Sector News

The real reason diversity is lacking at the top

June 24, 2022
Diversity & Inclusion

It’s a persistent myth: if a company recruits enough employees from underrepresented racial and ethnic groups, a sufficient number will, over time, rise through the organization to create a diverse culture at all levels. But that is not happening. Although efforts to recruit employees from racially and ethnically diverse backgrounds have become more effective, in many industries, these individuals, particularly Black and Latinx employees, are not advancing as successfully as their white counterparts.

To understand why, we took an in-depth look at our own industry: management consulting. The study, conducted in partnership with Management Leadership for Tomorrow (MLT), looked across the management consulting industry to understand why consultants fall off the promotion track, and we found five root causes that impact all consultants, regardless of their backgrounds. Of those five, two causes—a weak sense of belonging and difficulty navigating professional environments—are particularly challenging for consultants from underrepresented racial and ethnic groups.

Unfortunately, these root causes are often underappreciated barriers to diversity. Efforts to increase diversity typically focus on improving recruitment and on supporting the development of consultants from underrepresented racial and ethnic groups with training and skill-building opportunities. But none of these efforts, nor firms’ performance management systems, address the most significant obstacles that are blocking advancement and retention.

The result for many companies is a frustrating cycle in which significant energy is continuously expended on activities that do not have an impact. Ultimately, confidence erodes that the problem can be solved.

We have identified actions that can break this cycle—ways that companies can address the root causes of low promotion rates among employees from underrepresented racial and ethnic groups. And while our study focused on management consulting, the lessons learned are also relevant for other industries, including banking and technology, that have faced challenges in creating diversity and inclusion in the leadership ranks.

The renewed focus on racial inequity, particularly in the US, has reinforced the commitment among many business leaders to promote diversity in the workplace. But there is also a practical reason for companies to support greater diversity: it improves financial performance. In a 2018 study, BCG found that companies with management teams with above-average diversity reported higher innovation revenue. For those companies, sales from products or services launched within the past three years was 19 percentage points above that of companies with below-average leadership diversity.

Unfortunately, statistics show that business leadership is not growing more diverse, especially at the most senior levels; rather, the percentages of leaders from underrepresented racial and ethnic groups have hardly changed. In 2018, for example, Black managers represented only 3.3% of senior management in the US, down slightly from 3.6% in 2007. Interestingly, the percentage of Black midlevel managers in the US has been higher than the percentage of Black senior managers, but it increased only slightly, from 7.3% in 2007 to 7.5% in 2018. (See Exhibit 1.)

This data suggests not only that the percentage of Black leaders has stagnated but also that Black professionals are plateauing in middle management and not rising to the most senior ranks. Some industries are particularly lacking in diversity at the top: Black executives hold only 3% of senior management positions in finance and insurance and 2% in the IT industry.

One consequence of a lack of diversity is that top management often doesn’t have a clear understanding of the obstacles and, therefore, deploys ineffective solutions. A 2018 BCG study found that 33% of US employees who are from racially and ethnically diverse backgrounds see significant barriers to diversity when it comes to advancement. Only 19% of white heterosexual men aged 45 and older, a group that accounts for a large share of top leadership positions, had that same view.

The field of management consulting faces many of the same diversity challenges that other highly competitive industries confront. Although there has been a concerted effort to improve diversity through recruitment as the industry has grown, our interviews found a consensus that the number of partners from underrepresented racial and ethnic groups has not grown in proportion to the number of employees.

Given that the first promotion is particularly critical, often signaling whether an individual has the skills to rise in the organization, we focused on identifying the challenges that have impeded the early progress of consultants from racially and ethnically diverse backgrounds. (See “Putting Consulting Under the Microscope.”)

Eight Limiting Challenges. An obvious question is whether the advancement gap can be explained by differences in the levels of skills and expertise among individuals when they are hired. To address this, we took a look at the key metrics for students graduating from the top 20 MBA programs in the US in 2019. We compared the qualifications with those of business school graduates who earned their MBAs in 2015, 2016, and 2017, participated in MLT’s Professional Development program for underrepresented groups, and then were hired by top consulting firms. The two groups served as proxies for our analysis: the former reflects typical entry-level consultants at top-tier firms, and the latter represents new consulting hires from underrepresented racial and ethnic groups. READ MORE

By Justin Dean, John Rice, Wallrick Williams, Brittany Pineros, Daniel Acosta, Ian Pancham, and Mike Snelgrove


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