March 31, 2012

The big idea: Invest Co, a leading investment bank with operations worldwide, was concerned that it might be losing ground in the war for talent. Was bias in the talent-management decision-making processes to blame for the limited representation of women and minorities in senior leadership positions?

The scenario: In an industry where women and minorities have traditionally struggled to break in to the senior leadership, Invest Co, like other Wall Street firms in recent years, was on the heels of a discrimination lawsuit that cost the firm tens of millions of dollars in settlement fees. Questioning whether Invest Co engaged in intentional discrimination toward women and minorities, senior members of the human resources team wondered whether a culture of unconscious, yet biased, decision-making was contributing to a lack of diversity that was affecting the firm’s ability to attract, retain and promote the best talent.

To test this theory, the HR team designed an exercise for senior leaders in which they created profiles of candidates for promotion to managing director. The profiles included public-knowledge biographical information, career data (including 360 degree feedback assessments) and numerical performance ratings in four key metrics (ability to meet strategic goals, professional skills, leadership skills and team skills). Although the candidates had different strengths and weaknesses across these dimensions, the value of their total score was the same. Each profile concluded with commentary by the candidate’s managers and their recommendations for promotion. Demographic information such as race and age was not included.

Senior leaders were asked to identify up to two candidates to promote. Using a process that mimicked the standard approach for making such decisions at Invest Co, the leaders met in small groups to make the selection. The groups were asked to achieve a consensus, with the understanding that whoever was chosen might be assigned to his or her own division. Members of the HR team participated in these discussions, with the clandestine purpose of identifying whether biases would surface from the conversation.

While blatant discrimination was once relatively common in the workplace, the advent of federal legislation, activism and increased tolerance for difference has substantially reduced overt wrongdoing toward women and minorities, in particular. Yet research is uncovering the role that our unconscious plays in our preferences, including those that surface when making hiring and promotion decisions. Commonly referred to as unconscious or implicit bias, it can be as dangerous as its more explicit predecessor. It was this unconscious bias that the HR team observed in the promotion exercise. The conversations were replete with biases, but rarely were the biases ascribed to surface-level demographic characteristics. Rather, biases were evident in other, more subtle ways. For example, tenure with the firm seemed to matter to the decision makers in ways that were disadvantageous to female candidates.

The resolution: Armed with the insight that one’s unconscious might well be influencing the decision-making processes at critical talent development junctures, the HR team worked with an external partner to build awareness of this more subtle form of bias.

The lesson: Failure to recognize that unconscious biases exist in all of us can lead to perceived or actual discrimination and can severely limit a firm’s ability to identify and seize top talent. As competition grows fiercer and winning the war for talent becomes increasingly critical to success, firms must become proactive in identifying and circumventing unconscious bias.

Erika James

James is a professor of business administration at the University of Virginia Darden School of Business. This is a fictitious case based on a compilation of actual experiences from multiple firms in the banking industry. The case is taught in Darden’s MBA classes.

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