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Cultural diversity in leadership

Race Race Discrimination

Speech given at the 2016 Kingsley Laffer Memorial Lecture, University of Sydney Business School

It was 60 years ago that Professor Kingsley Laffer helped establish the first industrial relations course taught at the University of Sydney. As it has already been noted, Laffer was subsequently instrumental in setting up a Department of Industrial Relations here in what was then the Faculty of Economics.

In reflecting upon Kingsley Laffer, whose memory this lecture honours, it occurred to me that matters of race or culture might have been the furthest thing on his mind as a scholar. Laffer was born in 1911 in Western Australia, and began his academic career just before the end of the Second World War. When Laffer retired in 1976, as the head of the Department he had set up, Australia was a society just getting acquainted with the idea of racial equality and multiculturalism. It was only in 1975, that the Whitlam Government introduced the Racial Discrimination Act, and it was only a few years earlier in 1973 that the last vestiges of the White Australia policy were removed. Australian society was yet to experience the arrival of non-European migrants in any significant number since the 19th century; that would only begin shortly after with the arrival of refugees from southeast Asia, predominantly Vietnam.

However, in studying the life of Kingsley Laffer, I was struck by the progressive tenor of his thinking. Here, after all, was a man who became a student in economics by correspondence while working in the West Australian wheat belt. While living in Bruce Rock, a township which sits 240 kilometres east of Perth, Laffer helped found the Bruce Rock Literary and Debating Society in 1933. The archives of the Bruce Rock-Corrigin Post faithfully record a debate of the Society in 1934, in which one Mr K. Laffer argued in favour of the proposition, ‘That Free Trade for Australia would be preferable to Protection’. In that dispatch, Mr K Laffer is reported to have cited the city states of ancient Greece and their tariffs, and spoke of how the world would become bound closer by rapid means of communication. Clearly, this was no ordinary young fellow working in the West Australian wheat belt.

There was also something of a pattern in Kingsley Laffer’s life. He was clearly someone who liked to start new things. Not long after he arrived in Sydney in 1944, part of a considerable expansion of academic staff in the Economics Department, Laffer joined fellow economists Noel Butlin and Heinz Arndt in founding the Fabian Society of New South Wales. Theirs was the cause of advancing democratic socialism through gradual reform, their latter-day Fabius Maximus no other than E.G. Whitlam. So there was form when Laffer would later set up a Department of Industrial Relations and also found the Journal of Industrial Relations.

Tonight, I wish to address the question of cultural diversity and leadership, and in a manner which I hope Kingsley Laffer would have approved. As the father of industrial relations scholarship in Australia, Laffer succeeded in bringing the discipline of industrial relations out of the shadow of its parent discipline, economics. We find today that within many discussions about the Australian workplace that there is a similar challenge for those interested in speaking about cultural diversity. By this, I mean that discussions of diversity and inclusion in the workplace are frequently just about gender. Culture is a poorer cousin in the diversity and inclusion family. But just as it was right for Laffer to bring industrial relations into greater prominence, so we should for cultural diversity. For those of us interested in the future of work and organisations in a multicultural Australia and a global economy, it is of paramount importance that we do justice to cultural diversity.

How culturally diverse are our leaders?

On cultural diversity and leadership, we can say this. Australia is an emphatically multicultural society. We are often triumphant about our cultural diversity. Few can boast to have enjoyed our multicultural success. Yet it is striking that among our leaders today, in various spheres, we are yet to see our multicultural character being reflected. Why don’t we see more diversity among our leaders? Do we have leadership that is fit for today’s Australia?

In June 2015, I invited members of the business and academic community to join me in finding some answers. The Working Group on Cultural Diversity and Inclusive Leadership consisted of the Australian Human Rights Commission, the University of Sydney Business School, Westpac, PwC Australia and Telstra. The group was tasked with developing a blueprint to guide organisations on how they could improve the representation of cultural diversity in leadership. But first, the group had to put together some data. While most of us knew that cultural diversity wasn’t well represented in leadership, we didn’t have an authoritative set of numbers establishing that was the case.

Here’s how we went gathering the data. We looked specifically at the cultural composition of senior leaders in Australian business, politics, government, and civil society. Our attention was confined primarily to the ranks of chief executives and equivalents – namely, CEOs in the ASX200 companies, representatives and senators in the federal parliament, secretaries and heads of federal and state government departments, and the vice-chancellors of universities. We focused on these leaders, to some extent, because of the difficulties in studying the cultural background of organisational leaders at levels below the very top. As there remains limited data collected about cultural diversity, focusing attention on chief executives gave us the best prospect of generating credible data.

Our method involved two stages.

First, we identified senior leaders’ cultural background. In determining an individual leader’s backgrounds, we examined information including people’s publicly available biographical details and public statements about their background, their names and places of birth, and also photographs of that individual.

Such a methodology is consistent with academic and industry studies of cultural background. For example, in its Capitalising on Culture study of corporate Australia, Diversity Council Australia measured cultural diversity based on the surnames of board and senior executive managers in ASX 200 companies. Academic research in the United States by sociologists investigating the cultural backgrounds of CEOs in Fortune 500 companies has also resorted to using biographical information about race and ethnicity, as well as photographs. Similarly, management researchers in Canada have relied upon public information such as captioned photos and biographies to identify leaders and their cultural backgrounds.

Second, after determining the specific cultural background of a leader (e.g. ‘English’, ‘French’, ‘Italian’, ‘Chinese’), we then categorised them according to one of the four classifications: namely, according to whether they have an Indigenous, Anglo­Celtic, European, or non‑European cultural background. We believe these four classifications of cultural background are appropriate in light of Australia’s demographic history. In particular, they reflect the main waves of immigration that have primarily shaped the composition of Australian society today.

We were careful in how we have described and counted cultural diversity. For instance, we don’t refer to people being of a certain cultural background, but rather to people having a certain cultural background. To say, for example, that an individual has a non-European background doesn’t preclude them from also having a European background or an Anglo-Celtic background (as would be the case with an individual who has a Japanese father and an Italian mother, or an individual who has a Chinese father and a Scottish mother). The methodology we adopted simply means that, for the purposes of classification, they may be described as having a non-European background. As these examples indicate, we have erred on counting more cultural diversity than counting less. 

Before I go into our findings, some context on what Australia’s cultural mix looks like.

On various measures, Australia is among the most culturally diverse in the world. Our population is drawn from more than 300 ancestries. About 28 per cent of people in Australia were born overseas, with an additional 20 per cent having a parent born overseas. While there are no official statistics on the ethnic composition of the Australian population, close to 20 per cent of people speak a language other than English at home. To provide an appropriate baseline for our study, though – namely, a baseline that maps on to the four broad classifications of cultural background – we have drawn from research done by Diversity Council Australia, which estimates that about 32 per cent of the general population have a non-Anglo-Celtic background, with more than 10 per cent of the population having a non-European background.

So, then, what does the cultural diversity of Australian leadership look like? We found a bleak story for multicultural Australia.

In corporate Australia, the ranks of senior leaders remain overwhelmingly dominated by those of Anglo-Celtic and European background. Among the 201 chief executives of ASX 200 companies, 77 per cent have an Anglo-Celtic background and 18 per cent have a European background. Only 10 chief executives – or five per cent – have a non-European backgrounds. None of the 201 chief executives has an Indigenous background.

Similar patterns prevail elsewhere (these figures reflect statistics we have updated since completing our original research). In the current Australian parliament, 77 per cent of the 226 elected members in the House of Representatives and the Senate have an Anglo‑Celtic background. Eighteen per cent have a European background. Those who have a non-European background make up less than four per cent of the total, while those who have an Indigenous background comprise just under two per cent.

Cultural diversity is even lower within the ranks of the federal ministry. Of the 42 members of the ministry, 81 per cent have an Anglo-Celtic background, 17 per cent have a European background; there is one member of the ministry who has an Indigenous background (two per cent), though none who has a non-European background.

In the Australian public service, diversity is also dramatically under-represented. Of the 124 heads of federal and state departments, it is notable that there is only one who has a non‑European background (less than one per cent) and one who has an Indigenous background (less than one per cent). Eighty-three per cent of departmental heads have an Anglo-Celtic background, with 15 per cent having a European background.

Among our universities, it is even worse. All of the 40 university vice-chancellors either have an Anglo-Celtic background (82.5 per cent) or a European background (15 per cent). There is only one vice-chancellor who has a non-European background (2.5%) and none with an Indigenous background.

Bias and barriers

These numbers are unambiguous about one thing: Australian society isn’t making the most of its cultural diversity. Bias and discrimination do appear to play some role in this. There is mounting body of research about professionals from culturally diverse backgrounds reporting that organisations understand leadership in ways that privilege ‘Anglo’ cultural styles.  International research on leadership and race also suggests that in predominantly ‘white’ work environments, leaders who are ‘people of colour’ may face disadvantages because they are not perceived as legitimate and because power inequities in organisations privilege ‘whiteness’.

Some may argue the under-representation of cultural diversity in leadership is not a problem. It may simply reflect the relatively short amount of time that Australian society has been multicultural. With time, we may well see a natural improvement.

Such arguments are familiar. Also familiar are suggestions that a principle of merit should guide decisions about appointment and promotion. According to this view, taking an active concern with representation elevates equality of outcomes above equality of opportunity.

It may be comforting to believe that decisions in organisations are guided purely by considerations based on merit. Indeed, most of us would endorse the meritocratic ideal – the idea of careers open to all the talents. It is just that the ideal isn’t always realised in practice; only rarely is it realised in practice. Meritocracy only makes sense when there is a level playing field; yet that playing field is elusive. It’s worth noting that last month, a series of senior business leaders in the Australian Financial Review, in the context of gender equality, put paid to the idea of merit. It matters how merit is defined; and who it is that defines it. More often than not, merit can be defined by those in power to mean code for someone who looks like me. It can disguise power and privilege.

Certainly, the idea of leadership is bound up in elusive notions of charisma and authority, which open the way to bias and to reproductions of the status quo. Often such biases concern physical attributes. A considerable amount of research has found, for example, a correlation between being tall and attaining managerial positions.  Other research indicates that attractiveness may also be a strong predictor of decisions about who is put in a position of leadership.

This illustrates the clear limits to our cognitive ability. Psychologists refer to the ‘halo effect’: having positive feelings about the overall impression of a person may influence our assessment of their character or ability. Where we have a positive first impression of someone, we will tend to believe that everything else about them is positive. There can also be a ‘reverse halo effect’: a negative first impression of someone means we will tend to be negative about everything else about them.

As it concerns cultural diversity in leadership, bias and discrimination can play out a number of ways, depending on the specific cultural backgrounds involved.

In the United States, sociologists studying the ‘power elite’ have observed that many of the African-American men and women in positions of power seemed to have ‘very light skin tone’ or were perceived as ‘non-threatening’. It was found that, ‘the less different people were from the white male norm that was dominant in the power elite, the more likely they were to be deemed acceptable’.  Similarly, the same study indicated that most of the Latino-background CEOs in the Fortune 500 companies were ‘light skinned’ and ‘Anglo-looking’.

For other groups, bias and discrimination may focus not so much on skin colour but on cultural traits associated with one’s ethnicity. This has been the focus of much of the commentary concerning the ‘bamboo ceiling’ – namely, the barriers that those of Asian backgrounds face in professional workplaces dominated by Anglo and Western norms.

To some extent, this is due to stereotypes about those from Asian backgrounds being self-effacing, quiet, even submissive. As Jane Hyun explains, some of these stereotypes may reflect certain dispositions associated with Asian cultures. In highly individualistic societies, those who speak or shout the loudest get noticed the most or rewarded: ‘The squeaky wheel gets the grease.’ Yet, within Asian cultures, a different norm may prevail: ‘The loudest duck gets shot.’

This appears to be a live issue within Australian organisations. A survey into Asian-background talent conducted by Diversity Council Australia highlighted that only 18 per cent of Asian background workers surveyed felt their workplaces were free of biases and stereotypes about culture. About 61 per cent reported feeling pressure to conform to ‘Anglo’ styles of leadership, which emphasise self-promotion and assertiveness. 

Improving cultural diversity and inclusive leadership

So how do we go about fixing or changing this? And why is such change so important? Let me answer these questions in reverse order.

First, the case for cultural diversity can be emphatically made. Simply put, a more diverse workforce makes for better decision-making. In a notable study, economist Scott E. Page found that a group drawn from a diverse pool of people was superior to a group drawn from talented individual thinkers in solving difficult problems.  The reason is that a unique kind of learning takes place when people from different backgrounds come together, one that doesn’t occur within groups that are homogenous. Experiences with diversity – including cultural diversity – are associated with improved cognitive skill and intellectual self-confidence.

Analysis conducted by McKinsey also supports the case for diversity – indicating a positive relationship between a more diverse leadership team and better financial performance. In a study of 366 companies from the United Kingdom, Canada, Latin America and the United States, McKinsey found that companies in the top quartile of cultural diversity were 35 per cent more likely to have financial returns above the national industry median.

The findings of the study also indicated the relative scale of gains that accrue from cultural diversity. Companies in the top quartile for gender diversity were 15 percent more likely to have financial returns above their respective national industry medians.  At least on the evidence of this study, the benefits of cultural diversity may be even greater than those generated by gender diversity.

What, then, are the ways change can be achieved?

In the first place, leaders must communicate that cultural diversity isn’t a matter of second-order importance. This is an obstacle I’ve observed a number of ways. For example, it is sometimes assumed that action on cultural diversity may need to wait until organisations complete their efforts to achieve greater gender equality. Within conversations about diversity and inclusion, some executive leaders emphasise that there may not be enough ‘bandwidth’ in an organisation to handle both gender and cultural diversity as priorities.

Progress on diversity, however, is best made when it is even – across not only gender, but also culture (and, for that matter, disability, age and sexual orientation). To wait until gender equality is achieved within the workplace would place the issue of cultural diversity on indefinite hold. In any case, the different dimensions of diversity frequently intersect. Efforts to improve the advancement of culturally diverse talent may also contribute to improve gender representation in leadership, given that we can assume at least half of such talent will be female.

To ensure that we have the leadership required, I will be establishing a leadership council on cultural diversity, comprising senior leaders in business, government and higher education. I will be saying more about this in coming weeks, but this leadership council will include CEOs, government department secretaries and university vice-chancellors. In the realm of gender equality, we’ve seen what senior leadership can do to instigate change and shift organisational cultures – it’s time that we did the same for cultural diversity.

There are two other ingredients needed for change: what we describe in the Blueprint as ‘systems’ and ‘culture’. In terms of system, there needs to be enhanced gathering and reporting of data on cultural diversity. The reason is simple. Doing so gives a baseline for measuring future progress. It focuses minds within organisations. Having numbers on hand can add clarity and urgency to the issue. Deferring action becomes harder if the hard data says there is a problem.

On all this, data on cultural diversity remains poor when compared to data on gender diversity. For example, the Workplace Gender Equality Agency requires the collection and reporting of gender equality data from all companies with 100 or more staff. There is no question such reporting mechanisms have helped to achieve systemic change, however incomplete, on gender equality.

Once you have the data, it becomes possible to consider accountability, including through targets. As it is argued in the Blueprint, we believe there is a case for considering targets on cultural diversity. This is because targets are about sending a signal. They signal that an organisation wants to get something done. 

It is crucial that organisations don’t consider the setting of targets as a cure-all solution. Rather, targets need to be supported by other policies that encourage the development of diverse talent. Organisations should also mitigate some of the ‘stereotype risks’ that may accompany the appointment of culturally diverse talent to leadership positions. If those promoted through targets should perform poorly, the result may be to entrench unhelpful perceptions about culture and leadership.

Which brings me to ‘culture’. Much of this, I’ve already touched on. We need leaders and organisations to get serious about countering biases, both unconscious and conscious. This requires something more than just consciousness-raising about cultural diversity – more than just food and festivals. It might make the boffins in Human Resources feel warm and fuzzy, but asking people to celebrate diversity through a multicultural potluck lunch every Harmony Day won’t do anything to transform people’s biases and prejudices. If only it were as easy as combatting prejudice and discrimination through food. Given our national obsession with Modern Australian fusion and reality cooking shows, you’d have thought by now that we would have eradicated all forms of racism.

Countering bias and discrimination does require education and training – but of a certain kind. It must be about presenting people with strategies to eliminate bias and apply them in their daily work. It should be about encouraging people to take the perspective of others, about promoting contact with those who are different. The best approach seems to be one that transforms people’s experience. Research studies have indicated that unconscious racial bias was most effectively reduced where people listened to stories that involved ‘high self-involvement’ – for example, scenarios that prompted people to ask themselves if they would react differently to a person if they belonged to a different race.  Bias can be eliminated, but it can’t be done through eating – it can only be done through effort.

The other part of culture concerns professional development. While it’s true that change requires leadership from the top down, it also requires action from the bottom up. This is perhaps the biggest challenge on this issue. If we were to examine the cultural composition of the top achieving students in Australian high schools and universities, we wouldn’t see any problem with cultural diversity being represented. If anything, there’s an over-representation of cultural diversity – something also apparent in the graduate intakes that enter our leading companies and most prestigious organisations. But where are all these high achieving graduates from culturally diverse backgrounds ending up? Why don’t we see them forcing their way through to the top of organisations? Are they all ending up in some kind of professional graveyard within middle-management? Do they burn out? Do they disappear into thin air?

Action is required to ensure that those of culturally diverse backgrounds can step up to leadership positions. This means equipping talent with the right set of ‘soft skills’, and ensuring that a broader set of talent has access to the unwritten curriculum of power and leadership.

Greater cultural self-understanding is a prerequisite for this. People need to understand how culture can shape behaviours and perceptions. Just as some may need to be made aware of their own biases, so it is that some may need to understand their own culturally influenced attitudes or approaches. Consider some of the behaviours that have been identified in discussions about a ‘bamboo ceiling’. Against a background of possible bias or stereotyping, it makes sense for those of Asian backgrounds to be mindful of how their behaviour in the workplace may be perceived or interpreted.

Such recognition doesn’t exonerate bias. The suggestion here isn’t that culturally diverse talent must fix themselves, without there also being some effort to fix stereotypes. But it seems to make sense for people to consider how traits such as deference to seniority or self-effacement could be regarded by others as part of a more general cultural pattern of behaviour. Being mindful of such factors may help some professionals to be more assertive and to claim the credit they deserve in the workplace – things which may add up to being regarded as having a good fit for leadership.

The issue is by no means confined just to one particular cultural group. Within the American professional setting, for example, many African-American men have spoken of having to calibrate their demeanour in their offices. As described in one study, this may involve ‘striving to appear focused at the office but not too aggressive; hungry but not threatening; well-dressed but not showy; talented but not too damn talented’.  In similar vein, I recently heard one former Australian executive from an Asian cultural background note that she would constantly rephrase her commands as questions – in order to counter the risk that her subordinates would find her too threatening as an Asian-Australian female executive.

In sum, professional development requires cultivating both self-understanding and strategic nous.

The workplace amid political turbulence

So far, I have focused on the question of cultural diversity and leadership as it concerns representation. But there is another respect in which I want to consider it as I conclude this evening. It’s about how leaders within Australian society should respond to cultural diversity.

As current political debates across the West illustrate, matters of race, immigration and multiculturalism have the potential to polarise. We are seeing the emergence, or re-emergence, of populist nationalism. In a multicultural society such as ours, there are clear dangers with this development. Our social cohesion can never be taken for granted. It is something that can be easily undermined by political appeals to fear, division and hatred.

It would be grossly naïve to believe that these social and political matters can somehow be quarantined from the workplace. If there are deteriorations in our race relations and cultural harmony, they will affect the atmosphere within our workplaces. By the same measure, where we see leadership in our workplaces on cultural diversity, that may itself contribute to better race relations outside the workplace. The standards we set and the habits we cultivate within our organisations have an influence well beyond the walls of our offices, shops, warehouses and factories.

It’s in this sense that current political debates about race and free speech bear upon how we deal with cultural diversity as I have primarily discussed tonight. As many of you know, some in our Parliament have been pushing to amend section 18C of the Racial Discrimination Act, the provision which makes it unlawful to do an act that offends, insults, humiliates or intimidates someone because of their race. A number of senators are seeking to delete the words ‘offend’ and ‘insult’ from the section.

In 2014, of course, the federal government did attempt to repeal section 18C, following an election pledge to do so. The proposed legislative change was abandoned after widespread public opposition to the government’s proposal. In one sense, the debate about section 18C has already been had – and has already been resolved. The Government has indicated it has no intention of revisiting the issue. Within the new Parliament, it is unlikely that any proposed amendment will succeed. And yet, agitation over the legislation continues, and will likely do so for the life of this Parliament.

As I have said consistently during the past three years, there is no case for changing section 18C of the Racial Discrimination Act. The law should remain in its current form. This is because the law reflects our values as a society; it sets a standard for acceptable behaviour. If, as a society, we repudiate racism, it is only right to have laws that express that commitment.

Many of the Act’s critics have said that section 18C goes too far – that it unreasonably restricts freedom of speech, and is too broad in its scope. Many of these critics object to section 18C, yet are content to accept the many other limitations that are placed on our speech: national security laws, defamation laws, trade practices laws, criminal summary offence laws. Moreover, they frequently ignore how section 18C is accompanied by section 18D, which protects any fair comment or reporting on a matter of public interest, and any sentiment expressed ‘in the course of any statement, publication, discussion or debate made or held for any genuine academic, artistic or scientific purpose’. Provided something is done reasonably and in good faith, any fair comment or public discussion will be exempt from being in breach of section 18C. Given the broad protection of free speech in section 18D, we are entitled to ask: Why is that people want to make it acceptable to cause gratuitous offence or insult to others because of their race? What is it that people want to say, which they can’t already say?

Of course, the intricacies of the Racial Discrimination Act go well beyond the scope of this lecture. I’ve already tested your indulgence in making this detour into human rights and anti-discrimination law. But, in some respects, it goes to a prerequisite of any genuine conversation about cultural diversity in Australian society. If political leaders are incapable of assuring us that they are committed to upholding racial tolerance and multiculturalism, it gives us little reason to be optimistic about the more challenging task of getting cultural diversity in our corridors of power.

It would be wrong for me to conclude tonight on such a desultory note. I suspect Kingsley Laffer wouldn’t have approved. I imagine that, the Fabian that he was, Laffer wouldn’t counsel despair, but rather point us in the direction of George Bernard Shaw’s famous credo: ‘Educate, agitate, organise.’ It’s not bad advice to follow – whether it’s defending our racial tolerance, or building cultural diversity in leadership.

Dr Tim Soutphommasane, Race Discrimination Commissioner