Research: What Inclusive Companies Have in Common
From by J. Yo-Jud Cheng and Boris Groysberg at Harvard Business Review
The killing of George Floyd catalyzed a reckoning around racial injustice that led many corporate leaders to seek to evolve their organizations to meet today’s tremendous societal challenges. Many U.S. organizations have publicly pledged to increase diversity by filling more executive positions with individuals from underrepresented groups. Some boards of directors, like Nike, Starbucks, and Uber have gone further, tying executive compensation to diversity goals.
While it is still too soon to know the effects of these policies, we do know from prior research and our own experience that financial incentives can be effective in changing behavior in the short term. But will these policies create sustainable and long-lasting organizational change?
Alongside these formalized change mechanisms, we think it is just as important for leaders to turn their attention toward an informal lever for organizational change: culture. We asked more than 19,000 HBR readers to rate the diversity and inclusivity of their organizations and to rank their organizations’ central cultural attributes.
We found that one particular culture style differentiated the diverse and inclusive organizations from those that were not: a learning-oriented culture.
Developing the right culture can be a slow and difficult process. Although achieving a shift toward a learning culture will take longer than setting diversity targets and paying out bonuses, we believe organizations that are able to pull it off will be the ones to build equitable, diverse, and inclusive organizations for the long-run.
What Is a Learning Culture?
Each organization’s culture is distinct, but can be described by a combination of eight culture styles that fall along two dimensions: how individuals respond to change (stability versus flexibility); and how individuals interact (independence versus interdependence).
Learning-oriented cultures emphasize flexibility, open-mindedness, and exploration, and can equip organizations with the ability to adapt and innovate. The power of culture lies in its alignment with strategy, and therefore, there is no one-size-fits-all formula. However, the flexibility afforded by learning cultures can be invaluable in navigating today’s exceedingly uncertain business environment.
The Relationship Between Learning, Diversity, and Inclusion
Our survey of HBR readers revealed that 65% of respondents did not think that their organizations are diverse and inclusive. When we separated the organizations that were rated highly for diversity and inclusion from those that received low marks, some cultural differences emerged. Among organizations rated as very or extremely diverse and inclusive, 14% had an organizational culture in which learning was the most salient culture style. In comparison, among organizations rated as not at all or not very diverse and inclusive, only 8% ranked learning as the most salient style.
On the other end of the scale, we found that organizations that were not diverse and inclusive were much more likely than diverse and inclusive organizations to have cultures that emphasized authority (dominance, decisiveness) and safety (stability, preparedness).
It’s important to note that culture styles do not operate in isolation and that examining an organization’s most salient culture style only reveals part of the picture. Organizations are defined by multiple styles, so we next analyzed the relative salience of all eight culture styles. Here, we found that caring ranked as the most salient culture attribute across all organizations, on average, regardless of how the organization was rated on diversity and inclusion.
A culture that emphasizes caring, collaboration, and mutual trust will provide a foundation for diversity and inclusion, but that isn’t sufficient on its own. What’s interesting about learning cultures is that they differentiated the diverse and inclusive organizations from those that were not.
We found that as the level of diversity and inclusion reported by respondents increased, so too did the organizational emphasis on learning. Among organizations that were not at all or not very diverse and inclusive, learning ranked as the sixth most salient culture style (out of eight styles); among organizations that were very or extremely diverse and inclusive, learning ranked as the third most salient culture style.
When we zoomed out further, we found that organizations that are rated as diverse and inclusive had cultures more heavily weighted toward flexibility and independence, while organizations that were not diverse and inclusive had cultures that tended toward greater interdependence. While one might expect interdependence to be a good thing for inclusion, interdependent organizations tend to focus on tradition, rules, and continuity — all of which can get in the way of change and the acceptance of new and different voices.
How Do Learning Cultures Promote Diversity and Inclusion?
Organizations with learning-oriented cultures will seek out and value individuals who bring unique and varied perspectives and experiences to the table, and will be better positioned to make progress in increasing diversity within the workforce. Creating a more diverse workplace requires a shift away from the status quo — something that learning cultures are uniquely equipped to accomplish.
Learning cultures emphasize openness, creativity, and exploration. As Robin Ely and David Thomas show in their research, these are the same characteristics needed to tap the benefits of a diverse workplace and to ensure that a wide range of perspectives and experiences are heard, valued, and embraced. Once new individuals join the organization, this type of culture can create an inclusive environment and boost retention of a diverse workforce. One study found that 47% of people actively looking for new jobs cited company culture as the main reason. In organizations where differing perspectives and voices are silenced, ignored, or neglected, we expect leaders will struggle with managing, hiring, and retention.
Altogether, the foundation provided by a learning culture can promote the selection of a more diverse workforce while decreasing attrition. Eighty percent of respondents to a Deloitte survey reported that inclusion is an important factor in choosing an employer. Once an organization has established a reputation as a diverse and inclusive work environment, with clear opportunities for advancement and development, it will continue to attract a diverse workforce.
How Can Leaders Build a Learning Culture?
Once leaders have made the decision to orient their organizational culture around learning, they can catalyze the evolution by framing the culture change in terms of current business challenges and tangible outcomes, demonstrating a focus on learning in their own leadership, holding organizational conversations about learning, and reinforcing the change through organizational design.
Our survey shows many leaders have room to grow as a role-models for organizational culture, with 30% of respondents reporting that leaders in their organizations are not at all or not very effective in role-modeling and shaping culture. To foster a learning-centric culture, leaders should lead by example: being open to new ideas, failure, and feedback; sharing how their own perspectives have changed over time; and recognizing those that think outside the box and take risks. They can take time to develop new skills, and make sure their reports have the flexibility to do the same. Leaders need to hold one another accountable for acting in accordance with this culture style.
Next, the desired changes must be consistently communicated. For example, using language that embraces adaptation for the future, rather than framing today’s challenges in terms of weathering the storm, can help employees feel empowered to think creatively and make changes from how things have been done in the past. Leadership messages and team meetings can be used to highlight new innovations and learning-related accomplishments. When employees routinely hear what is valued within the organization, behavior will start to shift. Our survey showed that in 35% of organizations, people do not talk about culture frequently. This can and should change.
Finally, leaders can design organizational structures, systems, and processes to support the evolution toward a learning-centric culture. This may include adjusting hiring and interview procedures to identify new employees who are curious and open to change. To build a learning culture, onboarding processes should be designed accordingly. For example, because learning opportunities often come from those different from oneself, orientations can be structured to help new employees build cross-functional relationships. Training programs for existing employees can focus on envisioning new opportunities and possibilities outside of long-established routines and provide job rotations that allow exposure to different parts of the organization.
Performance targets and reward systems should be tied to innovative activities and outcomes, and allow for a degree of appropriate risk-taking without fear of reprisal. Performance reviews can explicitly ask employees what they have learned, and can be used to provide feedback and guidance on how employees can become more flexible and exploratory in their work. Coaching and reverse-mentoring programs that match experienced executives with more junior employees can allow for learning to flow in all directions and for ideas to be exchanged throughout the organization. Setting up a resource library can allow employees to both learn from and contribute to a constantly evolving knowledge base.
These efforts will lead to myriad benefits. In addition to providing a foundation for a diverse and inclusive workplace, learning-centered organizations will also be well-positioned to innovate and evolve in a rapidly changing external environment as we emerge from the Covid-19 pandemic. We also found that respondents who reported working in organizations with high organizational performance tended to characterize their organizations as more learning-oriented, while those working in organizations with lower performance levels had cultures that did not heavily emphasize learning. Taken together, what’s good for diversity is also good for organizational performance, and what is bad for diversity is also bad for performance.