Businesses began to care about diversity in the late 1990s and early 2000s after a series of shocking lawsuits hit the financial industry. Morgan Stanley paid out $54 million and Smith Barney and Merrill Lynch more than $100 million each, to settle sex discrimination claims. Again in 2007, Morgan faced a new class action, which cost the company $46 million and in 2013, Bank of America Merrill Lynch settled a race discrimination suit for $160 million. These high profile cases got Wall Street's attention and ushered in the era of mandatory diversity and inclusion classes.
Many of these classes, however, focused on scaring participants with big lawsuit numbers, blaming white males for racism and sexism, and creating classroom environments that certainly did not foster learning. Companies have also tried to fight bias by using hiring tests which many managers ignore or work around. Similarly, annual performance ratings have not been shown to be effective in preventing bias, nor have various grievance procedures.
What does work? The study revealed that three basic principles helped:
1. Engagement: Asking managers to actively help boost under-represented populations -- such as women or minorities -- in their organizations through college recruiting or mentoring, has shown to be highly effective.
2. Contact: Studies show that contact between groups can lessen bias going all the way back to studies on the integration of troops during World War II. In business, self-managed teams or cross-training which allows people to try their hand at various jobs can expose people to a wider variety of people.
3. Social accountability: Firms that have transparency in posting a unit's average performance ratings and pay raises by race and gender show decreases in those differences. Corporate diversity task forces or diversity managers help promote social accountability by having members from each department investigate where there might be career bottlenecks, recruitment lags and other issues, and come up with solutions.
