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Studio Session: Pipeline Equity's Katica Roy on the new metrics of stakeholder capitalism

February 08, 2021 00:00 AM UTC
- Updated June 07, 2021 10:10 AM UTC

<p style="padding-bottom: 20px;">In a shareholder-driven world, the data used to evaluate a company’s performance comes from traditional financial documents such as P&amp;L reports, balance sheets, income statements, cash flow, and the like. But to achieve the new promise of business purpose as defined by the Business Roundtable, leaders will need to employ new metrics to better grow their companies “for the benefit of all stakeholders.” In this workshop, Roy explains why diversity and inclusion data are central to inclusive capitalism and how you can leverage those insights to build better teams, businesses, and communities.</p> <p style="padding-bottom: 20px;">Connect fellow Katica Roy is a gender economist and the CEO and founder of Denver-based Pipeline Equity, a SaaS company that leverages artificial intelligence to identify and drive economic gains through gender equity. Pipeline launched the first gender equity app on Salesforce's AppExchange.</p> <p><strong><a href="https://content.fortuneconferences.com/wp-content/uploads/2021/02/Key-Takeaways-Show-Me-the-KPIs-Diversity-Inclusion-and-the-New-Metrics-of-Stakeholder-Capitalism.pdf" data-type="URL" data-id="https://content.fortuneconferences.com/wp-content/uploads/2021/02/Key-Takeaways-Show-Me-the-KPIs-Diversity-Inclusion-and-the-New-Metrics-of-Stakeholder-Capitalism.pdf" target="_blank" rel="noreferrer noopener">Read key takeaways from the event here.</a></strong></p>

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Transcript
Hello and welcome everybody to show me the KPI s diversity inclusion in the new metrics of stakeholder capitalism. I'm Ellen McGirt, your connect editorial director and it's wonderful to see some new and familiar faces. Um our guest today is how to kuroi and who is a researcher, gender economists, breadwinning mom, which is a great story. Please ask her about that and the founder of software company pipeline equity and is quite literally the closest thing fortune has to our own in house economists these days. She's become a prolific comment or unfortunate about politics and and the nuts and bolts of how we're going to evolve capitalism to benefit for all and absolutely my go to person if I understand how stakeholder capitalism is and how it's evolving and why crunching a new set of numbers is the only way we will ever achieve true racial and gender equity. She's also connect fellow which is a wonderful benefit I'm going to bring her on in just a minute. But first as usual, a little bit of housekeeping. My conversation with Radical will be on the record meaning you can tweet about it, share up, share the information you find here with other people and we at force you can cover it. But questions from fellows and all breakout group conversations are as always off the record just to make sure you feel comfortable having a candid conversations you want to and getting the information that you need. If you're new here, I just wanted to let you know that the vibe and our all of our connect meetings is chatty, get chatting in the chat. It helps us stay on track. Um, a men's memes are always good to hear if you've got questions or comments, don't wait till the question and answer session. So Katica, here we go. You are a gender economists and the Ceo and founder of Denver based pipeline Equity. You're an award winning entrepreneur. I want to hear about that. You use artificial leverage to identify and drive economic gains through gender equity and it is just fascinating to watch your business grow in your work grow. You've also launched the first gender equity app on sales forces app exchange. You're going places. Thank you so much for being here and welcome. Absolutely. It's great to be here. So tell us before we dive in and I'm keeping a close eye on the chat from a variety of angles here. As you can see why don't you just tell us a little bit about pipeline and how, how it works and how it's growing. Sure. So pipeline is uh, a cloud platform, a software platform that increases the financial performance of companies through closing the intersectional gender equity gap. So gender plus, race, ethnicity and age. We actually started with research, we did a research study across 4000 companies in 29 countries. And what we found was that for every 10% increase in intersectional gender equity, there's a 1-2% increase in revenue. So that Yeah. So yeah, that's the model for the platform. What it actually does is this augmented decision making. So much like you would use google maps or Waze to go from point A to point B. We do the very same thing. But for companies people decisions. So we essentially intercept them using technology, um, and that's across five different pillars. So internal hiring, pay, performance, potential and promotion, run them through our algorithms and then make recommendations. I'm sure there's gonna be lots of questions about that. But I'm keeping an eye on the chat. But I want to I want to dig into the subject here and help. Maybe you can start with just providing some context because I think we really need that. We we look at August 2019 as the moment where we all have to focus on stakeholder capitalism with the business roundtable announcement. Now, we're in a pandemic. Can you take us from that moment, what it meant to what it means to think about um, the stakeholder capitalism now? Yeah. So, prior to the pandemic, and certainly in August of 2019, we were on a positive upward trajectory for gender equity in the workforce. There were, and there were also cracks that were sitting right under the surface. So right after August 2019 2 things happened. One is that uh women became the most educated cohort actually participating in the labor force. So they women have been the largest educated cohort for quite quite a while, but they weren't actually participating in the labor force. So what we saw was this increase in labor force participation coupled with women holding the majority of um all jobs that was really positive. And then the pandemic hits and all those cracks that sat right under the surface came, you know, actually came up to the surface. So just to give you a sense of what that looks like Um in a matter of 12 months we lost 32 years of progress for labor-force participation for women. We set back the gender pay gap by 22 years suicide. This mass exodus of women uh coupled with the pay gap actually growing. Um and why that matters outside of the issue of fairness Is that since 1970, women have actually added $2 trillion dollars to the U. S. Economy through their increased labor force participation. And we lost almost all of that progress. And so um it is imperative for our economy that we fix this problem and fix it quickly for those who follow the jobs report which was today, we added 49,000 jobs in a month. That is not going to get us to where we need to a true economic recovery. Probably now would be a good time for you to tell your breadwinning mom's story, your fight for gender equity because it speaks to the pre existing, the pre existing ideas around who's valuable in the workforce and who's not. Yeah. So you know, folks have maybe heard of the motherhood penalty or the mommy track where um you don't even have to have Children. You can just be a child bearing age. And there's this assumption that you are less committed to your job simply because your mom or you might become a mom. That's actually not true in the data. What the data shows is that working moms are actually the most productive employees in our workforce. My experience and I'm a breadwinner mom who fought to be paid equitably twice in one and I didn't file a lawsuit. I knew the law and I stood up for myself. Um, was that the first time I could never really figure out um why my Children rewards less to society simply because their mother was the breadwinner. Why should my Children have less opportunity? Why should they be less valuable? And that's not only an issue of fairness for my Children, but they are the future labor force. I was joking with you Ellen that they're the ones who are going to be working to provide a Social Security benefits. But beyond that they're going they are the ones who are going to be growing our economy in the future. We should value all of them equitably and And you know, I am not alone in that 40% of US. households in the United States, women are the breadwinners, there, 16 million breadwinner moms in the workforce and they actually support 28 million Children. And as a cohort they have the largest gender pay gap of any cohort in the in the workforce at 66 cents on the dollar. Do you study that you study this data from a race perspective? What can you tell us about women of color and mothers of color in in this particular scenario? Yeah. So, um I mentioned the 66 cents on the dollar and we do things through an intersectional lens. Right? So we gender first, not gender, only Black breadwinner moms actually have the largest gender pay gap of any women in the workforce. It's 44 cents on the dollar. And black breadwinner moms support 51 for Children, 51% of all black Children and have for the last 38 years. And so when you begin to look at things through an intersectionality lens, you begin to see the gaps that um that actually exists. And that's something that we have pushed for quite a bit, which is look at gender plus race and ethnicity. And then also add an age because you will begin to see um gaps that really are quite big. I mean we've seen that the promotion gap For women as a cohort through pipeline implementations is 21, points For black women. It actually doubles its 42 points. So I know we're going to dig into the implications of this for all of us in the work force. This is the time where you take us to KPI school and help us understand what the traditional markers of business success have always been and why they fall short in this new world. So, you know, many of us may be familiar with this, particularly if you work for a public company, um but the traditional KPI KPI s markers of success are mostly based on our financial statements. There's, you know, obviously three key financial statements that we measure things like gross margins and net income, um, a bit odd. You know, they're they're really um kind of key standards, what we have advocated for, and there was some movement in the sec toward this, and then also the E E O. C. Um, is that if we're actually going to have stakeholder capitalism, we need to have metrics around our people in the workforce. And there has been an argument, uh, that stakeholder capitalism and shareholder returns are actually at odds, and that doesn't actually prove out in the data. What we see in the data is that when you focus on stakeholder capitalism and actually inclusion, you actually improve returns to shareholders, and we can certainly dive into the details, but just kind of a sense of what that might look like. Um, that would be not only pay by race and ethnicity, particularly through an intersectional lens and the levels, but actually mobility. Where do people sit in the organization? How quickly are they moving throughout that organization? Which parts of the organization do we actually see them in? I'll give you an example. One of the KPI s that pipeline focuses on is a quota carrying employees, essentially sales employees. And there's a couple of reasons for that one is that the sales, it's really hard to become a ceo unless you've actually carried a quota. And in fact, in 2015, of new Ceos had quota carrying experience and 100% of them were men. The sales function actually has the second largest gender gap in leadership, second only to supply chain and logistics. That's one reason. The second reason why we focus on that is because gender diverse sales teams, those that are 45% gender diverse or more actually far outperformed their non gender diverse peers on revenue, market share, etcetera. So it's not only the right thing to do, it's actually the right thing to do by your shareholders. So we talk about this a lot. Um, we had a wonderful Ellen Murray and I had a wonderful session um, on sort of the debate on shareholder versus stakeholder capitalism with two amazing experts, Rebecca Henderson, who is pro pro shareholder and lucian Bebchuk, who is skeptical. And I'm curious how you um evaluate the resistance to all of this, because it seems to me if shareholder capitalism was real and then the business case is so strong that at some point there's something else at play if people don't embrace it. So how do you, how do you talk about the reason? How do you handle the resistance to shifting the way we think about equity and measurement, making it irrefutable? That, you know, which is the data is the data? You can choose not to do something about it, but the data is the data. It is that the argument that shareholder returns and stakeholder capitalism are at odds, does not get out. I'll just give you one example, um companies who put equity at the core of their of their strategy in general, in good times. Right? So pre pandemic Actually have a 24% point difference on their stock price. That improvement doubles when we have bad economic times like we've had for the last year, it actually goes to 50, uh, 50% points. That is that that is the price of their, their stock. And that is companies that put equity at the core of their crisis management strategy in bad times actually increase the velocity of their recovery. That's not just good for equity and for underrepresented folks. It's actually also good for shareholders. So putting equity at the center is something that we're all talking a lot about, and I'm not sure we all know what that means, um, at the highest level, but also for us as people who are working within our organizations. Can you walk us through that? Yeah. So a lot of the focus, um, historically, excuse me, on equity has been on hiring for diversity. This idea that we need more diverse talent pipelines, which is fine. It is only one piece of the puzzle. We really need to hire for diversity, but build for inclusion. And one of the things that um, pipeline does in that in our hiring, and we specifically focus on internal hiring, which is mobility. And the reason is that the best way to attract diverse talent is to ensure that your existing, diverse talent is successful and not just in their current roles but across your company. So what that means is that the decisions that you make across your talent, so, um, how much they're paid, what their performance reviews, say, what their performance ratings are, how you rate them for future potential in your workforce and then actually promote them their employee lifecycle, their employee experience. That is actually um more important than simply getting more folks into your talent pipeline um that we must begin to look at upward mobility for instance, as one example are these kinds of changes take place within an organization? Does it absolutely have to come from the top down or can we, as people who are movers and shakers in the middle of our careers have an impact. We can absolutely have an impact. You know, one of the things that we saw last year, which is actually a really good thing is that in a matter of eight weeks we fought a five year acceleration toward digital transformation and companies digital adoption and that. Um and we couple that with if you look at just through the HR lens, 79% of talent management leaders say that by 2022 they will actually implement augmented or ai decision making. And that's good. That makes managers jobs where they can advocate right now easier because essentially they have augmented leadership or augmented talent decisions, the decisions and you can um, effect change for everybody who works for you. I will tell you a couple of quick stories. Um, One is that after I thought to be paid equitably, I had actually inherited two teams and those two teams um had equity issues, pay issues, opportunity issues and I committed that if you work for me, I was going to ensure you had equity of opportunity and equity of pay. So I would fight for that. And so that's exactly what I did. Um and and the other piece of that is to see the unseen, there's the one piece about um who is not in the room if they're in the room, are they speaking If they're speaking, are they being spoken over If they're speaking are their ideas actually um taken into account? Uh, there's, there's that piece, the other piece of that and it goes back to my breadwinner moms story is ensuring that I was paid equitably didn't just impact me. It also impacted my family. There are people you probably will never meet and never see that you impact through the decisions that you make about the people who work for you. Is there a way to capture that data as an ongoing case making for this kind of work? Because when we talk about it and when I'm on connect, it feels very straightforward. You know, we're checking to make sure everyone's paid correctly. I'm getting the right people's attention and things move along. But that doesn't, it doesn't really work out that way in the, in the workforce. This is this is a more complicated set of redesigns and rethinking. And I'm curious to see. I want to ask you about the biden administration coming in just a second to look like, okay, I'm gonna make sure my camera doesn't fall. Yeah. Yeah. So, Absolutely. So we can get that and I can talk about what pipeline does the um, so a couple of days you mentioned pay, which is the most common thing for companies to talk about. Um, and we're certainly advocates for pay equity. What we have found through our implementations is that you can't close the gender pay gap by starting with pay. And the reason is that pay is the symptom, it's not the disease. In other words, pay is the quantitative value that you place on your talent, but the actual value happens before that in performance. So how you're writing performance reviews and potential who you're actually assessing that we'll have future opportunity um in your company. So the things that you can look at as a manager and of course pipeline helps with this is when writing performance reviews is they're biased language in those performance reviews. So as an example um we found about a third of all performance reviews contain bias. But what we and there's a lot of talk and particularly last year right? So in last year um women's unpaid work at home increased 153%. That that was part of the mass exodus. We saw women leaving the workforce but also women are rewarded for unpaid work at work. So they are rewarded for E. R. G. S. Or affinity groups are typically not paid. And it's typically diverse folks who are running those um They are rewarded for you know a celebration or these kinds of things. We have, we have seen that. That's one way, one big way that bias shows up in in um performance reviews. The other way that bias shows up in performance reviews. The actual writing of the review itself is um through uh commenting on women's emotional state. Oh wow. Yeah they're too aggressive. They're not communicative enough. I mean all those kinds of things. Um and then we see that actually translate into lower performance ratings and those ratings impact your potential. So am I going to be if you use a nine box model all the way to the top and to the right, will I be considered uh for a future senior leadership position? Um It will impact my base pay. Any merit increase I might get, it will impact my variable pay. Any bonus pay I might get if I'm at the level in an organization or in an organization that provides stock options or rsus what um, you know what will be my will like even be qualified for them. Which is by the way, how you make a fair amount of money in large companies. And if I'm qualified, how much will I get? And so looking at all of those different pieces matters, um, how we refer to people. Um, I've often, uh, I mean outside being pregnant, I haven't talked about being a mom a lot in the workforce intentionally because I mean now obviously I do. But before this I didn't because I would get asked, well who's taking when I would travel? Who's taking care of your kids? Yeah. Taking care of your kids right through that. Uh, that I was not a good mom or or something. This happens. The other place This bias comes up is when we talk about flexibility for the facility for women. And one of the things that I have talked about and I've also said is give me more opportunity and I can pay for my flexibility. I don't need somebody to manage my flexibility for me. Many moms do not, what we simply want is to be valued equitably and have equity of opportunity. So really looking at those decisions, mobility of talent around your organization, are you making a decision for somebody because you assume that they um, are not going to want something because they're pregnant or because their mom, you know, I had someone who worked for me, she was pregnant and she was on one of the most high profile projects uh that we worked on. That's what she wanted to do. You know, I was not going to make that decision for her now. It's and it's good to be the queen, isn't it? Of your own company. I love that. I do love these stories because you get so fired up. What do you tell them? But everyone is curious about technology now. And is there a technological component, the culture piece I still want to circle back with you because I think that if we're looking at what it takes to remove our pre existing ideas about women's behavior, black women's behavior, Latinas, women's behavior. That's a developmental, I think that's a developmental opportunity as they say, in the leadership game. You know, it's just this is an opportunity to learn and grow, but there's a role for technology and say eliminating bias and job descriptions and or in performance reviews. Yeah, absolutely. And I think, um, I would, I will answer your question Ellen, I want to just add on to as a leader. It's an opportunity to learn and grow. You also have a responsibility because the people who work for you, you can profoundly impact their lives. It is, it is not only your growth matters, but the people who work for you, you have an obligation to them to do something that it is. So I just want to drive that home because it matters. Um, the format technology perspective, a couple of things we have talked about augmented leadership or augmented uh, talent management. This idea of augmenting the decisions that you're actually making about your talent. Um, you may remember a few years ago that companies talked about their low for one case savings rates. Yes. Yeah. Right. Yeah. What what companies did was to auto enroll new employees in 41K savings plans. And what happened was that the savings rate went up? Why? Because um because now I have to choose to enroll rather than to choose to enroll. And from a behavioral economics perspective, that's a very different decision. That's really the power of artificial intelligence and the approach that we took with the pipeline platform. I mentioned that, you know, before I started pipeline, you know, I was committed to if you work for me, you would have equity of opportunity and equity of pay. What that means is that I had to choose to be equitable because what we know right now is that the default is that the system is inequitable. Right, right. Right. So um so with technology, so for instance with the pipeline platform, when you have the pipeline platform, your company or your function or your department whatever. However, why did that coverage is is by default equitable? Why? Because we run all of your decisions through algorithms that actually look for bias and make recommendations when we find it. And when we make recommendations, if you choose to reject the recommendation. Now you are choosing to be inequitable. That is a very different decision than I'm going to be benevolent and I'm going to choose to be equitable. Alright. Alright. So and assuming that folks um are not pipeline customers and are piecing together um strategies, tactics and strategies that can that can help them be centers of equity hubs of equities and their organizations. Um You've highlighted a couple of things. They're just part of the day to day life of a manager or leader which is evaluating others. Um matching them to opportunity to stretch assignments, thinking about them, thinking about the people that work for you and with you as having a lifetime to work that you're thinking about, guiding them through an entire career that's bigger for them than it made that you may think about it for them, That kind of thing? What are the kinds of things that you've seen people be successful right now in thinking more about how to how to create a more equitable day to day life for people? Well the first is um Mhm. We talked about over and over when your question reminded me of something we talk about pipeline, which is at pipeline, which is the over indexing Under indexing. So sort of over indexing on diversity. Under indexing on on inclusion. Over indexing awareness. Under indexing on action. Um And so the first thing is um so so it's actually understand how biased uh like how that works in your brain and then and then based on that uh think about how you see people and the assumptions that you make about them based on what you see. So um bias is essentially this is my first master's degree. The bias is if we talk about pattern matching and in cognitive science, those are called schema. Those are essentially things that created in your brain. You see something you attach meaning to that that in and of itself is not bad. When we make judgment calls about people about their value. That is where that's where that where that is actually where is negative. So you can think about what decisions do you automatically make for people based on who they are, right based on whether or not their mom? If they're a breadwinner mom, um uh their race and ethnicity. A black mom versus a white mom versus the Latina. What are the assumptions that you are making about them and then set them aside? And not only it? Or is the is the status quo Leadership Playbook to not consider how we think about other people, but what we're really doing is what do I need these people to do for me? You know, what do I need to people do for me? And I'm gonna pick the person who I'm most comfortable with, who I think it looks like the person who can do this and that's because I'm dead. I'm tired and desperate and the world's falling apart and I just need what I need, that kind of thing, which is not Leadership. Well, that's true. If it's not about you. I think when well, do you mind if I tell one quick story? I know I know I'm seeing some smiles here. So this story why I feel so strongly about this and you obviously know this story. But I am I am the daughter of an immigrant and a refugee. And I'll just tell my dad's story very quickly and why I feel why, why I do the work I do, but why I feel that it is such a strong obligation not to make it about you. Um, which is that my father escaped from Hungary after the fall of the 1956 revolution. Um, he escaped with my three oldest sisters. They were 37 and eight at the time. He had been in two camps. He walked them across the minefield to a refugee camp in Austria And less than two months into their stay in Austria. President Eisenhower sent Air Force one to bring 21 Hungarian refugees to the US on Christmas Day 1956. And they were on that plane and this was not, this is 1956, this is 11 years after World War II ended. This was a tenuous thing for President Eisenhower to do, but he did it because it was the right thing to do. And that is what leadership is about. If you are more concerned about what somebody can do for you versus how you can develop them, that's not leadership, you're one of the things that I would often talk and I still do here at pipeline um is when I sit down with people and talk about what's your development plan, like what do you want to be? And often times you will tell me what I wanted to hear in the department, and I said, well hold on, you are not going to work for me for the rest of your life like that, that's just the fact you're not going to and so let's figure out what you want to do and if that's here or somewhere else, I'll help you, like I will help you and I will help you develop and that that is leadership, it is not about you. The biden administration is coming in hot with the equity talk, it's like, like it's like watching some sort of saturday night live skit at this point where everybody has refrained everything through an equity lens were mentioning tribal properties and communities, which has never happened. And I'm curious, Katica or anybody really, if you think this will make a difference and um in terms of actual policy in particular, but also if you think it will change the culture of the way we speak because powerful people are naturally fluent in centering vulnerable and marginalized communities in the way they think about how they advocate for certain policies are we will this work and are we getting a master class that we that we need but didn't know what's coming. So there are, there are a couple of things I actually wrote an article for Fortune about what it would look like to take. Uh, the bidens top four priorities and apply the intersectional gender equity lens to those. Um, if you I was glued to the television on inauguration day, mostly just really wanted to make sure biden actually got inaugurated. And so, and I will tell you as the daughter of an immigrant and refugee. Uh, and we actually gave everybody a couple days off because it was like most of the folks who work for us or immigrant and refugees. The stakes are very high when you've had parents who, who've risked what they had so that you would have opportunity. But I watched that day and one of the, I thought one of the most profound things that President biden said was when he was swearing in um uh all the staff and administration folks in that zoom call. And he said if I ever and I'm paraphrasing here something like if I ever hear you be disrespectful to another employee, I will fire you on the spot. That was huge because most of us don't speak up because we fear that we are going to be retaliated against. And the data shows that in the E. E. O. C. In the last 20 years there's been a 50% increase um in retaliation claims. So that is not being discriminated against but being retaliated against for speaking up. Yeah. The other thing I think we can advocate for and it goes back to the question about mental gymnastics but also this piece of the culture is we need to also look at the structures we have in place that keep people silent. And two of those are binding arbitration and N. D. A. And and if we want people to speak up and be vulnerable, we actually need to create those structures to do that. I do believe that things will change in the biden Harris administration. I had the opportunity to interview both president biden and Vice President Harris when they were running for president in the primaries, they both committed to intersectional gender equity. I'm very confident. My one concern is that people become complacent. I mean all of us because folks are speaking our language, we need to continue to advocate to ensure that our voices are heard. Now is not the time to lean back now. The time is to speak up and ensure that truly equity happens.