Managing Director & Senior Partner
Diversity and inclusion do not receive enough airtime in Southeast Asia. This is unfortunate and rather ironic, given the exceptionally rich breadth of peoples, ethnicities, and creeds in the region. This timely report lays out a useful blueprint for businesses that are looking to transform their organizations into truly inclusive environments.
One of my core beliefs is that it is a moral imperative for us to champion diversity and inclusion within our organizations and workplaces. This is simply the correct thing to do. I am personally committed to ensuring that my firm allows people of all identities—in terms of gender, ethnicity, sexual orientation, disability, age, and national origin—to thrive. At Banyan Tree, we are steadfast in ensuring that no discrimination is tolerated and that our employees feel comfortable with their diverse identities. No one should feel uncomfortable or undervalued because of who they are.
In addition to being the right thing to do, inclusion gives companies a competitive advantage. As a global hospitality group that prides itself on providing exceptional experiences to our guests, Banyan Tree cannot deliver on our promise without a motivated, innovative, and creative team. Without an inclusive environment, we could not attract diverse employees, who often bring the most innovative ideas to the table. Our commitment to inclusion provides the platform for our talented team to thrive and excel.
This report highlights that although firms in Southeast Asia have much more work to do, a few simple steps can go a long way to improving diversity and inclusion in our organizations. Employees in Southeast Asia indicate that they are twice as likely to benefit from diversity initiatives relative to global benchmarks. However, diversity initiatives are only half as likely to be present at companies in the region. Therefore, putting strong diversity initiatives, policies, and programs in place will contribute greatly to the well-being of our employees.
A key part of improving inclusion at all organizations is strong leadership and managerial commitment. I have personally witnessed the importance of leadership commitment and am heartened that this report highlights this key factor. No matter whether you’re a manager in a multinational company or the CEO of a homegrown company, I encourage you to read this report, reflect on its findings, and think about how we can all contribute to improving inclusion for the benefit of everyone in Southeast Asia.
Ho Kwon Ping
Executive Chairman, Banyan Tree Holdings
As the CEO of BCG, I have the privilege of engaging with CEOs around the world. As our global economy becomes ever more integrated, most corporate leaders I speak with are grappling with the challenge of deriving a strategic advantage from an increasingly diverse workforce.
This challenge is particularly pressing in Southeast Asia, which is one of the most diverse places in the world. In a region comprising such a rich mosaic of peoples, ethnic groups, languages, and beliefs, CEOs know that embracing diversity and inclusion will allow their companies to tap into a rich pool of talent. However, companies are not always aware of the most effective inclusion programs or are unsure of the return on investments in such programs.
This report explains the economic and qualitative value of diversity and inclusion for companies in Southeast Asia. Our research not only reveals that companies with a strong emphasis on diversity and inclusion benefit from reduced turnover and improved innovation, but also highlights how to implement effective programs.
Beyond economic benefits, I believe that all firms—including BCG—have a responsibility to embrace diversity and inclusion simply because it is the right thing to do. All employees deserve the right to be respected and recognized no matter their ethnicity, gender, age, nation of origin, physical condition, or sexual orientation. Such an approach will be a critical element of competitive advantage and responsible leadership in years to come.
A diverse and inclusive workforce can generate huge advantages for companies, making them more innovative, more profitable, and better able to retain their most talented employees. Southeast Asia is one of the most diverse regions in the world—with more than 100 ethnic groups and 655 million people speaking more than 1,000 languages and dialects—but many organizations operating there have not yet tapped the potential of this talent resource. Instead, workforces and leadership teams consist primarily of ethnic majorities (mostly men), and few companies have policies to support diverse groups. By failing to focus on diversity and inclusion (D&I), Southeast Asian companies are leaving significant value on the table.
We recently conducted a survey of more than 6,100 employees in Singapore, Thailand, Malaysia, Indonesia, Vietnam, and the Philippines to gauge the current state of D&I in the region. (For more details about our methodology, see the Appendix.) Our analysis builds on a similar BCG survey of employees around the world. The results of the latest survey show some progress: companies in Southeast Asia—both local companies and multinationals operating there—are starting to hire dedicated D&I representatives, develop specific strategies, and launch new initiatives.
But there is much more work to be done. Overall, only 58% of companies in Southeast Asia have some form of D&I program in place, compared with a global average of 96%. Moreover, expectations are growing among employees in traditionally underrepresented groups: ethnic minorities, women, and LGBTQ people. These employees want nothing more than a meritocratic environment, one that gives them a fair shot at hiring and promotion, and a workplace free of bias in which their voices are heard and their contributions are recognized.
Moreover, employees in Southeast Asia express a willingness to leave their current employer if those baseline criteria aren’t met. In our global survey, 57% of all respondents—and 90% of those from underrepresented groups—said they would consider leaving their job for one at a more inclusive organization. That should be a wake-up call for leadership teams. We estimate the cost of replacing those workers at more than $25 billion a year.
The good news? Companies that do have D&I programs in place are generating results. Employees from diverse groups in Southeast Asia are 2.5 times more likely to say that they have personally benefited from such programs, compared with the respondents to BCG’s earlier, global survey.
Our research also identified measures that Southeast Asian companies can take to create a more diverse and inclusive organization—measures that companies in other regions have employed successfully and that were flagged by our survey respondents as important and beneficial. These should therefore be at the top of the leadership agenda for companies in the region.
Fostering a more diverse and inclusive workforce is a worthy activity simply because it’s the right thing to do. But there’s also a clear business case for getting D&I right. Consider innovation. By hiring people from different backgrounds—and ensuring that their voices are heard—companies can bring the benefit of differing perspectives to problems, avoid groupthink, and solve challenges in unconventional ways. (See “A More Diverse Workforce Drives Innovation at Facebook.”)
At Facebook, the case for a more diverse and inclusive workforce is clear: it helps the company build better products, make better decisions, and better serve its global community of more than 2 billion people.
In 2015, Facebook introduced its “diverse slate approach,” which requires hiring managers to consider candidates from underrepresented backgrounds when interviewing for open positions. The approach, which has since been rolled out at all Facebook locations worldwide, puts the onus on the company to get better at sourcing qualified talent. The goal is to give more people the opportunity to compete on an equal basis. The diverse-slate approach has several components:
Since embarking on its diversity strategy, Facebook has had marked success improving diversity globally, particularly in the realm of gender. Worldwide, women now make up 37% of the company’s workforce (up from 31% in 2014). That includes 23% of technology-related positions (compared to 15% in 2014), 33% of senior leadership positions (up from 23% in 2014), and 57% of business and sales roles (up from 47% in 2014).
This increased diversity has had a tangible impact on innovation and product development. In Southeast Asia, for instance, Facebook is focusing on developing “conversational commerce,” which is the use of online chat to influence a transaction or sale. Individual sellers, as well as companies and customers, can communicate via messaging apps such as Facebook Messenger, Instagram Direct, or WhatsApp to understand more about a product or service—a huge area of growth, especially in that region.
Facebook was able to take advantage of this sales channel after hiring recent female university graduates as partnership managers, who work with Facebook’s merchant partners. (In Asia, partnership managers in the industry have traditionally been older men.) The new managers quickly identified conversational commerce as a key lever to drive engagement with the untapped market of female entrepreneurs in the region—a group that Facebook’s traditional managers may have overlooked. In the company’s earnings for the third quarter of 2019, Click-to-Message advertisements emerged as one of the fastest-growing advertising formats, especially in Southeast Asia.
For example, our research has found that companies with above-average diversity on their leadership teams report 19% more innovation and 9% higher EBIT margins. And the same holds true for Southeast Asian companies, where we found a correlation between a more diverse workforce and greater innovation—with a higher share of revenue coming from new products. (See Exhibit 1.) Similarly, at companies where leadership teams are committed to D&I, employees are more likely to believe that the organization is on an upward trajectory, more prepared for the digital economy, and better positioned to compete. (See Exhibit 2.)
Companies with inclusive workforces also benefit through their access to a wider pool of talent. A recent study by Open for Business, a coalition of global companies that aims to increase LGBTQ inclusion, found that the cities most inclusive of LGBTQ residents had stronger innovation ecosystems, higher concentrations of skills and talent, and a better quality of life compared with other cities. Another study, by the BCG Henderson Institute, found a correlation between diversity and a company’s vitality, with “vitality” defined as a firm’s ability to reinvent itself in response to evolving market challenges.
If the case for diversity is clear, so is the price of failing to embrace it. We estimate the cost of replacing the 57% of employees—and the 90% of employees from underrepresented groups—who would leave their current employer for a job at a more inclusive company at 2% to 3% of staff costs each year, or $25 billion to $30 billion. That is roughly equal to the combined annual education budgets of Malaysia and Indonesia in 2019. Spending such an amount to replace departing talent is a needless expense that companies can avoid by creating a more diverse and inclusive environment. And the absence of D&I has other negative effects, even for employees who stay, including reduced productivity, lower morale, and poor health. (For an example of how one company is using diversity measures to create a more satisfied workforce, see “More Inclusive HR Policies Boost Employee Satisfaction at Visa.”)
Visa has five worldwide hubs—its Asia-Pacific business is based in Singapore—comprising 119 offices and more than 20,000 employees globally. The company fosters an inclusive workplace and encourages diversity, but establishing HR policies across multiple geographic markets is a challenge. Visa’s leadership team nevertheless decided to offer the same benefits to all its employees, even if these exceeded the minimum requirements of individual markets. The company’s standardized benefits now include the following:
Because Southeast Asia is such a diverse region, both the dividends of diversity and the costs of failing to get D&I right are higher than in other markets. Quite simply, companies that operate there have access to a tremendous resource, and they need to be more systematic about using it to their advantage.
To capture the region’s richness of diversity, we surveyed a meaningful sample of employees at companies in Southeast Asia on aspects of diversity that included three areas of focus—gender, race/ethnicity, and sexual orientation—as well as some additional data on age, nation of origin, and disability status. There were several crucial findings.
Not surprisingly, many respondents to our survey from underrepresented groups reported an unfair environment at work. Overall, 50% agreed that there are obstacles for women, ethnic minorities, and LGBTQ employees; in contrast, only 37% of the respondents to our earlier survey of employees worldwide agreed that these employees face obstacles. (See Exhibit 3.)
The good news, perhaps, is that this view is held by members of each of the underrepresented groups and by majority employees as well. (For example, both men and women agreed that women face obstacles, and both ethnic-minority and majority employees agreed that minorities do.) LGBTQ employees and heterosexuals showed the biggest split in responses, but they still broadly agreed that the former face obstacles, with a difference of just 8 percentage points. This consensus demonstrates the D&I challenge for companies in the region.
D&I programs are less common in Southeast Asia than elsewhere. Overall, 58% of respondents in the region said that their companies had instituted formal programs to boost diversity and inclusion, whereas 96% of employees in the rest of the world reported such programs. (See Exhibit 4.) The numbers are slightly higher for programs aimed at gender and ethnicity (in place at 68% and 64% of companies, respectively) than for LGBTQ programs (43%). (See Exhibit 5.)
There are also disparities across countries (as shown in Exhibit 4). For example, Thailand, Vietnam, and the Philippines are all more likely to have programs for LGBTQ employees, suggesting that companies may need to customize their D&I approach according to the cultural and national context.
The contrast with countries outside the region underscores the large amount of work that Southeast Asian companies still have to do. But it also creates an opportunity for forward-thinking organizations. Those that proactively establish D&I initiatives can stand out from the pack and make themselves more attractive to employees and potential recruits.
D&I programs may be less common at Southeast Asian companies, but those that do exist have had notably good results. More than two-thirds of respondents to our recent survey said they believe these programs are important (68%) and beneficial (67%). Compare that with our global survey, in which just 25% of respondents said they had personally benefited from a D&I program at their company. Moreover (as Exhibit 5 illustrates), among respondents whose companies have targeted D&I initiatives in place, 68% said they had benefited from programs aimed at women; a similar share of respondents said they had benefited from programs aimed at ethnic minorities (72%) and from programs aimed at LGBTQ employees (63%). These findings are heartening.
A key issue for companies that want to invest in D&I is where to start. Our survey revealed effective interventions in three main categories that should be at the top of the agenda for leadership teams. (See Exhibit 6.)
All of our respondents, regardless of gender, ethnicity, and sexuality, agreed on a set of foundational measures that companies need to have in place. One is a formal antidiscrimination policy, which states the company’s expectation that employees will treat each other equally. Antidiscrimination policies are virtually standard at most large organizations—to the point that the challenge is enforcing rather than issuing them. However, only about one-third of respondents in Southeast Asia said they were aware of such policies at the companies where they work.
Another basic measure is support during “moments of truth.” These are key junctures in an employee’s life—coming out, returning to work after having a child, or becoming responsible for the care of aging parents—when some form of assistance may be needed. A company’s response to such pivotal moments can boost an employee’s loyalty and commitment to the organization—or fracture that relationship badly. Success requires proactively identifying the right employees and having appropriate support mechanisms in place for them to take advantage of.
Our research also shows the importance of regular employee surveys to gauge the company’s progress over time. Used effectively, surveys can be a powerful tool to capture indirect feedback and ensure that all voices are heard. (For more on the value of employee surveys, see the sidebar “Caterpillar Capitalizes on a Strong Employee Resource Group.”)
As part of its commitment to diversity and inclusion, industrial manufacturer Caterpillar wanted to fully embed diversity into its daily routines (rather than having it be perceived as a one-time project). In particular, the company wanted to increase resources and support for its Women’s Initiative Network (WIN) employee resource group, which forges connections among female employees worldwide and encourages them to act as catalysts for local and global change. Created in 2006, WIN has more than 3,000 members in 50 chapters around the world.
In Singapore, the WIN group conducted a survey to gain a better understanding of female employees. The results showed that they needed more male allies and leaders to champion D&I and make concrete progress, and the company took action based on these findings. A cornerstone of the strategy was organizing an annual Women in Leadership conference, where company leaders, dealers, customers, and suppliers share their experiences and learn from each other about increasing support for women. Vice presidents and C-level executives, and men in particular, have been very active in these conferences, bringing much-needed leadership visibility to the topic and support for implementing followup programs.
The Singapore network has also collaborated with other corporations to develop a cross-company mentorship program. Caterpillar employees can sign up to mentor women at other companies, providing advice as well as access to a powerful network for advancement.
Finally, the company recently launched an internal awareness campaign called Power of Everyone, which highlights images of its diverse workforce, from women wearing hijabs to LGBTQ employees. For its efforts, Caterpillar was named one of America’s Best Employers for Diversity by Forbes in 2019.
The second set of D&I measures aim to support women, ethnic minorities, and LGBTQ employees specifically. They are interventions that the members of these groups say are important but that company leaders may overlook. For example, women and members of ethnic minorities in our survey cited the effectiveness of nursing rooms for new mothers and signs and notices in multiple languages and dialects. These may seem like small measures, but they can send a meaningful signal to employees that the company has considered their needs and taken steps to accommodate and make them feel welcome.
Another hidden gem is leadership commitment, which any large-scale initiative or cultural change requires. But it is especially important for LGBTQ employees in a region that has historically been fairly conservative when it comes to their inclusion.
Potential Measures to Implement
Several measures not yet in place at companies in Southeast Asia were cited as particularly effective by minority respondents to our survey.
One is blind screening for applicants. At most companies in the region, it is common practice for applicants to state their ethnicity and include a photo with their job application. This perpetuates biases in recruiting and hiring decisions and therefore constrains a company’s access to the best talent. Blind screening requires hiring managers to assess applicants on the basis of their qualifications alone.
In addition, management teams should become more transparent about where the company is falling short in terms of diversity. This may seem counterintuitive, but addressing the issue openly can actually increase an organization’s credibility. Employees are likely aware of the diversity challenges that a company faces, and trying to mask the issue or hide basic facts and data will only signal a lack of seriousness about addressing them.
Finally, companies should have a specific and documented diversity strategy, with concrete measures to boost inclusion, a roadmap for implementing them, and a plan to gauge progress over time. This kind of systematic approach is becoming more common in other regions, where diversity and inclusion are increasingly treated as a business imperative rather than a nice-to-have option. Companies in Southeast Asia should treat D&I in the same way and apply the same structured approach to fostering it.
Implementing D&I interventions in Southeast Asia requires a nuanced understanding of the region. However, a few globally recognized best practices always apply.
Even at companies that have yet to launch programs to ensure basic protections to all employees regardless of identity, antidiscrimination policies can unlock significant value. Companies that already have basic measures in place can consider expanding their programs to include “hidden minorities,” such as disabled employees. And no matter what type of initiative a company undertakes, leadership commitment is critical to successful change. Leaders need to demonstrate their support for D&I by speaking about it publicly and by establishing company policies that foster inclusion. Finally, the most successful programs are outcome-focused, with specific targets for which leaders are accountable.
Our survey drew responses from approximately 6,100 people in six countries (Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam) across a range of industries. Key demographic facts about our respondents:
As in previous BCG surveys related to diversity and inclusion, we asked respondents to rank the relative effectiveness of 30 diversity initiatives. We compared the rankings of women, ethnic minorities, and LGBTQ respondents with those of respondents who did not fall into those categories. (That is, we compared the rankings of women with those of men, the rankings of LGBTQ respondents with those of heterosexual men, and the rankings of ethnic-minority employees with those of white men.) We considered the initiatives with the biggest disparities between the two groups—a difference of at least four places in rank—to be the most important “hidden gems.”