Many companies have clear strategies in place to increase diversity and inclusion (D&I) among leaders, but it remains unclear how these policies are making change. Deloitte’s Sandy Cockrell and Carol Larson discuss CFOs’ increasingly important role in championing D&I.
Diversity and inclusion (D&I) are top of mind for executives and organizations of all sizes, but progress remains sluggish. For example, the number of women CEOs at the Fortune 500 recently inched up to 33, according to Fortune magazine. Although a record high, that’s still only 6.6 percent. Moreover, none of them are women of color. The number of women CFOs in the Fortune 500 hovers around 12 percent, but that level could drop depending on who ends up filling positions that are open due to planned retirements of women CFOs. The gap is baffling, given that women make up about 26.5 percent of executive/senior level officials and managers in the S&P, according to Catalyst.
When Deloitte’s CFO Program explored what organizations and CFOs are doing to help close the gaps in both gender and diversity, two-thirds of 158 CFOs from many of North America’s largest and most influential organizations indicated their companies are making substantial efforts to use D&I strategies to strengthen their talent base. 1
Deloitte’s first-quarter 2019 CFO Signals™ survey revealed that CFOs’ actions for promoting gender inclusion focus largely on helping women advance in their careers. Actions taken to promote minority inclusion concentrated on increasing minority hires — especially through more diverse interview slates and new/broader recruiting channels.
Implementing flexible work arrangements was the most-cited action for fostering D&I, cited by 60 percent of the CFOs participating in the survey. Other actions cited were: including diversity metrics in internal reporting (54 percent), providing training around unconscious bias (54 percent) and assigning D&I responsibility to a senior leader (54 percent). Developing specific aspirational goals for diversity/representation and including diversity metrics in external reporting were the two least-cited tactics, at 42 percent and 20 percent, respectively.
These results indicate room for improvement. CFOs have an opportunity to shape the outcome by drawing on the skill sets they demonstrate daily in leading finance: namely holding themselves and others accountable for results and bringing an independent and objective mindset to issues, processes, the means of measurement, the roadmap to get there and progress against those goals.
Formalizing D&I Objectives, Strategies, Measurement and Accountability
CFOs know the power of formalizing strategies and holding people accountable for executing them. CFOs can work with their HR or talent groups to develop formal D&I objectives, with well-thought-out strategies and processes to meet them, along with accountability that cuts across both finance and HR/talent. Such efforts would encompass development programs, including coaching, opportunities to gain more experience from rotations in other parts of the organization and sponsorship, which goes beyond mentoring to require a commitment to identify and prepare future leaders.
The CFOs we surveyed said some of their best actions for ensuring equitable advancement opportunities involve considering diverse slates of candidates, focusing on merit-based decisions and hiring diverse leaders into senior roles. When asked about the most impactful steps their companies have taken to provide equitable opportunities for advancement, CFOs were most likely to cite approaches that create diverse slates of candidates (for both recruiting and promotions) and also make decisions based on merit. They also cited providing training around D&I and unconscious bias, implementing sponsorship and mentorship programs, strengthening development opportunities for all staff and establishing resource groups.
Critical to accountability for results is leadership. The CFO Signals survey made clear that CFOs recognize the role leadership plays in expanding D&I, citing a variety of practices that can help ensure D&I has the leadership support necessary to achieve results, including hiring diverse leaders into senior roles, developing a company vision for D&I, creating a culture of inclusion and establishing regular reporting on diversity metrics.
Without a formal and deliberate plan to increase D&I within finance and commitment from the CFO and other leaders, the tendency – particularly when under time pressures – can be to turn to the usual slate of candidates who, while possibly qualified, may not bring the diversity of thought and experience organizations need to do business in today’s global marketplace. CFOs, known for their rigor in planning for capital allocation, major transactions and business transformation, are ideally positioned to help drive toward their organization’s D&I efforts, again, in close collaboration with their HR/talent groups.
Communicating the Objectives, Roadmap and Progress
Given their work with the investor community, CFOs understand the importance of communications with clear, consistent and ongoing messages about their organization’s strategic direction, the plans to get there and key milestones reached. CFOs can take a page or two from their investor relations (IR) playbook to underscore their organization’s commitment to D&I. Like other corporate strategies, D&I objectives need to be communicated — and broadly — to take hold and be effective. Case in point, slightly more than half (53 percent) of the 158 CFOs surveyed on their organization’s strategies to promote diversity and inclusion indicated that those strategies are known throughout their company and embedded in their talent brand/strategy. And only 31 percent of the CFOs noted that their practices affect their customer brand.
That signals a major opportunity for CFOs to team up with HR/talent, corporate communications and investor relations to convey what they are doing to support D&I and make their organization’s D&I efforts and achievements a hallmark of the organization’s brand for both employees and customers.
Revisiting Your Finance Bench
Perhaps one of the most direct ways CFOs can contribute to the organization’s D&I efforts is to revisit their own finance function, how it is currently staffed and opportunities to develop women and minorities into finance leaders. And as CFOs look ahead to the legacy they want to leave their organization, they might also want to consider what impact they want to have on increasing diversity and inclusion in their own teams.
Turning back to the Q1 2019 CFO Signals survey, CFOs indicated their average number of direct reports was 7.60, with about 40 percent female, minority or both.2 Racial/ethnic representation among current direct reports, by comparison, was considerably lower — 1.05 minority, or about 14 percent, compared to an average of 6.55 non-minority.
When CFOs were asked about the ratio of men to women among their direct reports, the results show an average of 5.22 men and 2.38 women ― or about 31 percent women, an increase from Q3 2017 when we asked the same question. Then, the average number of female direct reports was 1.9 out of 6.75, or about 28 percent.
CFOs also indicated that roughly 20 percent of their direct reports would be CFO-ready within three years, for an average number of 1.46. Among CFOs’ direct reports, 43 percent of the men (23 percent minority and 20 percent non-minority) were noted as ready to step into the CFO role in three years, according to the survey.2 That compares to 32 percent of the women direct reports (14 percent minority and 18 percent non-minority) who were regarded as being CFO-ready in three years.
The role CFOs play in championing D&I will grow ever more important to their organizations, as well as to employees, investors, customers, board directors and other stakeholders. Now is the time for CFOs to take a close look at their finance function and what it could, and should, look like in 2020.
Endnotes
1 The Deloitte CFO Signals survey for the first quarter of 2019 was conducted between February 11 and February 22, 2019. A total of 158 CFOs responded. Sixty-nine percent of respondents were from public companies, and 84 percent were from companies with more than $1 billion in annual revenue.
2 For survey purposes, “minority” includes Black or African American, Asian, Hispanic/Latino(a), American Indian and Alaska Native, Native Hawaiian and Other Pacific Islander and two or more races. Percentages are calculated only for responses that included both the total number of direct reports and the number of CFO-ready reports.
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Sandy Cockrell is the global leader of the CFO Program for Deloitte Touche Tohmatsu Limited (DTTL). The CFO Program enables DTTL to achieve its strategic vision “to be recognized as the pre-eminent advisor to the CFO.” It harnesses the broad capabilities of DTTL member firms to deliver forward thinking and fresh insights for every stage of a CFO’s career — helping CFOs manage the complexities of their roles, tackle compelling challenges and adapt to strategic shifts in the market.
Carol Larson, a senior Audit & Assurance partner at Deloitte & Touche LLP, is the champion for Women Executives in Finance for Deloitte’s CFO Program. In this role, Carol works to add the perspectives of women across the spectrum of CFO Program offerings through mentorship and development of women in many levels of finance leadership. Carol supports and engages with women in finance and across the C-suite and contributes perspectives and insights through various thought leadership vehicles. These efforts include championing the advancement of women finance executives through events like CFO Vision™, CFO Forums and CFO Transition Lab™ sessions.
Carol has been a Deloitte partner since 1989, serving large, complex clients in the financial services industry. She has held the U.S. and global leadership roles in audit, financial services and central banking.
