Backward step or a catalyst for change?

Has diversity and inclusion been a priority during Covid-19?

The world has changed more than we could ever have imagined since the start of the Covid-19 pandemic, with our hospitality, travel and leisure sector being hit harder than most. During this time, HTL leaders have responded with creativity, agility and strength to ensure business survival. Amid this disruption, D&I has understandably slipped down the corporate agenda. To understand the scale of this shift, over the last few months The MBS Group has conducted extensive interviews with more than 60 CEOs, Chairs and HR Directors drawn from across the industry. Through these discussions, we have been able to uncover the extent to which the sector’s leaders have taken into account the impact of the pandemic on their female employees and employees from ethnic minority backgrounds.

Key findings

The data

Just 15% of businesses interviewed have measured the impact of temporary actions (such as furlough) on women or employees from ethnic minority backgrounds

89% of companies interviewed anticipate reducing their workforces. 50% have already made redundancies, 17% have entered into consultation and the remaining 23% anticipate making redundancies soon

6% of those companies that have made redundancies, or have entered into consultations, have measured the impact specifically on women or employees from ethnic minority backgrounds

63% of companies self-report that they have made provisions for childcare or other caring responsibilities during the Covid-19 pandemic

On average, HTL leaders rate the relative priority of D&I over the period since March at 3.4 (on a scale of 1-5, where 5 is high)

44% think D&I has been a higher priority for their business than pre-crisis; 33% say it is about the same and 23% say it has been a lower priority Just 15% of companies report that D&I has been raised at Board meetings regularly over the last period; 42% say it has come up infrequently, and 43% say it has not at all

On balance, most companies report that as they focus on survival, they have not received any pressure to perform on D&I from shareholders during the crisis – a significant shift compared to the beginning of 2020

Most leaders interviewed felt their company had not mounted a sufficiently strong response to the Black Lives Matter movement in 2020

On balance, more HTL leaders than not believe that they are now more likely to offer remote/flexible working policies going forward as a result of changes during the pandemic

Overall, there is a belief that the changes resulting from the crisis could present an opportunity to improve diversity in the sector in the future (50% think it likely; 37% believe it is possible)

The key trends

A GAP BETWEEN UNDERSTANDING AND ACTING

The Covid-19 pandemic has heightened leaders’ awareness of key issues associated with diversity and inclusion. Very practically, the risk to employee health overall has forced employers to think empathically and holistically about their wider workforce. Homeworking has given leaders a greater insight into their teams’ personal lives, and there is also more pressure than ever from consumers to ‘do the right thing.’ Additionally, the increased prominence of HRDs around the decision-making table has ensured that the people agenda has been front and centre of Covid-19 response policies.

This awareness was clear in our interviews with leaders: from across the sector, two-thirds of those we spoke to reported that D&I has been remained a priority throughout Covid-19, or has become a higher priority in the period.

However, it appears that this heightened awareness has so far not always been translated into action – often for very understandable reasons such as focus on business survival.

Our research suggests that, on balance, most companies:

have not measured the impact of furlough on women or employees from ethnic minority backgrounds;

have not measured the impact of planned or realised redundancy programmes on women or employees from ethnic minority backgrounds;

have not seen D&I discussed regularly, if at all, at Board meetings during the crisis; and

have not evolved their D&I strategy or implemented new interventions since the start of Covid-19.

A LACK OF DATA IS LEADING TO UNINTENDED CONSEQUENCES

As has been a core message in each of our previous joint reports examining D&I in hospitality, travel & leisure, ‘what gets measured, gets done’. While it is clear that leaders within the HTL sector are not deliberately taking actions that impact negatively on gender and racial diversity, without measuring the impact, it is impossible to know.

Anecdotally, based on our conversations with the sector’s leaders, and as borne out in the evidence of PwC’s survey of 1,500 employees, it is apparent that employees from ethnic minority backgrounds are likely being disproportionately impacted by Covid-19.

COVID-19 RESPONSES ARE EXAGGERATING EXISTING IMBALANCES

Despite significant progress in recent years, there are varying levels of diversity across different functions in HTL (as with other sectors). The IT function, for example, still tends to be male-dominated across the sector, while Black, Asian and minority ethnic representation tends to decrease at the most senior leadership levels.

As such, when HTL companies have made large-scale interventions in response to the coronavirus crisis, such as the furlough scheme, their impact can sometimes be felt unevenly.

UNDOING PROGRESS

In the last few years, the HTL sector has made some very positive steps to achieving diversity across gender and ethnicity. However, our conversations revealed that many of the decisions necessary for business survival in the last six months may have undone – or will undo – that progress.

For example, some leaders told us that they had been forced to make every graduate employee that had been in the business for under two years redundant – a group that likely included lots of diverse employees, given the prevalence of the diversity agenda in recruitment processes over the last two years.

Moreover, entry-level schemes designed to drive diversity in the industry – particularly in roles with a dearth of female talent, such as pilots or engineers in aviation – have been scaled back. Programmes like the excellent Amy Johnson Initiative over the last few years have been key tools in attracting women to the aviation industry – but now are unlikely to yield significant fresh female talent in the near future. Indeed, given the state of the aviation sector – as an example – it is questionable whether the sector would be attractive to young, female talent in any event.

D&I BUDGETS

Since Covid-19, businesses in HTL have been dramatically cutting costs in a bid for survival. As a result, D&I budgets across the sector have been significantly reduced.

Our conversations revealed that – in many cases – D&I leads had been furloughed or made redundant. This is problematic for two reasons. Firstly, it demonstrates the sector’s perception that D&I is not a core business priority. Secondly, it means that there was no one to champion D&I throughout the Covid-19 response process in many businesses.

Additionally, a plethora of D&I activity planned for 2020 was put on hold or cancelled – which undoubtedly removes momentum from the agenda.

RESTRUCTURING OPPORTUNITIES

Despite budget cuts and backwards steps, there are green shoots of hope. For example, the mass restructuring of the HTL industry will provide an opportunity for businesses to rebuild with diversity at front of mind.

Indeed, one key blocker to progress in creating diverse leadership teams is the slow rate at which senior leadership roles have historically churned. This is especially true in functions such as operations, where incumbents have often been in post in senior roles for long periods of time, preventing progression opportunities for diverse talent in the layers beneath.

Undoubtedly, over the coming months, many businesses in our sector will be forced to restructure to reflect their new trading reality – and as companies rebuild teams and organisational structures, it will be possible for different, more diverse, leaders to emerge.

One hotel company confirmed that it is seeing this time as an opportunity to promote existing diverse talent into recently available positions and a key priority.

“You can’t solve your diversity issue by trying to hire a more diverse workforce,” the company’s CEO told us, “you have to build it. I’ve put this challenge to the business as we restructure postcrisis. I want to show our commitment to our diverse workforce.”

Previous research from The MBS Group found that restructuring with diversity in mind is currently at the top of the agenda for NEDs. One Chair of a hospitality business commented: “It is imperative to bring in as much diversity of thought as possible on a regular basis. Throughout this crisis, most businesses will have been cost-cutting and reorganising – which brings with it another moment to insist on increasing diversity when it comes to rebuilding.”

However, a few respondents expressed their hesitancy at pointedly hiring diverse candidates, or developing and promoting existing diverse talent, during this time. In the current commercial landscape, with many businesses struggling for survival, a few respondents told us that proven experience was more important to them than diversity of thought. “This is not the time to hire development candidates,” one company said. Especially in key areas such as finance, the pool of experienced leaders is overwhelmingly older and white.

INCREASED AWARENESS OF ‘DOING THE RIGHT THING’

One senior executive told us that they had stuck a note to their laptop that read ‘the way you treat your people now will define your brand forever’. Covid-19 has certainly fast-tracked the conversation – among consumers, employees and executives alike – around how a company treats its people. The Black Lives Matter movement exacerbated this further, shining a light on the lack of diversity and instances of racism in the corporate sphere.

Now more than ever, a company’s people policies, its diversity credentials and its stance on key moral issues are being factored into consumers’ purchasing decisions. Moreover, businesses know that doing right by their people will give them access to the best talent in the market.

As such, most respondents in our research told us that they were more aware of D&I from a moral and ethical standpoint than they were prior to Covid-19, due to the focus on people throughout the crisis and the increased scrutiny from customers since the explosion of the BLM movement.

One notable exception here is in aviation. Airlines have – so far – not been under the same level of scrutiny from customers, due to the more immediate concerns around flight cancellations and refunds. One respondent from an airline explained: “Our relationship with the customer is in such turmoil that issues around diversity or ‘doing the right thing’ get drowned out in the noise of customers asking for refunds or waiting days to get their flights changed.”

NEW WAYS OF WORKING

In the HTL sector and beyond, Covid-19 has transformed the way we work. One point that resonated strongly across our conversations was shrinking team sizes and their impact on representation and inclusion.

Some respondents told us that smaller teams had accelerated inclusion and amplified the diverse voices left around the table. One female leader commented: “with fewer people in the teams we focused more on each other’s wellbeing, and we were more attuned to topics such as diversity. I found that, as a woman, my voice was better heard.”

Conversely, other senior executives reported the opposite to be true in their business. One executive explained how her company’s crisis team had not been diverse at all, consisting of similar viewpoints, leading to groupthink and increasing the chance of unconscious bias. “For the first five weeks it was the CEO, CHRO, CFO, COO and our chief legal officer making the calls. After some time, we looked around and realised – this isn’t going to work. So then we shifted.”

There has also been a shift to online working, as businesses world-over swapped face-toface meetings with virtual communication via programmes like Teams, Zoom or Slack.

Some respondents told us that they found online working encouraged inclusivity and flattened the hierarchies and social codes that exist within an office. One executive took this view, positing that “everyone’s equal when you’re a tile on a screen.” By contrast, others took the opposite view, suggesting that online meetings had stifled diverse voices – and have led to more one-on-one conversations amongst cliques, which have been harder to access by a broader group of voices.

DIVERSITY AS A LOWER SHAREHOLDER PRIORITY?

Perhaps most pressingly, our research indicated that diversity has fallen down the list of priorities for shareholders. Previous research by The MBS Group found that, prior to Covid-19, D&I was at the top of the agenda for investors in HTL, who viewed gender, race and ethnic representation as a commercial imperative.

However, since Covid-19, we have found that businesses in the sector, perhaps understandably, have not been placed under pressure on diversity by their boards: “Any pressure has completely gone,” one executive told us. “I think all our shareholders care about is our survival.”