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 per- centage 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 underrep- resented 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 7.3% 7.5% 3.6% 3.3% 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 back- grounds. 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 chal- lenges 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 indi- viduals 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 1 2015–20172 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 MAT 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.