Studies have shown a positive correlation between diversity and innovation, says PwC Malaysia

@Jackie San

 

PROMOTING diversity, equity and inclusiveness (DEI) is important for companies in Malaysia, especially for organisations that want to have robust competitive advantages and sharp differentiation to create their right to win, according to Datuk Ami Moris, chairperson of 30% Club Malaysia and CEO of Maybank Investment Banking Group (Maybank IBG).

Ami pointed out that DEI are the driving forces for the mobilisation of human or people capital.

“To thrive sustainably with resilience, successful companies typically need four types of capital - human capital together with financial, infrastructure and intellectual capital - that form the foundation from which organisations are built,” she said.

 

 

Ami pointed out that ensuring the diversity of demographic representation - around gender, age and social groupings - alongside the equity of access to opportunities for such representation to bring about inclusion - are all at the core of winning the battle for the best talent.

“In today’s world of fast and furious disruptions that requires equally tenacious re-thinking and re-inventing of business models, every Malaysian company will need to have the best talent at every level and domain to elevate their competitiveness and ultimately investability to attract capital at different stages of their growth,” she added.

PwC Malaysia people leader Steve Chia pointed out that the diversity of the Malaysian community should be reflected in workplaces, to allow companies to better serve their clients and stakeholders.

 

“We may miss out on opportunities if our teams are not diverse, which may close us off from new and emerging markets that result from changes in the business landscape today,” said Chia.

He noted that numerous studies have shown a positive correlation between diversity and innovation, which allow companies to develop innovative solutions and then offer a greater range of products to consumers.

 

“Studies also show a linkage between higher female representation in top management and greater returns to shareholders,” said Chia, adding that with social media, potential recruits will quickly know which organisations do well and those who do not.

“Where there is fierce competition for talent and with the current ‘Great Resignation’, a culture of inclusion may sway a talent’s decision to join,” said Chia.

Lee Soo Fern, who is Ernst & Young (EY) Asean DEI leader and Malaysia talent leader at Ernst & Young Consulting Sdn Bhd, also said DEI are increasingly important for talent attraction, engagement and retention, as well as to factor prominently into environmental, social and governance (ESG) and long-term value.

“As we continue to face unprecedented challenges that impact our people, clients and community, DEI are the levers that help us build trust and stability in times of volatility and uncertainty. Diversity is about differences and inclusiveness is about leveraging these differences to build high performing teams while establishing equity guardrails so that people get the resources and access to opportunities that they need to thrive, considering their different starting points. In doing so, we will have better business results and in turn, investability,” said Lee.

Institute of Corporate Directors Malaysia (ICDM) president and CEO Michele Kythe Lim also said organisations need to know that DEI are more than just mandated company policies, programmes, or headcounts.

“Boards and senior management teams need to play an active and significant role in setting the right tone from the top, one that balances employee morale and needs, productivity and performance,” said Lim.

She added that there is now greater awareness and heightened understanding of the need for different facets of diversity to manage risk and ultimately drive the success of a business.

In July 2021, ICDM, in partnership with WTW (previously known as Willis Towers Watson), launched the Malaysia Board Diversity Study & Index to establish correlations between board diversity and company performance.

 

 

Lim noted that a key observation from the study is that a well-constituted board is better placed to achieve sustainable financial performance across key financial performance metrics, suggesting a correlation between board diversity attributes and company financial performance.

As for Hays Malaysia business director David Hedges, he pointed out that DEI encourages “voices” and participation from people with diverse backgrounds, including neurodiverse individuals such as those with attention deficit hyperactivity disorder (ADHD), autism, dyslexia, dyspraxia, dyscalculia and Tourette syndrome.

Hedges explained that with more diverse viewpoints, organisations could tap into strengths and attributes that may be difficult to showcase during the interview process.

“Diverse individuals also bring a wider range of problem-solving approaches to the table, which may in turn drive innovation. Organisations with DEI strategies in place often find that employees feel more loyal and motivated to perform,” said Hedges.

Victor Phang, CEO and founder of WorkSmartly, which aspires to be the leading enterprise HR (human resources)-tech provider globally, is anticipating that more businesses will improve their appreciation of how DEI can benefit their companies in 2022 as a result of Malaysia’s strength as a multiskilled workforce.

Phang noted that there are currently 267,500 working-age Malaysians who have disabilities but are unable to land a job.

“Companies will have access to a fresh talent pool if they embrace diversity and inclusion while taking disability inclusion into consideration,” he said.

According to WorkSmartly’s study of corporate cultures, when workers believe they and their coworkers will be treated equitably regardless of colour, gender, sexual orientation, or age, they are 5.7 times more likely to wish to remain with their firm for a long time.

“In this disruptive environment, businesses that continue to employ employees of a specific race or culture face the danger of losing money, earning less, and falling behind their competitors. However, businesses that succeed in being inclusive and diverse will create significant value from the distinctions among their employees and thrive,” said Phang.

DEI issues at workplaces in Malaysia

About 54% of boards of the top 100 public listed companies (PLCs), and 80% of PLCs still have less than 30% women representation which is deemed the minimum critical mass to disrupt groupthink and to pave the way for more successfully diverse and strategic decision making, pointed out Ami.

“The current state also does not adequately reflect the realities of the marketplace where women and female graduates make up 50% of the population,” she said.

Ami noted that for listed companies in Malaysia, the right gender representation and balance at both boards and top leadership are naturally key success factors in building robust, resilient and sustainable companies that offer strong opportunities for the investing public.

She added that there is a clear business case to dig deep and cast the net wide to find the brightest, most talented and competent people to make public listed companies for example, globally competitive and to achieve higher investability whether amongst institutional or individual investors.

“So leaders need to assume the mindset of proactively fixing the broken rung, and creating the conditions and removing barriers for the best talent to be at the table and to stay. It’s not good enough to say we cannot help women who need flexible hours. Men would need them too as many are sharing in household responsibilities,” said Ami.

Chia noted that companies typically see diversity as “a nice to have, rather than a business imperative”.

“Where there are teams who are made up of mostly men, they tend to recruit others who are like them. This is called similarity bias. It isn’t just confined to gender; we can sometimes see cases where people recruit from the same universities or speak the same language,” he explained.

Chia also pointed out that during the pandemic, many women dropped out of the workforce to care for their family.

“Naturally, this will impact their careers and presents another setback to closing the gender pay gap,” he said, adding that companies should evolve programmes to help women return to work.

Meanwhile, Lim said challenges include driving the DEI agenda from the top – through culture, policies and governance.

 

 

“A strong and robust framework has to be in place to guide and govern the organisation on their journey. The policies and procedures need to be in place to challenge internal bias’, status quo and the pre-existing mindset or culture (where relevant),” she said, adding that increasingly, companies are under scrutiny for varying reasons.

In PwC’s Workforce Hope and Fears Survey 2022, after financial remuneration, 69% Malaysian workforce revealed that finding meaning at work matters the most when considering their employment decision.

Lim pointed out that the survey highlighted how employee expectations have evolved and are heightened – especially post-pandemic – and DEI is a key element in the overall working experience employees expect the company to cultivate.

Also, Hedges noted that the primary challenge is the lack of a proper framework for implementing a DEI strategy.

“DEI issues are highly nuanced and to properly understand them requires the allocation of resources and budget for consistent education and training for both employers and employees. Additionally, organisations that have decided on actions to take may yet find it difficult to agree upon clear goals, metrics and benchmarks for progress,” said Hedges.

He suggested that to mitigate this, organisations could tie DEI actions and strategies to key business initiatives.

“For instance, pulsing employees through listening sessions or surveys could be a steppingstone towards enhancing talent acquisition and even retention strategies,” said Hedges.

For Phang, one issue is workplace stereotyping which is a predefined, overly generalised opinion of an individual or group of individuals.

“This type of stereotyping might be based on your prior interactions with people who share your age, gender, ethnicity, background, level of education, or it might be influenced by your judgement and cultural biases (which we all have),” said Phang.

“Numerous prevalent stereotypes are disparaging in the sense that they are founded on unfavourable comparisons to a person’s race, ethnicity, age, gender, politics, or sexual orientation. Stereotypes restrict us from understanding one another and interacting with one another in a productive way based on individuating information. The characteristics that distinguish one person from another are referred to as individuating information,” he explained

As an example, Phang said, “If you make assumptions about your new co-worker based on the unfavourable stereotypes associated with their political party, you face the risk of establishing your relationship with them in a confrontational and unfriendly manner. This can make it very difficult for you to cooperate.”

Comparison with other countries

“The state of affairs is mixed in Malaysia and as in any country. Women hold 26% of board seats amongst the top 100 PLCs and only 18% of seats of all PLCs in Malaysia. Interestingly in Thailand, the proportion is reversed at 19% and 21% respectively,” said Ami.

She pointed out that some multinationals are naturally further on the DEI scale, driven by a global mandate.

“The 30% Club Malaysia has corporate advocates interested in participating because their head offices support the 30% Club in the United Kingdom,” she said.

Meanwhile, large Malaysian companies such as PETRONAS and Maybank have rolled out DEI initiatives.

Maybank Group is amongst four PLCs in Malaysia and 418 in the world to be part of Bloomberg’s Gender Equality Index.

At Maybank, women hold 31% of board seats above the minimum target of 30%; and account for 41% of senior management, the target is 45% by 2025.

Ami also noted that as local institutional investors such as Employees’ Provident Fund (EPF) integrate DEI considerations in its investment mandate, more of their investees will be compelled to take DEI more seriously.

Meanwhile, Chia pointed out that regarding women’s participation in the workplace, a Global Gender Gap Report 2021 by the World Economic Forum shows that East Asia and the Pacific (68.9%) was one of the three most-improved regions in 2021, having narrowed its gender gaps on three of the four sub-indexes (economic, education, health) but regressing on the political gender gap.

“As companies address their ESG priorities and align with Malaysia’s net-zero commitment, there needs to be a focus on designing gender responsive policies that enable women to have equal access to future job opportunities,” he said.

 

 

According to PwC’s Women in Work Index 2022, new green jobs will be concentrated in a few sectors such as utilities, construction and manufacturing, which are male-dominated.

“This will perpetuate further inequity unless steps are taken now to expand access to these sectors. This includes policies to increase the representation of women in STEM (science, technology, engineering and mathematics) studies and careers or providing more access to green finance for women entrepreneurs,” noted Chia.

He added that businesses, for example those in the energy sector, should also take this chance to boost female recruitment and representation and redesign policies to encourage more flexibility for both genders, helping to eliminate biases towards people who work flexibly.

According to Lim, Malaysia has seen tremendous growth in promoting DEI and “we continue to see efforts by businesses pushing this agenda forward.”

Lim noted that people are more aware and expect more responsible and ethical behaviour from companies and businesses – a Global Investor Study 20223 found that young investors felt more empowered to influence corporate decision-making through investments, prioritising principles and values when it comes to investing.

She pointed out that more are adopting and employing policies and practices that cater to the needs of different employee segments, age, gender and level.

“Early this year, four Malaysian companies, namely Bursa Malaysia Bhd, Digi.com Bhd, Malayan Banking Bhd (Maybank) and Top Glove Corp Bhd, have been included in the 2022 Bloomberg Gender-Equality Index (GEI)4, which is an index that recognises PLCs that bring transparency to gender-related practices and policies, increasing the breadth of ESG data available to investors,” said Lim.

She added that overall, boardroom priorities in 2022 have shifted and Asean boards across this region are aware of the need to do things differently to safeguard organisational resilience and create long-term value.

ICDM’s 2022 Asean Board Trends Survey published late last year showcased key trends that may impact boardrooms and they include Asean boards recognising the importance of board refreshment (51%), which is key to ensure board diversity.

Meanwhile, the Hays Diversity & Inclusion Report (2019/2020) found that more Malaysian respondents believed ethnicity lowered their chances of being selected for a job, compared to other Asian countries like Singapore, Japan and China.

Additionally, the report also found a decline in the number of female line managers, alongside a drop-in belief in the equality of career progression.

“Salary levels followed a similar trend and there is still a notion that pay levels across seniority and genders lack transparency,” said Hedges.

Phang pointed out that 56% of women in Malaysia had encountered some sort of gender discrimination at work, according to the “Voices of Malaysian Women On Discrimination & Harassment in the Workplace” survey.

He noted that factors such as discrimination, harassment and a heavier unpaid care burden that impacts both employees and job searchers, contribute to women’s poor involvement in the workforce.

“Also, according to reports, 62% of men hold management jobs now, compared to only 38% of women in Malaysia,” said Phang.

Challenges involving DEI in workplaces

Ami urged corporate leaders to go beyond the lip service of believing in DEI to questioning on a day-to-day basis business-as-usual thinking and actions.

“Sometimes, expediency and “if it ain’t broken, why fix it” is an enemy to greatness. Companies must be prepared to slay sacred cows,” she pointed out.

Ami proposed that at the board level, concrete steps to operationalise DEI can include getting the diversity right at the selection panel or nominating committee.

“Set the tone from the top. Ask for a 50:50 list, for example, four men, four women so that both genders have equal chances of succeeding,” she said.

Another step to integrate DEI should be to remove the criteria that candidates must have prior board experience before they can be considered so that companies can tap into a bigger pool of applicants

including those coming out from the workplace with the latest expertise.

“Look out for candidates with skillsets that are very much needed today but are lacking in the current board such as in sustainability, change management and digital transformation. These are dynamic fields that do require latest practical know-how,” said Ami.

“Also, please hold management accountable. Ask for the data, set realistic targets that link to business objectives, implement and of course, fine-tune. There’s no silver bullet answer,” she added.

Meanwhile, Lee pointed out that a culture change requires concerted efforts from both the organisation (employer) and employees.

“The organisation needs to enable the culture change starting with establishing a baseline and cascading awareness, to institutionalising DEI through clear narratives, policies, processes, clear measurements (key performance indicators or KPIs/scorecards), learning, performance management, reward and having a dedicated team that drives the DEI agenda,” said Lee, while the employees need to influence the culture through understanding and practicing inclusive leadership and behaviours.

 

 

“Making DEI systemic requires investment of time, effort and money and a clear tone from the top management. It needs to be seen as a business imperative, not another human resource initiative,” added Lee.

Lim noted that one challenge is that the misalignment between employer and employees.

“A Global Trends in Employee Engagement 2022 report highlighted that amidst the fluctuating and uncertain environment we operate in, many organisations are trying something new - testing, learning and refining, whilst others are holding back in the hope that things will go back to “normal”, an indication that companies are not moving fast enough to address employees’ expectations and needs,” said Lim.

Lim added that challenges need to be addressed from the top.

“On this front, ICDM will continue to work with industry experts to bring capacity building programmes relevant to this area to equip directors with the right knowledge and tools to respond to these challenges.

For instance, ICDM hosted a PowerTalk on Talent Uprising to provide deeper insights to the trends and themes in culture and talent and its impact on organisational success,” said Lim.

Meanwhile, Phang pointed out that bringing together a varied group of people might also result in some difficulties and communication problems.

“Your team may include members who have hearing impairments, various communication preferences or styles, or language barriers. It’s crucial to handle these difficulties before they become an issue,” he said.

Phang noted that an organisation is likely to experience more bias, discrimination and harassment as its workforce becomes more diverse.

“More than 50% of employees have seen or been the victim of discrimination at work because of their age, colour, gender, or sexual orientation. This may prevent workers from bringing their true self to work, which would limit collaboration, creativity and innovation,” he said.

Progress in Malaysian companies

The percentage of women holding board seats amongst top 100 PLCs has doubled from 2014 at 13% to 26% in 2021.

Ami noted that a key catalyst has been policy, as the Malaysia Code of Corporate Governance has prescribed for companies to have at least 30% women representation at board level and to explain the reason if this is not fulfilled.

By June 2023, all PLCs in Malaysia must have at least one woman director.

“It’s shocking that there are some 200 companies with all-male boards,” she said, urging boards and top management to have an unrelenting pursuit to find and retain the best people.

“As Peter Grauer, Bloomberg chairman and global DEI advocate said at Maybank’s Invest Asean conference, DEI is an evolutionary process, not a revolutionary one. While leaders and capital market

regulators can mandate more gender diversity, this has to be supported by bottom up action so that the benefits of DEI are realised. We don’t want this to be just a box-ticking exercise, which I appreciate does happen. The worst case is to engage in pink-washing,” said Ami.

Chia said there has been progress among leading companies in Malaysia, in providing support and retaining women.

“There are also more companies who employ people who are differently-abled, for example, people with hearing impairment or who are on the autism spectrum,” he said.

Chia added there is a global trend of an increase in investors who prioritise good ESG practices in investee companies.

“This will influence business leaders who, in the past may not prioritise DEI, to see the value of integrating it within their businesses,” he said.

In PwC’s 2021 Annual Corporate Directors Survey, 52% of directors surveyed support tying executive compensation to diversity and inclusion goals, up from 38% in 2020.

Meanwhile, Lim noted that from a board and director perspective, ICDM has seen a marked change in board priorities and dynamics.

“Today, board attention and priorities on performance is underpinned by the understanding of the need to move the needle on culture, as a catalyst for more engaged, productive and higher performance employees,” said Lim.

Also, ICDM aims to create a structured path to build a pipeline of high-calibre, quality director candidates.

“In the ICDM director registry, young directors under 40 years old and between 40 and 49 years old comprises 22% and we hope to continue growing this pipeline. On this front, we are seeing the shift amongst Malaysia’s boards in their commitment to DEI by changing the way they source, nominate and appoint directors. This is evident with the increased number of requests in independent director sourcing,” said Lim.

From January 2021 to April 2022, ICDM received 87 independent sourcing requests, compared to 42 in the previous reporting period.

“We have successfully placed 12 directors in the first four months of 2022 alone. Our clients come from a wide range of industries, from consumer products and services to energy and transportation and logistics,” said Lim.

Amongst the most sought-after expertise for these director sourcing and placement requests are skill sets related to sustainability and ESG.

“We have also successfully placed first-time directors on a listed board. This demonstrates that companies are increasingly more inclined to welcome to their boards first-time directors who possess the necessary skill sets required,” added Lim.

Hedges also concurred that over the years, DEI in Malaysia has certainly seen some progress.

According to the 2022 Global Gender Gap report, Malaysia rose from 112 the year before to 103 in ranking.

“This likely be due to the growing public awareness of the importance of DEI, which have led to organisations implementing organisation-wide strategies to further improve DEI, as well as setting up collaborative roundtables for diverse employee groups to share their input on diversity. However, there remains much room for progress,” said Hedges.

Phang pointed out that women are increasingly holding managerial positions at the middle and lower levels across enterprises, which fosters a diverse work environment.

“In addition, there are a lot of households with just one parent, and most of them are headed by women. As a result, more women are working in organisations, which calls for new sets of work standards and regulations,” he said.

Phang also noted that many companies are modifying their policies to make it easier for families to balance dual careers.

Organisations walking the talk

Meanwhile, the 30% Club Malaysia is part of a business-led global campaign founded in the United Kingdom with the primary aim of promoting gender balance in boardrooms.

Its goal is to reach 30% women representation amongst top 100 PLCs by 2023, and for all PLCs by 2030.

The 30% Club Malaysia engages with boards and senior leaders on the business case and how to achieve DEI, and is also involved in shaping policies, contributing to industry consultation, communicating DEI best practices, and aligning with institutional investors as they can influence boards.

Also, PwC Malaysia and 30% Club Malaysia have been collaborating to improve diversity on boards.

Chia noted that by activating the movement among corporate leaders, and leveraging key influencers in the investor community and government groups, women representation on the boards of the top 100 PLCs in Malaysia has risen from 14% in 2015 to 28.2% as at July 1, 2022.

To create a sustainable pipeline of talent, the 30% Club Malaysia in collaboration with PwC Malaysia, launched a Board Mentoring Scheme in 2017 to bring together experienced board directors and aspiring board-ready women to accelerate the appointment of more women into board positions.

As of February 2022, 68 mentees have completed the nine-month programme, of which 33% are serving on boards of listed and non-listed companies.

Companies can get involved to champion DEI, learn and contribute by joining the 30% Club Malaysia as a Corporate Advocate.

Chia pointed out that at PwC Malaysia, the recruitment strategy has been curated with DEI in mind.

“We work with different colleges and universities to ensure we can get a diverse pool of talents, aiming for diversity in gender, social or educational background. We hire graduates from both the local and overseas pool, and as we rethink our delivery model, we also recruit talents who are diploma holders and school leavers with Technical and Vocational Education and Training to provide them with opportunities to develop and grow with us with the relevant educational support programmes or obtain their professional accounting qualifications through our Earn While You Learn programme,” he said.

Also, PwC Malaysia has recruited 20 women career break returnees since 2015 through the TalentCorp Career Comeback Programme.

In 2022, PwC Malaysia also set a long-term diversity target, which is one of its leadership KPIs that is being tracked and reported on annually.

To help parents manage family and work, PwC Malaysia has policies that include up to six consecutive days off to care for children who are infected by Covid-19.

The company also extended paternity leave from five days to 30 days in 2019, among the first in the market to do so.

Meanwhile, Lee pointed out that Ernst & Young (EY) has embedded DEI in its strategy execution plan to help realise its long-term ambition.

She explained that EY’s approach is systemic and holistic, including an established DEI team structure and resources to drive and execute priorities, an annual DEI tracker with clear targets to measure progress, a culture change road map towards the highest performing teams, a global social equity taskforce with a clear mandate to drive activation across regions and markets through locally relevant social equity campaigns, as well as a clear and inclusive leadership strategy that requires all leaders to complete a high-touch learning session and all employees to complete an inclusive leadership for all e-learnings.

EY also has policies and guidelines on workplace behaviors, flexibility, well-being and an inclusive work culture, regular surveys on employee experience with specific questions relating to DEI, and the organisation makes DEI part of performance management of leaders and people.

Meanwhile, mental health and wellness is a key focus of ICDM and Lim explained that initiatives were organised to keep employees engaged during the various periods of lockdowns.

“We have adopted a hybrid work model with two optional work from-home days per week to help employees balance work and life while maintaining the important in-person experience. Occasion-driven work attire is also part of the new normal in ICDM,” said Lim.

This year, ICDM will embark on an external independent employee survey to better understand their needs.

Lim noted that the ICDM team is made up of a mix of individuals from different backgrounds and expertise.

“In terms of gender diversity, our team is currently made up 70% females and we hope to achieve a more balanced gender diversity as we move forward. We also have a good mix of people from different age groups and locations - East and West Malaysia,” she said.

As for the ICDM board composition, it has 36% female directors and 25% are below the age of 40.

“They are made up of a balanced mix of cultures and skills, from regulatory to entrepreneurial, education to banking. These are the values we uphold in ICDM and are advocating to the business community via our research, advocacy dialogues, board effectiveness evaluation as well as director sourcing services and programmes,” said Lim.

According to Hedges, Hays emphasises robust equal pay policies to ensure that male and female employees are paid fairly for equivalent work as part of the company’s efforts to close the gender pay gap.

“Internally, we focus on building awareness, especially among female employees of the support that is available to them, such as ensuring that our policies on maternity and parental leave are visible and easy to understand. We also raised a new manager-led review for returners four months after they return to work to talk about their experiences and discuss any additional support if they need,” he said.

Also, all new employees at Hays are required to attend training sessions on unconscious bias and how to avoid it leading to unconscious discrimination.

“This is further enhanced with our blind recruitment process internally – where personally identifiable information such name, gender, age and education, is omitted from applicant CVs to have a more diverse selection to support diversity in our newest hires,” said Hedges.

He also noted that Hays Malaysia recently celebrated the promotion of its first home-grown country director, Natasha Ishak, to oversee the operations for both of its offices in Malaysia – Kuala Lumpur and Sunway, “truly walking the talk”.

Meanwhile, Phang said WorkSmartly supports the promotion of all aspects of its DEI policy and apply them in overall people practices at work for all levels.

“This year, we declared a group wide paid holiday for all employees on April 14, as we acknowledge that there is no gazetted public holiday for Tamil New Year and Vaisakhi. We learn and respect more concerning team members’ culture, traditions and religious beliefs,” he said.

 

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@Jackie San