THE REAL REASON DIVERSITY IS LACKING at the TOP by Justin Dean, John Rice, Wallrick Williams, Brittany Pineros, Daniel Acosta, Ian Pancham, and Mike Snelgrove

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THE REAL REASON DIVERSITY IS LACKING AT THE TOP By Justin Dean, John Rice, Wallrick Williams, Brittany Pineros, Daniel Acosta, Ian Pancham, and Mike Snelgrove

t’s a persistent myth: if a company consultants from underrepresented racial Irecruits enough employees from under- and ethnic groups. represented racial and ethnic groups, a sufficient number will, over time, rise Unfortunately, these root causes are often through the organization to create a underappreciated barriers to diversity. Ef- diverse culture at all levels. But that is not forts to increase diversity typically focus on happening. Although efforts to recruit improving recruitment and on supporting employees from racially and ethnically the development of consultants from un- diverse backgrounds have become more derrepresented racial and ethnic groups effective, in many industries, these individ- with training and skill-building opportuni- uals, particularly Black and Latinx employ- ties. But none of these efforts, nor firms’ ees, are not advancing as successfully as performance management systems, address their white counterparts. the most significant obstacles that are blocking advancement and retention. To understand why, we took an in-depth look at our own industry: management The result for many companies is a frus- consulting. The study, conducted in part- trating cycle in which significant energy is nership with Management Leadership for continuously expended on activities that Tomorrow (MLT), looked across the man- do not have an impact. Ultimately, confi- agement consulting industry to under- dence erodes that the problem can be stand why consultants fall off the promo- solved. tion track, and we found five root causes that impact all consultants, regardless of We have identified actions that can break their backgrounds. Of those five, two caus- this cycle—ways that companies can ad- es—a weak sense of belonging and diffi- dress the root causes of low promotion culty navigating professional environ- rates among employees from underrepre- ments—are particularly challenging for sented racial and ethnic groups. And while our study focused on management consult- of Black midlevel managers in the US has ing, the lessons learned are also relevant been higher than the percentage of Black for other industries, including banking and senior managers, but it increased only technology, that have faced challenges in slightly, from 7.3% in 2007 to 7.5% in 2018. creating diversity and inclusion in the lead- (See Exhibit 1.) ership ranks. This data suggests not only that the percentage of Black leaders has stagnated but The Power of Diversity also that Black professionals are plateauing The renewed focus on racial inequity, par- in middle management and not rising to ticularly in the US, has reinforced the com- the most senior ranks. Some industries are mitment among many business leaders to particularly lacking in diversity at the top: promote diversity in the workplace. But Black executives hold only 3% of senior there is also a practical reason for compa- management positions in finance and in- nies to support greater diversity: it im- surance and 2% in the IT industry. proves financial performance. In a 2018 study, BCG found that companies with One consequence of a lack of diversity is management teams with above-average di- that top management often doesn’t have a versity reported higher innovation revenue. clear understanding of the obstacles and, For those companies, sales from products therefore, deploys ineffective solutions. A or services launched within the past three 2018 BCG study found that 33% of US em- years was 19 percentage points above that ployees who are from racially and ethnical- of companies with below-average leader- ly diverse backgrounds see significant bar- ship diversity. riers to diversity when it comes to advancement. Only 19% of white hetero- Unfortunately, statistics show that business sexual men aged 45 and older, a group that leadership is not growing more diverse, es- accounts for a large share of top leadership pecially at the most senior levels; rather, positions, had that same view. the percentages of leaders from underrepresented racial and ethnic groups have hardly changed. In 2018, for example, Black Drilling Down on the Barriers managers represented only 3.3% of senior The field of management consulting faces management in the US, down slightly from many of the same diversity challenges that 3.6% in 2007. Interestingly, the percentage other highly competitive industries con-

Exhibit 1 | Business Leadership in the US Is Not Growing More Diverse

Black managers () 0

0 Middle management Senior management 200 20

Source: U.S. Equal Employment Opportunity Commission.

Boston Consulting Group | The Real Reason Diversity Is Lacking at the Top 2 PUTTING CONSULTING UNDER THE MICROSCOPE

Management consultants are accus- offered, and the efficacy of that support tomed to coming into a company and in addressing their challenges. quickly diagnosing the issues limiting performance. In this case, BCG and The data gathered from the interviews Management Leadership for Tomorrow and survey were used to generate a (MLT), which prepares college and comprehensive set of observable business school graduates from under- challenges and to determine their root represented groups to achieve in the causes. We relentlessly compared our private and public sectors, turned the findings with those from the latest tables. We examined a sample of ten top academic research and collaborated with companies in the consulting industry to leading researchers in diversity to better understand what is blocking the promo- understand these challenges and their tion pathway for consultants from root causes. racially and ethnically diverse backgrounds. We then tested several hypotheses to identify which root causes may explain We conducted 25 interviews with current the low promotion rate among consul- and former consultants, managers, and tants from underrepresented racial and partners from ten firms, and MLT ethnic groups in the industry, compared surveyed more than 50 alumni who are with the rate for those who are not from current or former employees of those underrepresented groups. Finally, we firms. The interviews and survey ex- identified a set of evidence-based plored the types of challenges faced by interventions to effectively address the these consultants, the level of support root causes.

front. Although there has been a concerted the qualifications with those of business effort to improve diversity through recruit- school graduates who earned their MBAs ment as the industry has grown, our inter- in 2015, 2016, and 2017, participated in views found a consensus that the number MLT’s Professional Development program of partners from underrepresented racial for underrepresented groups, and then and ethnic groups has not grown in propor- were hired by top consulting firms. The two tion to the number of employees. groups served as proxies for our analysis: the former reflects typical entry-level Given that the first promotion is particular- consultants at top-tier firms, and the latter ly critical, often signaling whether an indi- represents new consulting hires from vidual has the skills to rise in the organiza- underrepresented racial and ethnic groups. tion, we focused on identifying the challenges that have impeded the early prog- The result? The profiles for the two groups ress of consultants from racially and ethni- are similar: when hired, those from racially cally diverse backgrounds. (See the sidebar and ethnically diverse backgrounds had “Putting Consulting Under the Microscope.”) achieved the same level of academic excel- lence and had comparable work experi- Eight Limiting Challenges. An obvious ence as those from the top 20 MBA pro- question is whether the advancement gap grams that generally make up the universe can be explained by differences in the of new recruits. (See Exhibit 2.) levels of skills and expertise among individuals when they are hired. To address So, if the starting points are the same, why this, we took a look at the key metrics for are consultants from underrepresented ra- students graduating from the top 20 MBA cial and ethnic groups less successful at programs in the US in 2019. We compared landing promotions? From our interviews

Boston Consulting Group | The Real Reason Diversity Is Lacking at the Top 3 Exhibit 2 | The Typical Profiles of Entry-Level Consultants

raduates o MBA rograms who raduates o the to MBA articiated in the M rogram rograms

Academic ndergraduate maor 38% Business or economics 44% Business or economics background 30% Science, technology, engineering, 29% Science, technology, engineering, and mathematics and mathematics 31% Social sciences or humanities 27% Social sciences or humanities

ndergraduate PA 3.17–3.8 (mid-80%3) 3.00–3.80 (mid-80%4)

90% Fellows in one of the top 15 MBA MBA rogram 100% Top 20 programs programs

Score on MA 3–755 (mid-80%5) 30–740 (mid-80%)

Prior work Industries 44% Consulting or finance 47% Consulting or finance eerience 12% Military, nonprofit, and government 17% Military, nonprofit, and government 44% Other 3% Other

Source: BCG analysis. Note: MLT = Management Leadership for Tomorrow; GPA = grade point average; GMAT = graduate management admission test. 1Class of 2019: Columbia Business School; Duke University’s Fuqua School of Business; Emory University’s Goizueta Business School; Haas School of Business, University of California, Berkeley; Harvard Business School; Kellogg School of Management Northwestern University; McCombs School of Business, The University of Texas at Austin; MIT Sloan School of Management; New York University Leonard N. Stern School of Business; Samuel Curtis Johnson Graduate School of Management; Stanford Graduate School of Business; Stephen M. Ross School of Business, University of Michigan; Tepper School of Business, Carnegie Mellon University; Tuck School of Business at Dartmouth; UCLA Anderson School of Management; UNC Kenan-Flagler Business School; The University of Chicago Booth School of Business; UVA Darden School of Business; The Wharton School, The University of Pennsylvania; and Yale School of Management. 2MLT data; n = 75. 3Based on schools reporting the range for the middle 80% of the population: Duke University’s Fuqua School of Business, New York University Leonard N. Stern School of Business, and Yale School of Management. 4Data isn’t limited to 2015–2017; because of incomplete grade-point-average data on MLT’s alumni, we incorporated all years for MLT alumni in consulting (n = 291). 5Based on schools reporting the range for the middle 80% of the population: Duke University’s Fuqua School of Business; New York University Leonard N. Stern School of Business; Stephen M. Ross School of Business, University of Michigan; UCLA Anderson School of Management; UNC Kenan-Flagler Business School; and Yale School of Management.

with managers, we found that all consul- •• Attract the support of an advocate or a tants are sliding off the promotion track if sponsor, or both, for career progression they are unable to meet one or more of the following eight observable challenges: •• Have mentors who are willing to invest in their apprenticeship •• Demonstrate analytical or problem- solving skills To understand the dynamics behind these challenges, we performed a root cause •• Drive work independently, rather than analysis until we zeroed in on five root wait for direction causes that drive all eight challenges. (See Exhibit 3.) •• Assert their own position in a case team environment •• A weak sense of belonging

•• Ask for actionable feedback •• Difficulty navigating professional environments •• Fully address feedback in a timely manner •• The lack of a growth mindset toward development potential •• Request help, rather than wait until it’s too late •• A subpar consulting skill set

Boston Consulting Group | The Real Reason Diversity Is Lacking at the Top 4 Exhibit 3 | Five Root Causes Fuel Eight Challenges, Which Explains Why Some Consultants Are Not Promoted

Demonstrating analytical or Fully addressing feedback in a problem-solving skills timely manner

Driving work independently, Requesting help, rather than rather than waiting for direction OBSERVABLE waiting until it's too late CHALLENGES Attracting the support of an Asserting one’s own position in advocate or a sponsor, or both, a case team environment for career progression

Asking for actionable feedback Having mentors who are willing to invest in one’s apprenticeship

ROOT CAUSES

Lack of a growth Diﬃculty navigating Weak sense o mindset toward Subpar consulting Poor mastery of roessional belonging development skill set consulting tools environments potential

Ethnically diverse consultants are impacted more All consultants are impacted the same

Source: BCG and MLT analysis. 1A sense of belonging includes feeling socially connected, supported, and respected, as well as feeling appreciated as an individual (rather than being stereotyped), confident in one’s value proposition to others, and capable of advancing to the next level. 2Navigating a professional environment includes adapting to a firm’s culture and norms, power structures, internal politics, and expectations for promotion. 3A growth mindset toward development potential includes believing that hard work leads to improvement, that intelligence is expandable, and that adversity can be overcome. 4A consulting skill set includes expertise to solve problems, derive second-order insights, produce client-ready materials, own the answer, communicate clearly, and form client relationships. 5Consulting tools include Microsoft Excel, Microsoft PowerPoint, and data analysis and visualization programs.

•• Poor mastery of consulting tools Consider the issues around a weak sense of belonging. A robust body of academic The Disproportionate Impact of Two research suggests that feeling socially con- Causes. To understand whether some—or nected, supported, and appreciated as an all—of these five root causes dispropor- individual is essential to perform well.1 tionately affect the success of consultants However, 45% of survey respondents from from racially and ethnically diverse back- underrepresented racial and ethnic grounds, we analyzed academic research groups reported feeling a weak sense of and MLT survey data to understand how belonging at their respective firms, a re- they affect all consultants. sult that is consistent with findings across other professional and academic settings. The analysis suggested that there is little That feeling can erode individuals’ confi- difference between the degree to which dence in their value to their organization skill level and tool mastery influence ad- and their ability to advance to the next vancement for consultants from underrep- level. resented racial and ethnic groups versus for those who are not from underrepresent- The research also shows that a weak ed groups. The analysis was inconclusive sense of belonging is a greater barrier to on whether maintaining a growth mindset success in highly challenging and de- impacted promotions for these groups. manding environments, such as a consult- However, divergence between the groups ing firm. A study by Stanford University was identified on the remaining two root professors Greg Walton and Geoffrey Co- causes—a weak sense of belonging and dif- hen examined experiences at colleges and ficulty navigating professional environ- universities, casting a spotlight on this ments. barrier.

Boston Consulting Group | The Real Reason Diversity Is Lacking at the Top 5 Specifically, the study found that Black stu- Currently, the consulting industry does not dents were likely to interpret challenges appear to be aggressively tackling the root and adversity as signals that they didn’t be- causes of weak promotion and retention long in that environment. As a result, their rates for employees from underrepresented sense of belonging declined as adversity racial and ethnic groups. When consultants increased. However, white students didn’t from diverse backgrounds were asked have the same reaction; their sense of be- about support mechanisms that were al- longing was unaffected by the daily chal- ready in place across the consulting ecosys- lenges. Importantly, this study also showed tem (which includes MLT and similar organ- that well-designed programs can help izations, academic programs, and firms), re- Black students maintain their sense of be- spondents cited assistance in developing longing, improving their academic perfor- consulting skills and mastering tools—es- mance and their ability to make connec- sentially the hard skills—as the most avail- tions in the college community. able. Specifically, training programs on Mi- crosoft Excel, basic modeling, and slide Similarly, consultants from racially and eth- writing are offered throughout the ecosys- nically diverse backgrounds disproportion- tem. However, companies do not invest as ally struggle with navigating the profes- much effort and resources into building a sional environment created by their firms. culture that creates a sense of belonging or Our work uncovered two contributing fac- into helping consultants learn how to navi- tors to this root cause: gate the professional environment. The consultants surveyed noted that they tend •• First, a wealth of research finds that to rely on the network aspect of MLT and employees from underrepresented their firm’s affinity groups to provide a racial and ethnic groups find it more sense of belonging and guidance on navi- challenging to create networks that gating their firm. support their professional growth.2

•• Second, these professionals are more Actions to Promote likely to be first-generation college Advancement and Retention graduates than their peers. Consequent- Consulting firms and other companies in ly, they have less exposure to the industries with similar diversity challenges unspoken and unwritten rules that should take a comprehensive approach to impact career trajectory, including how supporting the advancement and promo- to build relationships that will advance tion of employees from underrepresented their career and how to promote racial and minority groups. Such efforts themselves. must do more than improve recruitment and support the development of new skills The disparity among first-generation grad- and expertise. uates exists at the top universities where many consulting firms recruit. For exam- To move the needle, employers should take ple, in 2019, 27% of Harvard University’s aim at the root causes that limit the advance- students from underrepresented racial and ment of all employees, tailoring assistance ethnic groups were the first in their family and support to the specific background and to attend college, compared with 13% of starting point of the employee. At the same students from other backgrounds. time, companies need to pay particular at- tention to the two root causes that dispro- In many industries, consulting included, portionately hinder employees from racially there are tremendous advantages to skillful- and ethnically diverse backgrounds. ly navigating the organization. It can lead to higher-quality feedback, better assignments, We recommend five actions: access to more-effective managers, and greater support for professional opportuni- •• Improve employees’ sense of belong- ties, such as graduate school sponsorship. ing. Although belonging is a complex

Boston Consulting Group | The Real Reason Diversity Is Lacking at the Top 6 topic because it means different things fessional, safe-place coaching that is to different people, there are proven normally reserved for senior executives approaches to improving and encourag- during crucial transitions. Such coaching a sense of belonging. These include ing should take place during the first helping employees from underrepre- year at the firm (when a high-performer sented racial and ethnic groups to build narrative is established) and the year a robust support network and to before the promotion window (to clari- interpret daily challenges as common fy the requirements for advancement and surmountable. and the decision-making process).

Creating an inclusive work environ- •• Instill a growth mindset. During ment—one in which employees feel entry-level training programs, compa- valued, respected as individuals, and nies should highlight the processes and free from bias and prejudice—is also best practices for giving and receiving critical to encouraging a sense of be- feedback. They should also coach longing. An important institutional le- managers on how to provide construc- ver to advance belonging in an organi- tive feedback that highlights areas of zation is proximity training for white strengths, frames areas for development managers. This approach grounds those as both common and manageable, and managers in the realities of how em- outlines tactical actions for addressing ployees from racially and ethnically di- those areas for development. In addi- verse backgrounds experience the or- tion, companies should highlight and ganization differently, even if they at- reward managers who excel at develop- tended the same schools and worked ing talent within their teams, while previously in the same organizations. coaching managers who are less adept in this area and helping them improve. •• Support employees in navigating the professional environment. According •• Help employees enhance their skills. to the academic research and our own Companies must ensure that managers findings, improving outcomes for are clearly modeling what good perfor- employees from racially and ethnically mance looks like. In addition, entry- diverse backgrounds will require level training programs should include programs that enhance their network- guidance on how to structure one’s ing abilities and make them comfort- work, how to team with clients, and able navigating the professional envi- how to communicate effectively. ronment. •• Enable recruits to master tools. Improving outcomes will also require Companies should support employees structures and processes that promote in excelling in the use of critical tools, equity. For example, companies with such as Microsoft Excel and data staffing processes that are heavily reli- analysis and visualization tools. Such ant on networking should develop support could include developing structured approaches that ensure em- on-demand online-learning modules so ployees from underrepresented racial employees can access training programs and ethnic groups are staffed on mar- when it is convenient. quee client teams (which are often led by the highest-performing managers) as In addition to these steps, companies need frequently as their white peers. to ensure that they have sufficient internal capacity to tackle these issues. They must Companies also should do more than have the right leadership and talent within formalize sponsorship and mentoring the organization to set a strategy for ad- programs for employees from underrep- dressing the root causes of diversity chal- resented racial and ethnic groups; com- lenges and for rigorously measuring the panies should provide the kind of pro- outcomes. Then human resources must

Boston Consulting Group | The Real Reason Diversity Is Lacking at the Top 7 support line managers with the resources, racial and ethnic groups. Certainly, aca- expertise, and capacity to execute, and it demic institutions and outside programs, must hold them accountable for progress. It such as the one offered by MLT, can help isn’t realistic to ask line managers to figure ensure that people from diverse back- out how to implement the strategy and grounds are as prepared as possible for a measure outcomes using only a small per- demanding and intense professional envi- centage of their time. ronment. But if companies don’t dig in to understand what is blocking the success of those individuals, their efforts to create di- ur research on the consulting in- verse and inclusive workplaces will come Odustry has implications for a variety of up woefully short. highly competitive industries where diversity gains at the top remain elusive. Al- though recruitment remains a crucial way to improve diversity and inclusion, filling Notes the pipeline with more highly qualified 1. See Mindset Scholars Network, “Belonging,” accessed October 22, 2020. employees from diverse backgrounds won’t 2. Herminia Ibarra, “Race, Opportunity, and Diversity solve the problem. of Social Circles in Managerial Networks,” Academy of Management Journal, June 1995. Companies must instead focus on why they are not able to retain and promote many bright employees from underrepresented

About the Authors Justin Dean is a managing director and partner in the Washington, DC, office of Boston Consulting Group and a core member of the firm’s Energy practice. You may contact him by email at [email protected].

John Rice is the founder and CEO of Management Leadership for Tomorrow, a nonprofit organization that helps prepare men and women of color for high-trajectory, postcollege jobs.

Wallrick Williams is a principal in BCG’s Washington, DC, office and a core member of the firm’s Insur- ance, Transformation, and BCG TURN practices. You may contact him by email at williams.wallrick @bcg.com.

Brittany Pineros is a project leader in the firm’s Washington, DC, office. You may contact her by email at [email protected].

Daniel Acosta is a managing director and partner in BCG’s Los Angeles office and an expert in strategy and organizational challenges for both the public and private sectors. You may contact him by email at [email protected].

Ian Pancham is a managing director and partner in the firm’s New York office and a core member of BCG’s Technology Advantage and Financial Institutions practices. You may contact him by email at [email protected].

Mike Snelgrove is a diversity and inclusion manager in BCG’s Washington, DC, office and an expert in applied behavioral science. You may contact him by email at [email protected].

Acknowledgments The authors thank Accenture, Kearney, Bain & Company, Booz Allen Hamilton, The Bridgespan Group, Deloitte, EY-Parthenon, McKinsey & Company, and Strategy& for their participation in the interviews and survey used in this research.

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