The Case for Diversity

The world is changing. Less than 50 years ago, NASA sent the first man to the moon. Since then, technology has improved and spread rapidly. Take the average car, for example. It has more computing power than NASA’s entire system did during the moon launch.¹ Look at your smartphone. It has millions of times more computing power than all of NASA had in 1969.²

We can expect even more drastic changes in the coming decades. Estimates show that by 2040, 75 percent of all vehicles will be driverless.³ NASA has made plans for humans to live on Mars within decades. Artificial intelligence (AI) is already in use today, and its capabilities are growing.

How can we best compete in the future? We must consider that question both as individuals and as companies. There is a clear need for more professionals in the fields of science, technology, engineering and math (STEM). In the last decade, STEM jobs grew six times faster than non-STEM jobs.⁴ If trends continue, by 2040, the United States could see a shortage of 1.1 million STEM workers.⁵

One reason behind this projected shortfall in STEM workers is the lack of diversity. The National Center for Science and Engineering Statistics maintains statistics on the diversity within the U.S. workforce. In its 2017 report, it states: “The representation of certain groups of people in science and engineering (S&E) education and employment differs from their representation in the U.S. population. Women, persons with disabilities and three racial and ethnic groups—blacks, Hispanics, and American Indians or Alaska Natives—are underrepresented in S&E.”⁶

The report also includes demographic projections. By 2060, minorities will account for more than half—56 percent—of the U.S. population. This is an increase from 38 percent at the time of the report’s publication in 2017. As baby boomers retire, more professionals will leave STEM employment. About half of engineering and advanced manufacturing workers are approaching, or at, retirement age. As workers retire, not enough new workers are taking their place in these fields. In addition, the STEM workforce was no more diverse in 2015 than it was in 2001,⁷ despite the changing demographics in the United States. To address projected shortfalls, we need younger and more diverse professionals to enter the workforce, and this includes the actuarial profession. Like the overall trend in STEM professions, most minority groups are underrepresented in the actuarial field when compared to the general population.⁸

What Is Diversity?

We often link the concept of diversity to that of identity diversity. Identity diversity refers to personally identifiable characteristics such as race, ethnicity, gender and sexual orientation. Many large companies—such as Intel, PepsiCo and Microsoft—fund major programs to encourage identity diversity. Intel recently pledged $300 million to its diversity efforts with the goal of reaching full representation of women and underrepresented minorities in its workforce by 2020. PepsiCo invested $100 million in its educational initiative to help women and girls worldwide achieve success in the workforce.⁹ In addition, Microsoft launched a scholarship program to help students with disabilities go to college.¹⁰ Companies involved in such initiatives are helping to generate a more diverse workforce, which will help address the projected shortfall in STEM professionals. Companies that have more diverse workforces and management teams also see a positive impact on their financial performance.

Companies in the top quartile for racial and ethnic diversity are 35 percent more likely
to have returns
above the national
industry median.

Impact of Diversity on the Bottom Line

The consulting organization McKinsey & Company studies how identity diversity ties to financial performance. Its 2015 report outlined several key findings. Companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have returns above the national industry median, while companies in the top quartile for gender diversity are 15 percent more likely to have returns above the median. On the flip side, companies in the bottom quartile for gender and ethnic diversity are less likely to achieve above-average returns than the average company in the study.¹¹

What’s the connection between a diverse workforce and an increase in a company’s performance? Ethisphere Institute executives Ty Francis and Erica Salmon Byrne discussed this during an episode of Nasdaq’s Behind the Bell. They found companies that do business with integrity outperform the market. When companies encourage diversity and inclusion, according to Francis and Byrne, more of their employees feel a sense of belonging, and they are therefore more committed to the business. When employees are more committed, they do business with more integrity. This impact of diversity on company culture, and on integrity, is a key reason why companies with diverse management teams outperform their peers.¹²

As keynote speaker at the 2017 Society of Actuaries (SOA) Annual Meeting & Exhibit, Scott E. Page offered a more technical explanation of the impact of diversity on performance. He explained that diverse groups typically outperform individuals because of something he called the “diversity bonus.” Page demonstrated this effect through several examples. In these examples, when models were combined, they outperformed the results of any one of the individual models. This occurred because the average deviation from the best possible answer got smaller as more diverse models were grouped together. Page argued that this concept applies to people as well as to mathematical models.¹³ This effect is known as cognitive diversity, or diversity of thought. The more diverse viewpoints that are represented within a group of individuals, the better the overall output of the group is likely to be.

The Importance of Inclusion

So far, we’ve seen that cognitive diversity results in better modeled and group results, and companies with diverse workforces and management teams outperform their peers. It then follows that identity diversity can lead to cognitive diversity. People from different backgrounds often have different experiences from one another, and groups made up of people from varying backgrounds may generate innovative ideas that individuals in homogenous groups do not. There is another important element required to achieve diversity of thought: It is important to focus on inclusion. Even in a room full of diverse individuals, we cannot fully achieve the benefits of diversity of thought when we fail to include each person in the discussion.

92 percent of meeting participants say that if they could more freely share ideas in meetings, they would feel more engaged and happy
at work.

To place an explicit focus on inclusion, we must consider inherent differences in personality types—such as introverts and extroverts—that may have nothing to do with identity diversity. Introverts are individuals who prefer to recharge their energy in a quiet setting where they are alone. Extroverts are those who generate energy by being around and interacting with other people. Susan Cain, the keynote speaker at the 2012 SOA Annual Meeting & Exhibit, is a popular writer who has written extensively about workplace dynamics between introverts and extroverts. She argues that the workplace is moving toward one that favors extroverts and their strengths. Data supports this: Up to 50 percent of the workforce self-identifies as introverts, yet 96 percent of leaders and managers self-identify as extroverts.¹⁴ The workforce seems to place a premium on promoting more extroverted employees. That means that the views of introverts may often be overlooked or underappreciated. Cain notes that “the bias against introversion leads to a colossal waste of talent, energy and happiness.”¹⁵ In a group setting, if we fail to successfully engage and appreciate the views of all parties—including both the introverts and extroverts in the room—we will not fully tap into the cognitive diversity of the group.

How to Encourage Diversity and Inclusion in Your Daily Practice

We may not be able to change everything at our companies—including hiring practices or whether there is a diversity program and talent mobility—but there are still actions we can take to make a difference. Here are some ways that you, as an individual, can encourage a culture of diversity and inclusion and fully tap into the cognitive diversity of your team.

• Make sure to hear from everyone. According to research by Wisembly and Censuswide, 41 percent of meetings are dominated by just two of the meeting attendees, and 92 percent of meeting participants say that if they could more freely share ideas in meetings, they would feel more engaged and happy at work.¹⁶ The solution is simple: Find a way to hear from everyone at a meeting. It may be difficult to break the flow of discussion at times, but by doing so you gain input from those who have not yet spoken. This will help you to capitalize on the benefits of diversity of thought. This is especially important when meeting with others on the phone. It can be difficult to find the right time to speak during a conference call, especially when there are a lot of attendees on the line. It is incumbent upon the meeting organizer to call on people, including those who have not yet contributed. Even as a participant, you can always turn to others in the room or ask others on the phone for their point of view if they have not spoken in a while. Effectively engaging everyone is the best way to collect all points of view to best achieve effective diversity of thought.
• Try a matrixed approach. A matrixed team is one that is put together on a project-by­-project basis and is usually composed of people who have unique skills. This approach can also be used to expose employees to new assignments. More important, it gives employees an opportunity to work with a different group of people on each new project. This can offer participants more diversity in their interactions with colleagues. A matrixed approach can also motivate, engage and make participants feel included, as they are able to contribute to the decision-making process. In an article published by Management Square, the author explains that a matrixed approach “encourages democratic leadership style which incorporates the input of project team members before managers make decisions. This contributes valuable information that leads to employee satisfaction and increased motivation.”¹⁷ This combination of diversity in interactions with other employees and an increased feeling of inclusion can make a matrixed approach highly effective. If your organization does not employ a matrixed system, you can still seek out the benefits of such an approach: Ask to work on projects with a group of individuals with whom you do not normally work. The benefits of working with and learning from others with whom you do not normally work will improve the diversity of your own experience. It will also make your contributions more valuable in the future.
• Choose mentors and mentees that don’t look like you. Mentors are an important part of our professional growth and development. They guide us through important decisions, provide valuable insights and help us to understand ourselves better. We can have more than one mentor at a time. In some cases, it can benefit us greatly to work with mentors who do not look like we do. This can expose us to different backgrounds and experiences than our own and offer viewpoints we may not have considered otherwise. Author Conrado I. Generoso said, “No man is capable of self-improvement if he sees no other model but himself.”¹⁸ The same advantages exist for those we choose to mentor. It can help to promote diversity in a company when we mentor those who do not look like we do. Campbell Soup Company’s president and chief executive, Denise Morrison, said that “the path to diversity begins with supporting, mentoring and sponsoring diverse women and men to become leaders and entrepreneurs.”¹⁹

Bring It All Together

When it comes to technology and what the world will need in the future, there may be no better authority than Apple co-founder Steve Jobs. Apple recently broke its own record as the most valuable publicly traded company of all time.²⁰ Jobs helped bring the iPhone to more than 700 million users worldwide.²¹ He also made a compelling case for diversity. Jobs said: “A lot of people in our industry haven’t had very diverse experiences. So, they don’t have enough dots to connect, and they end up with very linear solutions without a broad perspective on the problem. The broader one’s understanding of the human experience, the better design we will have.”²²

A matrixed approach can motivate, engage and make participants feel included, as they are able to contribute to the decision-making process.

The need to advance diversity in STEM professions is clear. There may be no better place to start than with the actuarial profession. In U.S. News & World Report’s 2018 Best Jobs Ranking, the job of actuary is ranked as a top job. It is also ranked as the third-best job for STEM professionals.²³ As individuals, we may not be able to change the culture of our entire company, but we can still focus on the impact we can have on others. If we put some of these practices into place in our daily routine, we can all do our own small part to encourage the growth of diversity in the actuarial profession. That will contribute to the overall diversity of STEM professionals and, in turn, make us all better prepared to address the many challenges of the future, whatever they may be.

Copyright © 2018 by the Society of Actuaries, Chicago, Illinois.