Kay Formanek Of Diversity and Performance: How Diversity Can Increase a Company’s Bottom Line
An Interview With Fotis Georgiadis
Customer congruence — more diversity is linked to more satisfied customers and/or more loyal customer. Organizations that succeed in creating inclusive and diverse environments lead to a 31 percent uplift in employees’ responsiveness to customer needs. This responsiveness translates to more satisfied customers and more loyal customers, increasing the lifetime value.
As a part of our series about “How Diversity Can Increase a Company’s Bottom Line”, I had the pleasure of interviewing Kay Formanek.
Kay Formanek is a global speaker on Diversity and Inclusion, visiting lecturer at leading business schools and founder of Diversity and Performance, committed to unleashing the power of Diversity Performance within profit and not-for-profit organizations around the world.
She has also worked for leading global professional services organizations for over 20 years as Partner and Managing Director, actively supporting their D&I strategy realization.
In Beyond D&I: Leading Diversity with Purpose and Inclusiveness (Palgrave Macmillan, 2021), Formanek shares her proven approach to leading diversity strategically by drawing on extensive research and her advisory work with over 50 organizations.
Thank you so much for doing this with us! Before we dive into the main part of our interview, our readers would love to “get to know you” a bit more. Can you share a bit of your “backstory” with us?
I am passionate about diversity. In fact, diversity has shaped my life journey. Born to parents who had emigrated from Austria to South Africa, I grew up in South Africa in the late 1960s and 1970s at a pivotal time in the country’s struggle for equality and inclusion. Black South African schoolchildren who protested apartheid policies were met by violent government reprisals in the Sharpeville killings. Nelson Mandela, leader of the African National Congress (ANC) was sentenced to life in prison, and the ANC banned. The 1976 Soweto Riots followed and economic sanctions were applied. By the early 1990s, we finally began to see progress and, with Mandela’s release from prison, the first multi-racial elections were held. The formation of the Truth and Reconciliation Commission supported the slow process of healing the scars of apartheid.
Growing up in a country with legalized discrimination shaped the person I would become and the career I would pursue. I researched and reflected on the complex, intertwined elements of diversity, inclusiveness and leadership within organizations and across society. My parents taught me to question bias and prejudice, and I also saw how society created a smaller world for my sister, who was a brilliant lawyer and poet but had a physical disability. Then, as a student at a multiracial girls’ boarding school in Johannesburg, a close-knit group of diverse students was my family, in stark contrast to a society characterized by stereotypes and enforced racial segregation. I learned to move beyond the differences in color, background or culture to find those strands of humanity that connect us.
At the start of my career, as a consultant in a professional services organization, I was part of a transformation in which a homogenous (mostly male and white) organization had to change with the wider societal shifts occurring in the post-apartheid era in South Africa. I realized that stakeholder voices are increasingly demanding organizations to embrace diversity and provide an inclusive environment and courageous leadership.
When I moved to the Netherlands some twenty years ago, I experienced for the first time what it feels like to be a stranger in a foreign culture and I felt an intense yearning to belong. As an outsider, I confronted this feeling on multiple levels — as a new resident speaking a different language, as a female senior executive in a mainly male-dominated work environment, and as a full-time working mother in a society where the caretaker role of women is deeply ingrained. I realized that belonging is a powerful survival need and that feeling excluded hurts to the core. I also learned how one’s own authenticity can be compromised when trying too hard to belong.
Transformation was also central to my day-to-day work. As Partner and sponsor for many D&I initiatives at one of the largest management consulting organizations in the world, I oversaw the transformation of many life science firms on their journey to become patient-centric enterprises. It became crystal clear that to transform an organization, you must transform the culture, and to transform a culture, you must transform the person — and that without leadership, all transformation is difficult to achieve.
Eventually, diversity became the anchor point of my work, and I founded Diversity & Performance in 2014 to help organizations realize the benefits of diversity and create the conditions for inclusiveness through strategic leadership that would deliver performance outcomes. This approach recognizes the unique context and diversity maturity of each organization, validated through research and real-life application in organizations. By collaborating with business schools, leaders of organizations and diversity practitioners, I developed a strategic approach to diversity performance leadership and a Diversity Leadership Certification that can be applied in any organization.
Not least, my lifelong work with diversity is also intended to serve as an inspiration for my three children and their generation of future leaders, who bear the huge task of advancing diversity, equity and sustainability in our world.
Can you share the funniest or most interesting story that happened to you since you started your career? Can you tell us the lesson or take away you took out of that story?
While completing my MBA part-time in South Africa, one of our lecturers asked us to imagine a post-apartheid model for South Africa. At the time, the situation in South Africa seemed hopeless. Few people believed in a future South Africa that was united and peaceful. We were asked to consider other political models, searching for one that might suit the country’s uncertain future. I had a deep sense that the answer was not in an operating model but rather in courageous leadership, someone who could inspire a way forward. And indeed, Nelson Rolihlahla Mandela, Madiba, emerged as the unifying voice. That moment of truth is now part of who I am, shaping my conviction and my teaching that inclusive leaders are required for diversity to flourish — with the incredible role model of Mandela, as a truly inclusive leader.
Can you please give us your favorite “Life Lesson Quote”? Can you tell us a story about how that was relevant in your own life?
My favorite “Life Lesson Quote” is one I gleaned from Grace, an inclusive leader whom I met on my travels. Grace conducts her life with these words imprinted on her approach for life:
“Never stop seeing your brothers and your sisters in the streets. Never stop having the informal conversations, from your heart, to find out how someone is doing. You have been lucky to have opportunities; don’t forget those who feel they have no opportunities.”
Growing up in South Africa as a person of color, the daughter of a housekeeper and a gardener who worked for a stately home in an affluent part of Johannesburg, Grace was able to attend a private school. It was a great opportunity but her parents were anxious that Grace might forget her roots and her friends while in that privileged environment. The quote I share above was offered to Grace by her parents and she embraced the quote by her actions. During lunch breaks, Grace would take her lunch into the school gardens and chat with the gardeners, or to the staff in the canteen, inquiring about their family or a sick aunt. She spoke to the other students at school, who were seemingly confident and “had it all,” with compassion and curiosity and learned that “a person’s outside face masks much internal pain.”
These informal discussions influenced her post-academic life as she began to hold leadership roles in organizations, a recognition that all people have value, and that all people have something to say, want to be seen, and want to be heard. As she told me, “If you take the time for the unique individual, they grow like a flower in the sun. And this is good for the person and also good for the organization.”
Grace’s motto is one that I hold dear. It is easy to listen with one’s mind, and yet some of the most important truths in life occur when one listens with one’s heart: with empathy, compassion and interest.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are?
Many people have played an important role in my life, and yet I would like to acknowledge my only sibling, my late sister, Celine. My sister, a brilliant lawyer and poet, taught me that the way society sees you defines your access to opportunities. Her premature birth had led to a walking impairment and her ‘disability’ created a smaller world for her. She certainly did not want pity or special favors — all she wanted was a fair chance to exercise her talents. Her struggles to overcome the bias that so many persons with seen and unseen disabilities face inspired me to work towards advancing diversity, inclusion and equity in our world. My friends and family tease me about my energy and drive to empower people with knowledge. That drive is in part due to me wishing to live life, and contribute to life, for the both of us.
What do you think makes your company stand out? Can you share a story?
Diversity and Performance is dedicated to fostering diversity in profit and non-profit organizations, so as to liberate the benefits of diversity. Our organization has a clear credo: respect each human being; embrace versus tolerate diversity; create a sense of belonging and inclusion; acknowledge systemic bias and advance equity; walk-the-talk of inclusive leadership; and create an authentic and compelling narrative (purpose) for diversity.
Let me share a story: a leader of an organization approached me to support their diversity journey. They had started that journey 10 years earlier, but questioned whether their efforts were translating to results. They feared their environment was still biased and people were leaving, claiming they did not feel included or psychologically safe. We evaluated each element of Diversity Performance — Diversity, Inclusion, Equity, Leadership and Purpose — and realized that the diversity journey was being navigated top down. Diversity cannot be enforced. It needs to be stoked like a fire, allowing diversity to breath with the coals of engagement. We began a diversity reset, bringing meaning and purpose to their diversity journey. Now when one enters their organization’s headquarters, the celebration of diversity is vividly on display, from lobby walls adorned with full-color, framed pictures of people in all their diversity. The overall impression is one of abundance, summed up by a sign on the wall that reads, “We Serve: Our People. Our Stakeholders. Our Society.” Beyond the lobby, along a corridor, multi-colored papers taped to brown paper are linked by arrows. This is the Diversity Wall. Each colored paper reflects a different initiative that supports the shared diversity purpose. A traffic light legend indicates whether the diversity initiative is up and running and delivering results.
This captures what makes our organization, Diversity and Performance, different: we believe that diversity is a journey of many steps and the journey is more successful when there is clarity on the why, the what and the how, and by sustaining and celebrating the journey.
Are you working on any new or exciting projects now? How do you think that might help people?
I am collaborating with the national armed forces of a country in Europe seeking to advance diversity, inclusion and equity in their organization. Many readers will know that the armed forces in many nations have faced scrutiny for human rights transgressions in their foreign missions, including sexual intimidation, and lack of inclusion for women, people of color and the LGBTQ+ community. So when a national armed forces organization commits to advancing diversity, inclusion and equity, it matters. If successful, they can be highly influential in advancing diversity in other armed forces around the world. I feel incredibly privileged to work with inspiring leadership who are genuinely committed to embarking on a bold and courageous diversity journey. Of course, another exciting event is the forthcoming launch of the book that I wrote: Beyond D&I: Leading Diversity with Purpose and Inclusiveness (Palgrave & MacMillan, December 2021). Already I am celebrating the arrival of the book with a flurry of interviews, podcasts and speaking events. It is very exciting.
How have you used your success to bring goodness to the world?
Diversity is not an abstract concept in my life, it is my purpose, it is my ikigai (生き甲斐, ‘a reason for being’, a Japanese concept). Diversity is larger than my personal success and I see myself as a mere instrument to inspire leaders to be courageous diversity leaders. I do this as global speaker and author, researcher and leadership coach. All people deserve to have respect, dignity and safety and to apply their talents without facing discrimination and bias. I hope to be able to use my platform as writer and speaker to equip leaders and anyone else who is interested in advancing diversity and equity, with proven tools and frameworks.
Ok. Thank you for that. Let’s now jump to the main part of our interview. This may be obvious to you, but it is not intuitive to many people. Can you articulate to our readers five ways that increased diversity can help a company’s bottom line. (Please share a story or example for each.)
Today, the business case tends to be the dominant driving force for organizations to pursue diversity. It is often cited by leaders as the rationale for taking action. Certainly, it is a case that has merit: diversity has been shown to deliver clear performance benefits such as increased profitability, greater innovation, and better talent attraction and retention. Yet relying solely on the business case is insufficient to meet future challenges. Leaders are well advised to also pursue diversity for on the ethical case for diversity (“it is the right thing to do”) and the societal case for diversity (support social cohesion and equality and advance sustainability).
Significant research has shown correlational evidence for the link between greater diversity and bottom-line performance. This performance is linked to five levers: financial performance, customer congruence, innovation, employee engagement and better decision-making.
- Financial performance — more diversity is linked to higher profitability and/or increased return on investment (ROI) and/or higher return on equity (ROE), and/or increased revenue growth. McKinsey has done significant research here and has shown that organizations with top quartile gender diversity on boards were 28 percent more likely to outperform on profitability. Also that organizations in the top quartile of diversity in terms of ethnicity and culture in senior executive roles were 33 percent more likely to have above-average profitability than companies in the fourth quartile of ethnic and cultural diversity.
- Customer congruence — more diversity is linked to more satisfied customers and/or more loyal customer. Organizations that succeed in creating inclusive and diverse environments lead to a 31 percent uplift in employees’ responsiveness to customer needs. This responsiveness translates to more satisfied customers and more loyal customers, increasing the lifetime value.
- Innovation — more diversity is linked to higher innovation and creativity, as evidenced by higher revenue percentage coming from new/innovative products and services. Organizations with above-average total diversity (measured by migration, industry, career path, gender, education, age), had 19 percent higher innovation revenues and 9 percent higher EBIT margins, on average. The conclusion was that a broad-based approach to diversity that values multiple aspects of diversity is most likely to benefit an organization’s innovation outcomes.
- Employee engagement — more diversity is linked to happier employees, more engaged employees, more loyal employees, less sick employees and the improved ability to tap into scarce resources. Organizations that invest in initiatives that support the feeling of inclusion and lead to an inclusive climate have the benefit of higher employee satisfaction, more engagement and higher employee commitment. Employee experiences of inclusion contribute to engagement and retention; indeed, 35 percent of an employee’s emotional investment to their work and 20 percent of their desire to stay at their organization is linked to feelings of inclusion.
- Decision-making — more diversity is linked to better decision making, such as risk management, lower occurrence of fraud, better functioning boards. There is an increasing focus on women on boards in response to quotas and also because gender-diverse boards are shown to have better decision-making. Research shows that gender-diverse corporate boards are associated with more effective risk management practices, increased engagement among board members, fewer controversial business practices and a higher propensity to invest in higher-quality audits. For example, adding women to a board can improve investment efficiency and prevent risky overinvestment decisions.
What advice would you give to other business leaders to help their employees to thrive?
Leaders, through their daily actions and words, have a significant impact on whether people feel included in an organization. Leaders need to embody and practice inclusiveness. They need to demonstrate a personal commitment to diversity and show that this is genuine. They need to walk the talk. This means creating opportunities for team members to feel connected and contributing and belonging to the team. Inclusive leadership is about each individual ‘leading themselves’ to be respectful team members — up and down the chain of command. Employees cannot bring their diverse perspectives to a work environment if they do not feel safe to share their perspectives and if they do not trust their leaders.
What advice would you give to other business leaders about how to manage a large team?
There is a risk that members of a large team feel isolated and not connected to their fellow team members. So, I’d advise a leader managing a larger team to ensure that people are connected to the purpose of the team and understand how they individually contribute to this purpose. Leaders underestimate the impact of doing the “small things”, for example holding a check-in at the start of a meeting; rotating the chair role of the meeting; inviting members of the team who are less confident to contribute in the meeting; being a good listener and being curious by obtaining feedback; and being courageous, yet humble, when regulating biases that may occur. All these small interventions create a sense of inclusion and confirm that the leader “walks the talk” of diversity.
We are very blessed that some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why? He or she might just see this :-)
I would like to have lunch with MacKenzie Scott. That’s not simply because of her generosity in donating more than $2.7 billion to 286 “high-impact organizations,” but also because the recipient organizations have been hand selected for the impact they have demonstrated. They are often overlooked organizations that advance diversity and inclusion in society on topics such as racial justice, higher education, combating domestic violence, and advancing talent. I believe that MacKenzie sets an important example for leaders and makes the case for re-deploying wealth to support the advancement of equity and diversity.
How can our readers further follow your work online?
Book Site
https://beyonddiversityandinclusion.com
Diversity and Performance Site
https://diversityandperformance.com/
Thank you for these excellent insights. We wish you continued success in your great work.
