Thursday 25th February 2021
Haig Nalbantian is a Senior Partner at Mercer and Co-leader/Co-founder, Mercer’s Workforce Sciences Institute. He has spent over 35 years as a consultant and researcher focused on applying rigorous empirical discipline to workforce management. Haig made a significant contribution to the How-To Guide: Becoming Employer of Choice for Women. More recently, he joined us during Session 2 of the Working Group on D&I Strategies for the Future of Work, where he discussed Mercer’s Internal Labor Market mapping and analysis methodology. This week, we sat down with him again to discuss how to analyze your workforce and the surprising findings that analysis can lead to.
Alliance: What prompted you to help develop the Internal Labor Market Mapping and analysis methodology? What gap(s) were you looking to fill in how organizations assessed the state of and designed strategies around workforce diversity and inclusion?
Haig Nalbantian: We created the ILM mapping and modeling methodology way back in the early ‘90s. It was not originally designed to inform D&I strategies per se, but to support the development of effective workforce strategies more generally.
The central idea behind the ILM is quite simple: Organizations are constantly in the process of creating their workforces. They bring people in from the outside. They move people through assignments, roles, career levels, training regimens, geographies, etc. They keep some of these employees and lose others. And they reward people for what they bring and how they perform.
Those talent flows and associated rewards are what determine the workforce the organization has now and in the future. Our basic proposition is that by quantifying and better understanding the dynamics of an organization’s ILM we could help it shape its workforce to meet its business needs. By applying the ILM lens and developing predictive models of the drivers of key ILM outcomes, organizations better understand which policies and practices best help deliver and effectively manage the ideal workforce.
Of course, one of the important outcomes of interest is the demographic composition of the workforce across career levels, jobs, businesses, etc. So, it was quite natural to apply ILM mapping and modeling to inform diversity strategies. In building predictive models of the drivers of retention, promotion, performance and pay, we naturally had to account for demographics, which—for better or worse—do affect those outcomes.
In the process, we started to learn a lot about the influence of demographics on the organization. This put us in a unique position to put results from modeling any one organization in a broader context of business experience. This has been very helpful to organizations who need to make sense of their findings and translate them into practical policy action.
In 2006, the D&I leader at major pharmaceutical company commissioned us to conduct an ILM Analysis to support development of their D&I efforts. Since then, the application of ILM mapping and modeling to the D&I area has surged. More and more organizations recognize that to do it right, they need an evidence-based approach. Gone are the days when the corporate legal team would summarily squash such inquiry out of fear of legal risk. You can’t solve problems you don’t see, let alone understand. And there is no longer any cover for abiding inequity in the workplace. Those days are over.
Alliance: What are the most common mistakes you see in how organizations measure D&I? What are some of the unintended consequences of these mistakes?
HN: Three areas come to mind. First, D&I can quickly devolve into a simple numbers game, a check-the-box approach to meeting representation targets at different career levels without much thought to what created gaps in the first place. Often the focus is on senior levels because they are the most visible, and the chosen solution is hiring. It’s not a mistake per se to target those roles and expand hires, but it may not be sustainable.
To be sustainable, a DEI strategy has to be intimately linked to the underlying talent strategy. The classic example of how this crops up relates to the “build vs. buy” issue—how much of an organization’s talent strategy should be about building its workforce from within versus going out into the market and get the right people at the right time and at the going price? All organizations have a mix of build and buy; the question is about the relative balance.
The problem is that many organizations have a build orientation to their overall workforce strategy but then resort to a buy strategy for D&I. In other words, they go to the outside market for diverse talent at the top levels. That can be a recipe for failure. Why? Because the new “bought-in” talent has a higher probability of leaving the organization, for two reasons:
1. If you have a build-heavy strategy for the wider organization, it generally means that institutional knowledge, internal networks and other forms of firm specific human capital are very important sources of value. And so, the outside talent, no matter how capable, is at a disadvantage. It’s almost like tissue rejection. As such, they end up leaving.
2. They also leave because they are highly sought after and wooed by other organizations. A few years out, you find that the desired representation has not been achieved despite all the hiring.
The second big mistake I see arises when organizations focus decisively on representation outcomes. If you just focus on outcomes and not on the drivers of those outcomes, the organic sources of success, you end up working at the lowest common denominator. You haven’t addressed the underlying causes of disparity and impediments to career advancement that produced the shortfalls in representation in the first place.
Again, the focus on outcomes becomes a check-the-box exercise breeding complacency. Because the outcome targets are not clearly connected to the business, they begin to feel like a regulatory requirement that alienates rather than engages leadership. Focusing on root causes and driving systemic progress actually invokes factors directly related to business success and thereby enhances the ability of leaders to drive change.
Finally, I would also mention the tendency to take a heavily programmatic approach to D&I. For example, you hear a lot about other organizations using affinity groups and mentoring programs, so you institute those as well. I am not saying that’s a bad thing to do, but it is certainly not a whole strategy. Without a common reference point for what the organization is trying to accomplish and an understanding of the systemic barriers to progress, such programs operate in a vacuum and will not significantly advance the cause. Far more important is to address the structural impediments and then design specific programs to reinforce the more fundamental reforms. Affinity groups and mentoring may well be a part of that strategy, but they are tailored to address the problems at the source.
Alliance: One of the benefits of using the ILM is that it allows you to identify bottlenecks in women’s advancement up the career ladder at an organization. What common bottlenecks do you see across the financial services sector that prevent women from reaching the top?
HN: Well, the first one that jumps out at me is how prevalent this phenomenon I call the “flip” is in financial services. The flip is the empirical observation that many organizations have a larger proportion of women at the lower levels, and then in the lower-middle or middle level of the hierarchy, representation flips to a larger proportion of men. Female representation then gets progressively smaller as you move up the ladder.
We see this across all sectors, but I’ve observed the flip to be particularly stark in financial services, in part because you have relatively large populations of women overall that are highly concentrated in the lower levels. In financial services, the flip usually appears at a pretty low level of the hierarchy. There are a lot of women in the pipeline that are way overrepresented in the lower levels. Then, there is a career bottleneck where their representation drops off dramatically.
What drives those bottlenecks? We see some remarkably consistent patterns across firms. The importance of roles is a big one. There are certain roles, which if you touch them in your career, the trajectory of your advancement and pay steepens and accelerates. And there are other roles that have a damping effect on career progression and pay. We see all too often that women are much more likely to be in the latter kind of roles.
Understanding what those roles are is a very important part of managing D&I well. You can have the best female talent in the world, but if they are not getting into the right roles from the start, they will not get into the top positions down the line. All too often if they do get into the right roles, it is later in career, so they don’t enjoy the benefits of being in them to the same extent as their male colleagues.
Some of the roles that consistently stand out as accelerators are people manager and supervisor roles. In almost all organizations with which I have worked, all else being equal, people managers and supervisors are more likely to be promoted and are more likely to receive high performance ratings. They are also higher paid. We almost always find that women are underrepresented in those roles, and it’s usually white males who predominate them.
Similarly, among the professional and managerial ranks, the customer-facing roles tend to be accelerator roles. But women are more likely to be in internal or functional roles, such as project managing internal initiatives. These roles appear alluring, as they often have high visibility internally, and they may even report to senior leaders. But since they are not as connected to the business, they leave the employee vulnerable to shifting conditions, such as turnover in the leadership ranks. If your sponsor departs the organization, you may end up falling through the cracks. Without a strong anchor in the business, you can find your career derailed.
When we work with employers, we are constantly trying to widen this narrow, monolithic pathway to leadership—one of these being mobility. For instance, in many organizations you will find that there are a few specific positions that feed a broader set of higher-level jobs than others. We call these “catcher” positions. (The name reflects the observation that a disproportionate number of team managers in major league baseball are former catchers; no other position makes as many future managers). There is something about those roles, which by virtue of where they sit, whom they interact with and the impact they have on the business serve inherently to build breadth of experience. We encourage organizations to identify these roles and consider them as potential substitutes for mobility. Getting into these roles could be a great assist to women as a means to build out their leadership capability in a way that is more aligned with their needs and circumstances. If you want to tap the full potential of female population, find those “catcher” roles that can simulate what the mobility does.
Alliance: Over your years as a consultant to organizations all over the world, what are some effective ways that you have seen organizations address these common barriers?
HN: A critical area is performance management. Performance management is always dicey, and yet it is so important to advancement, pay and retention. Performance ratings matter a lot in most organizations. That means you need to ensure that your performance assessment is reflective of actual performance or contribution. So often, however, we find that ratings are driven by circumstantial or situational factors like the role one occupies, who one reports to, which division one is in, etc.—factors that have little to do with the individual employee’s capabilities or effectiveness.
One area fraught with challenges is the assessment of leadership potential. Often, when it comes to the performance results side, we find women are actually more likely to get higher ratings than comparable men. But when it comes to how they are assessed on leadership potential, women and people of color are rated significantly lower. Women of color are particularly vulnerable to this skew.
Nobody sets out to make it this way. It is generally because organizations have a monolithic model of leadership, one that reflects the attributes and behaviors of the traditional leader profile, which reflects the attributes and behaviors of the predominate leader demographic of white males. And so, the behavioral markers that people look for in leaders will be very much reflective of the existing leadership.
There are alternative ways to look at leadership potential. Adjusting the leadership model can be very powerful. Some people may lead in more classic ways—being more vocal, taking credit for things accomplished—while others may be less inclined to speak loudly, but lead by example. They may possess other great leadership qualities that are critical to business success.
One more data-driven way to assess leadership potential is to undertake a network analysis. This is an analysis based on patterns of work interaction and communication. A network analysis can be based on surveys of employees or meta data from emails pulling out the broadcast messages and protecting people’s privacy.
One can learn a lot about the amount, quality and position of people in networks that reveal much about their role as leaders and potential for leadership. You can identify where people sit in networks: Are they in a node position of high centrality (the point of connection for many people across the organization), in bridge roles (linking one group to another) or are they isolated or on the fringes? If they are on the fringe, chances are they are not getting very much information or interacting with the key players, which is a red flag in terms of their prospects for advancement.
Through a network analysis one can identify unofficial leaders in a group—not those designated as leaders but the go-to employees who help make others more effective. These are individuals whose colleagues have recognized as leaders even if senior management hasn’t recognized them as such.
Alliance: What advice would you give to women starting out and in mid-career around getting to the top?
HN: A couple of things. First and foremost, I emphasize the importance of roles. On this, I will be a broken record. It is just that important!
As mentioned earlier, in most organizations there are accelerator and dead-end roles. Women need to avoid the trap of getting into the wrong roles. Try and understand what roles tend to be springboards for success and which roles get one closest to the business. We talk to recruiters about this because often they’re so focused on the quality of the candidate that they don’t pay enough attention to the quality of match to a role. They end up putting top talent into bad situations. Poor matches lead to stalling out of careers and, often, exit from the organization.
We know that in many organizations, mobility is a pre-condition for advancement into leadership. Indeed, many leadership models are predicated on mobility. The idea is that good leaders have broad experience and the way to build breath of experience is to frequently change jobs and to move across functions, businesses or geographies. The reality is that women may be less mobile at certain points in their careers. As such, leadership models that are based on mobility can be a serious impediment to the advancement of women into leadership. Knowing that your employer embraces such a model can be a real red flag for up-and-coming female talent. Try to find out from your employer how important mobility is; if mobility is not in the cards for you, maybe you look for an organization where that is not a major criterion to succeed.
The final thing to consider is flexible working. This has really come to the fore during COVID-19, so what we’ve seen historically may not be the best guide for the future. Still, there is reason for caution. Historically, people who opted for part-time, non-regular status, who worked remotely and/or who took leaves of absence ended up with a very pronounced disadvantage from a career perspective. And since women have traditionally been more likely to opt for those flexible working arrangements, they were really hurt by this unfortunate reality. Will that be the case going forward? We hope not. But if I am a female starting out or re-entering the workplace in mid-career, I would want to know how my employer treats people who engage in flexible working. Don’t be afraid to ask the hard questions. Employers know they need to do things differently if they want to address pay and career gaps for women. As such, they are becoming more aware of the systemic barriers that have held back their progress.
Alliance: How can smaller banks, startups, fintechs, etc., that may not be positioned to hire a consulting firm like Mercer apply concepts behind the ILM to help them assess the state of D&I in their organizations?
HN: That’s a great question, and its one I’ve been thinking about more and more, because D&I is not just the preserve of the large global corporations of the kind we tend to work with. How can smaller employers benefit from the learnings of these more complex organizations? First, I want to note that basic ILM mapping is not rocket science. The predictive modeling behind it is quite sophisticated, but a smaller organization would not have a sufficient employee population to generate reliable statistical modeling results anyway—so they can focus on the mapping and simple descriptive statistics alone.
ILM mapping itself is not hard to do. You can learn a lot just by looking at the shape of the map, the buy/build ratios across career levels, and identifying choke points, if they exist. And those observations give rise to valuable questions. For example, if you observe that at a particular level, women have a raw promotion rate significantly lower than men, you can start to ask if there are some likely causes of that difference beyond pure bias, unconscious or otherwise. It may have to do with differences in market experience, tenure, or representation in specific roles. All of these explanations are remediable—they can be addressed or offset if they work to the disadvantage of women. But you need to know. And it doesn’t always take advanced analytics to find out. Sometimes simple observation and/or qualitative assessments provide meaningful answers.
Another very basic thing a small company can do is ask the question: What makes someone successful in our company? Is it particular skill sets, aptitudes, where employees sit in the business, whom they work with (which you can find with network analysis) or something else? You might notice that employees in one group are more likely to be exposed to top leadership and are more likely to advance.
Conduct a mental mapping of what matters most to employees’ success at the organization, and then ask the question: Are we giving women/people of color access to the situations that promote retention and success? Are we positioning them to succeed in our company? Answering that question honestly opens the opportunity to transform your organization and to get on a path to create a diverse and high-performing workforce operating in an equitable workplace. That’s an outcome that is good for employees, employers and society alike.