The CFO’s role in promoting diversity, equity and inclusion
Today is International Management Accounting Day – an annual celebration created by the organization of which I am CEO, IMA (Institute of Management Accountants), to recognize the crucial role that management accountants play in the economy. This year, we celebrate that observation amid two macro trends with far-reaching implications for the profession. Those two trends are 1) a talent crisis in accounting and finance (according to Robert Half, finance and accounting is one of the top five ranked industries facing skill shortages and problems filling critical positions) and 2) execution Diversity, Equity and Inclusion (DE&I) strategies as a way to combat the talent crisis (according to a recent Willis Towers Watson survey, “70% of employers are broadening their focus on DE&I strategies as a recruiting and retention tool”).
CFOs concerned with the resilience and competitiveness of their organization should take a close look at their DE&I strategy. McKinsey research has found that companies that prioritize DE&I and have a diverse group of senior executives outperform their peers (McKinsey’s research tracked the progress of 1,000 large companies in DE&I from 2014 to 2020 and identified the diversity winners) . McKinsey emphasized the need to “…adopt systematic, enterprise-focused approaches to inclusion and diversity.”
The message resonates with CFOs, and according to Deloitte’s North American CFO Signals™ survey for Q2 2021, “72% of CFOs say their organization now has a formal Diversity, Equity and Inclusion (DEI) program, an increase from the 67% of CFOs who responded similarly in the Q1 2019 survey.” Beyond mere rhetoric, the Deloitte survey asked these CFOs if their company had or was planning to have a defined budget for DE&I over the next year, and 60% of them indicated that this was the case.
That’s encouraging, but still means that 40% of companies don’t have a formal budget for DE&I. CFOs play an important role in endorsing investments in DE&I and presenting the business case to senior management. The lack of formal DE&I programs poses a risk for CFOs and the organizations in which they work, as DE&I programs help ensure that key demographics (which include sizeable populations such as women and people of color in the US and elsewhere) receive support , they need to be successful in finance and accounting roles. On this International Management Accounting Day, I feel it is important to emphasize how critical DE&I programs are to the success of organizations and finance and accounting teams.
A recent report on DE&I in finance and accounting by IMA, CalCPA (California Society of CPAs) and IFAC (International Federation of Accountants), which surveyed more than 8,500 finance and accounting professionals worldwide, revealed some startling statistics: less About 60% of respondents of all genders found the job to be either fair or inclusive, and 42% of female respondents have left a company due to a perceived lack of fair treatment or inclusion.
This report builds on previous US-specific research that found that “86% of CFOs of Fortune 500 and S&P 500 companies and 77% of partners in accounting or finance roles at US public accounting firms are men, and that more than 90% of the profession’s leaders are non-Hispanic whites.” Statistics like these speak to a systematic lack of professional advancement among women, people of color, and LBGTQIA populations, people who would otherwise lead digital transformation initiatives to implement sustainable Corporate governance and other key initiatives that contribute to the overall competitiveness of organizations.
So what is the task for CFOs around DE&I? Here are three recommendations finance leaders can follow:
1. Proponents of formal DE&I programs with dedicated budgets: A recent comment from Emory Business School advocates moving DE&I from an income statement to the balance sheet. The columnist, an Emory School MBA graduate, notes, “The paradigm shift of moving DE&I from the income statement to the balance sheet provides the context for leaders to understand that diversity, equity and inclusion are not goals . These are ongoing needs. Creating DE&I is an action, and the moment you think you’re done and stop your DE&I efforts, you’re falling behind.”
2. Make the connection between DE&I and stakeholder value: Deloitte’s recent CFO Signals Survey cites a Wall Street Journal Analysis of Diversity in the S&P 500. Their analysis found that “the 20 most diverse companies in the S&P 500 have five-year annual shareholder returns of 10%, compared to 4.2% for their least diversified counterparts.” The tangible returns of DE&I are well documented and CFOs should be able to articulate the value of DE&I in terms of stakeholder value.
3. See how DE&I helps retain and attract various job candidates: When DE&I principles are embedded in the corporate culture, this is obvious to potential employees. Donald Thompson, co-founder of DE&I training and certification agency The Diversity Movement, shared his thoughts on the subject in an American Marketing Association article: “Prospective employees of color will investigate where a company stands on DEI principles. But even when an organization is in the early stages of increasing workforce representation, inviting a new hire of color to the company-wide talent conversation can be a tempting incentive to stay long-term.” DE&I programs help expand the candidate pool for Expand key roles and provide organizations with a key retention tool once top talent has been identified and hired.
As we honor management accountants today, I believe our profession has a clear and urgent call to action to address the talent crisis as we seek to increase our relevance in a rapidly changing, disruptive environment. Every management accountant has a role to play in creating a more diverse, equitable and inclusive environment. Conscious, collective action is required to bring about major change, and CFOs can become champions of DE&I. The business case for DE&I has never been stronger and the need has never been greater. The talent crisis we are currently facing requires a more critical assessment of DE&I deficiencies and the implementation of formal, well-funded DE&I programs that produce measurable results. On this International Management Accounting Day, let’s make sure that everyone who has the skills and talents to fill important positions in accounting and finance feels welcome and valued.