on different parts of the population.

Building a diverse workforce can also boost productivity. EY have conducted internal research looking at 22,000 audit assignments and can show a direct link between productivity and level of diversity within a team. The research looked at gender diversity because of the difficulties in measuring ethnic diversity across global teams, but there is strong reason to believe that the outcome would be similar. Other benefits deriving from diversity include stronger links with the community, enhancing innovation and R&D and improving marketing.

However, if diversity is not well-managed, there can also be negative consequences. Organisations can avoid that by putting in place robust leadership that can manage the transition from a homogenous workforce to a heterogeneous one in a sensitive and controlled manner. High quality leadership and management hold the key to unlocking the potential offered by diverse team.

Obstacles to BME progression

The headline employment figures published by ONS mask deep, concentrated pockets of unemployment and economic inactivity. The employment rate gap between the overall population and ethnic minorities was 11.1 percentage points in 2015. Even within that group, you can find a more nuanced picture; unemployment varied from 14% for the black group to 6.4% for the Indian group. Pakistani and Bangladeshi women have inactivity rates of 57.2% compared with 19.9% for the men for the same ethnicity. We also know that representation of BME talent at the top of organisations is very low: 98% of FTSE 100 chairs are white and 96% of the chief executives are also white.

There is clearly more that can be done to engage more and more people from these communities in the world of work and to ensure that they can have rewarding careers. But what are some of the barriers these groups face?

One of the major obstacles to BME individuals accessing jobs that match their skills and progressing as far and as quickly as their white counterparts is discrimination and unconscious bias. In August 2015, the CIPD released a comprehensive piece of research showing that recruitment processes are often heavily skewed by a number of unconscious biases on the part of those hiring. The report showed that employers’ initial perceptions of whether a person will be a good fit can be determined by factors which have no real impact on performance, including visual, cultural, demographic and situational factors. For example, evidence suggests that we hire ‘mini-me’s – people like ourselves in terms of hobbies, experiences and how we dress and present ourselves at interview.

Lack of social or professional networks can reduce the number of opportunities for employment and progression for BME talent. If you are an ethnic minority, your network is, by definition, smaller and more limited. Similarly, a lack of role models can inhibit the professional development of BME talent. Unless a group of people get to see people like them at the top of organisations, there is less belief among that group that it is achievable. This is known as stereotype threat – reminding an individual that they are a member of a group that tends to perform less well at something can impair their performance in that task or vice versa.

The role for government and businesses

That business has a significant role to play in supporting the progression of BME employees in work is without question. Organisations should revisit their values, purpose and culture to ensure they are inclusive, meritocratic, fair and representative of the communities they serve. Employers should spend more time understanding the business case properly, lead on the agenda, and then deliver. They should also measure progress along the way so they can see which interventions and policies work best, and share that information with others.

For larger organisations that have well-resourced HR departments making progress on this agenda will be easier. However, to see a greater change in the labour market, we also need the huge number of smaller organisations in the UK to understand the benefits of having an ethnically diverse workforce and to have access to support so they can take action. To some extent that help can be provided by government in the way of guidance and advice. Prime organisations can also use their supply chain links to spread best practice, as can industry bodies through their membership.

Government should first and foremost lead by example in the way it recruits and progresses BME talent within the Civil Service, and through public procurement and contract management. It can also use its voice and power to convene employers to highlight best practice.

A number of the senior HR professionals we spoke to agreed that the Davies review was a successful model for how government can engage with business and make significant progress through the use of targets. Although the suggestion did come with a precaution that in setting a target, government should take into consideration the size of the BME talent pool in the UK.

Read the full CIPD response to the McGregor-Smith review.

By Sara Mosavi