Businesses are overlooking governance and its role in ensuring inclusive workplaces

To transform culture, it cannot be a set-and-forget exercise committed through a single statement, initiative, team, or designated program. However, this is too often what happens, writes Gloria Yuen.

The importance of diversity, equity and inclusion (DEI) initiatives in Australian businesses is being increasingly discussed and headlined. However, there has not been a simultaneous focus on governance and risk management and how they are fundamental in directing corporate culture. This is causing widespread confusion and, in some cases, backlash towards DEI when, in fact, businesses should be turning to strategies that strengthen their approaches to good governance.

It’s easy to blame DEI

The recent Rio Tinto survey, which found employees experiencing bullying in the workplace has increased from 31 per cent in 2021 to 39 per cent in 2022, highlights the major Australian corporation and employer has a clear governance issue. Surprisingly, the survey also shows reports of bullying being related to a DEI focus within the organisation, and this being reflective of growing negative sentiments towards DEI initiatives overall among the workforce.

To transform culture, it cannot be a set-and-forget exercise committed through a single statement, initiative, team, or designated program. However, this is too often what happens. It then becomes easy and convenient for DEI investments to be blamed for the progress or lack thereof on cultural change, which in itself is commonly an undervalued and under-resourced function.

What the Rio Tinto survey does make clear is there is an issue with the organisation’s risk management practices, leadership, and governance. The lack of substantial progress raises concerns about significant conduct, legal, regulatory, reputational and social risks. The time is now to take a refreshed approach in identifying and managing psychosocial hazards to improve organisational culture.

Getting governance right

Bullying, sexual harassment and discrimination in the workplace are unfortunately not unique to this mega-employer or this industry. Two in three women of colour have experienced discrimination in the workplace. In cyber security, women are leaving the industry entirely after just four years due to “professional disrespect” and bullying. One in five young doctors are considering leaving medicine due to harassment and racism, and research shows racism and harassment of First Nations medical trainees is significantly more severe in comparison to other trainees.

We don’t need more reports and statistics to know that building inclusive workplaces is not currently a priority for too many businesses, and that needs to change immediately. However, efforts to build both diverse and inclusive workplaces will be pointless if they are not approached from a risk and governance lens.

The data, both quantitative and qualitative, should inform an appetite and boundary decision. Like managing any other material business risk, a robust framework, scenario tests, and reporting mechanism should be developed to provide ongoing assurance.

Driving meaningful progress requires urgent, decisive, and sustained actions. There are five key things businesses should prioritise in leading cultural transformation:

1. Define what is and isn’t OK, set behavioural expectations and clear consequence management protocols;
2. Conduct a comprehensive risk assessment, including employee experience, policy and procedural reviews;
3. Conduct a governance review on the root causes to determine effective corrective and preventative actions;
4. Invite and appoint employee advocates in all executive leadership teams, governance forums and the ‘discrete unit’; and
5. Create clear accountability and progress communication, with outcome ties to executives’ remuneration.

While businesses are often familiar with looking at financials, strategy, and regulatory requirements from a governance and risk standpoint, workplace culture is often seen as something else – i.e. something that should be addressed in isolation and without its own impact on governance and risk. Until leaders start to see this misconception for what it is, their employees will continue to suffer, and their bottom line, brand reputation, stakeholder trust and financial performance will plummet as a result.

I urge all companies to leverage this report to look themselves in the mirror and ask:

1. How relevant are these findings to your company and workplace?
2. What action would you take?

Gloria Yuen is a risk adviser and non-executive director.