It’s a persistent myth: if a company recruits enough employees from underrepresented racial and ethnic groups, a sufficient number will, over time, rise through the organization to create a diverse culture at all levels. But that is not happening. Although efforts to recruit employees from racially and ethnically diverse backgrounds have become more effective, in many industries, these individuals, particularly Black and Latinx employees, are not advancing as successfully as their white counterparts.
To understand why, we took an in-depth look at our own industry: management consulting. The study, conducted in partnership with Management Leadership for Tomorrow (MLT), looked across the management consulting industry to understand why consultants fall off the promotion track, and we found five root causes that impact all consultants, regardless of their backgrounds. Of those five, two causes—a weak sense of belonging and difficulty navigating professional environments—are particularly challenging for consultants from underrepresented racial and ethnic groups.
Unfortunately, these root causes are often underappreciated barriers to diversity. Efforts to increase diversity typically focus on improving recruitment and on supporting the development of consultants from underrepresented racial and ethnic groups with training and skill-building opportunities. But none of these efforts, nor firms’ performance management systems, address the most significant obstacles that are blocking advancement and retention.
The result for many companies is a frustrating cycle in which significant energy is continuously expended on activities that do not have an impact. Ultimately, confidence erodes that the problem can be solved.
We have identified actions that can break this cycle—ways that companies can address the root causes of low promotion rates among employees from underrepresented racial and ethnic groups. And while our study focused on management consulting, the lessons learned are also relevant for other industries, including banking and technology, that have faced challenges in creating diversity and inclusion in the leadership ranks.
The renewed focus on racial inequity, particularly in the US, has reinforced the commitment among many business leaders to promote diversity in the workplace. But there is also a practical reason for companies to support greater diversity: it improves financial performance. In a 2018 study, BCG found that companies with management teams with above-average diversity reported higher innovation revenue. For those companies, sales from products or services launched within the past three years was 19 percentage points above that of companies with below-average leadership diversity.
Unfortunately, statistics show that business leadership is not growing more diverse, especially at the most senior levels; rather, the percentages of leaders from underrepresented racial and ethnic groups have hardly changed. In 2018, for example, Black managers represented only 3.3% of senior management in the US, down slightly from 3.6% in 2007. Interestingly, the percentage of Black midlevel managers in the US has been higher than the percentage of Black senior managers, but it increased only slightly, from 7.3% in 2007 to 7.5% in 2018. (See Exhibit 1.)
This data suggests not only that the percentage of Black leaders has stagnated but also that Black professionals are plateauing in middle management and not rising to the most senior ranks. Some industries are particularly lacking in diversity at the top: Black executives hold only 3% of senior management positions in finance and insurance and 2% in the IT industry.
One consequence of a lack of diversity is that top management often doesn’t have a clear understanding of the obstacles and, therefore, deploys ineffective solutions. A 2018 BCG study found that 33% of US employees who are from racially and ethnically diverse backgrounds see significant barriers to diversity when it comes to advancement. Only 19% of white heterosexual men aged 45 and older, a group that accounts for a large share of top leadership positions, had that same view.
The field of management consulting faces many of the same diversity challenges that other highly competitive industries confront. Although there has been a concerted effort to improve diversity through recruitment as the industry has grown, our interviews found a consensus that the number of partners from underrepresented racial and ethnic groups has not grown in proportion to the number of employees.
Given that the first promotion is particularly critical, often signaling whether an individual has the skills to rise in the organization, we focused on identifying the challenges that have impeded the early progress of consultants from racially and ethnically diverse backgrounds. (See “Putting Consulting Under the Microscope.”)
Eight Limiting Challenges. An obvious question is whether the advancement gap can be explained by differences in the levels of skills and expertise among individuals when they are hired. To address this, we took a look at the key metrics for students graduating from the top 20 MBA programs in the US in 2019. We compared the qualifications with those of business school graduates who earned their MBAs in 2015, 2016, and 2017, participated in MLT’s Professional Development program for underrepresented groups, and then were hired by top consulting firms. The two groups served as proxies for our analysis: the former reflects typical entry-level consultants at top-tier firms, and the latter represents new consulting hires from underrepresented racial and ethnic groups.
The result? The profiles for the two groups are similar: when hired, those from racially and ethnically diverse backgrounds had achieved the same level of academic excellence and had comparable work experience as those from the top 20 MBA programs that generally make up the universe of new recruits. (See Exhibit 2.)
So, if the starting points are the same, why are consultants from underrepresented racial and ethnic groups less successful at landing promotions? From our interviews with managers, we found that all consultants are sliding off the promotion track if they are unable to meet one or more of the following eight observable challenges:
To understand the dynamics behind these challenges, we performed a root cause analysis until we zeroed in on five root causes that drive all eight challenges. (See Exhibit 3.)
The Disproportionate Impact of Two Causes. To understand whether some—or all—of these five root causes disproportionately affect the success of consultants from racially and ethnically diverse backgrounds, we analyzed academic research and MLT survey data to understand how they affect all consultants.
The analysis suggested that there is little difference between the degree to which skill level and tool mastery influence advancement for consultants from underrepresented racial and ethnic groups versus for those who are not from underrepresented groups. The analysis was inconclusive on whether maintaining a growth mindset impacted promotions for these groups. However, divergence between the groups was identified on the remaining two root causes—a weak sense of belonging and difficulty navigating professional environments.
Consider the issues around a weak sense of belonging. A robust body of academic research suggests that feeling socially connected, supported, and appreciated as an individual is essential to perform well.
The research also shows that a weak sense of belonging is a greater barrier to success in highly challenging and demanding environments, such as a consulting firm. A study by Stanford University professors Greg Walton and Geoffrey Cohen examined experiences at colleges and universities, casting a spotlight on this barrier.
Specifically, the study found that Black students were likely to interpret challenges and adversity as signals that they didn’t belong in that environment. As a result, their sense of belonging declined as adversity increased. However, white students didn’t have the same reaction; their sense of belonging was unaffected by the daily challenges. Importantly, this study also showed that well-designed programs can help Black students maintain their sense of belonging, improving their academic performance and their ability to make connections in the college community.
Similarly, consultants from racially and ethnically diverse backgrounds disproportionally struggle with navigating the professional environment created by their firms. Our work uncovered two contributing factors to this root cause:
The disparity among first-generation graduates exists at the top universities where many consulting firms recruit. For example, in 2019, 27% of Harvard University’s students from underrepresented racial and ethnic groups were the first in their family to attend college, compared with 13% of students from other backgrounds.
In many industries, consulting included, there are tremendous advantages to skillfully navigating the organization. It can lead to higher-quality feedback, better assignments, access to more-effective managers, and greater support for professional opportunities, such as graduate school sponsorship.
Currently, the consulting industry does not appear to be aggressively tackling the root causes of weak promotion and retention rates for employees from underrepresented racial and ethnic groups. When consultants from diverse backgrounds were asked about support mechanisms that were already in place across the consulting ecosystem (which includes MLT and similar organizations, academic programs, and firms), respondents cited assistance in developing consulting skills and mastering tools—essentially the hard skills—as the most available. Specifically, training programs on Microsoft Excel, basic modeling, and slide writing are offered throughout the ecosystem. However, companies do not invest as much effort and resources into building a culture that creates a sense of belonging or into helping consultants learn how to navigate the professional environment. The consultants surveyed noted that they tend to rely on the network aspect of MLT and their firm’s affinity groups to provide a sense of belonging and guidance on navigating their firm.
Consulting firms and other companies in industries with similar diversity challenges should take a comprehensive approach to supporting the advancement and promotion of employees from underrepresented racial and minority groups. Such efforts must do more than improve recruitment and support the development of new skills and expertise.
To move the needle, employers should take aim at the root causes that limit the advancement of all employees, tailoring assistance and support to the specific background and starting point of the employee. At the same time, companies need to pay particular attention to the two root causes that disproportionately hinder employees from racially and ethnically diverse backgrounds.
We recommend five actions:
In addition to these steps, companies need to ensure that they have sufficient internal capacity to tackle these issues. They must have the right leadership and talent within the organization to set a strategy for addressing the root causes of diversity challenges and for rigorously measuring the outcomes. Then human resources must support line managers with the resources, expertise, and capacity to execute, and it must hold them accountable for progress. It isn’t realistic to ask line managers to figure out how to implement the strategy and measure outcomes using only a small percentage of their time.
Our research on the consulting industry has implications for a variety of highly competitive industries where diversity gains at the top remain elusive. Although recruitment remains a crucial way to improve diversity and inclusion, filling the pipeline with more highly qualified employees from diverse backgrounds won’t solve the problem.
Companies must instead focus on why they are not able to retain and promote many bright employees from underrepresented racial and ethnic groups. Certainly, academic institutions and outside programs, such as the one offered by MLT, can help ensure that people from diverse backgrounds are as prepared as possible for a demanding and intense professional environment. But if companies don’t dig in to understand what is blocking the success of those individuals, their efforts to create diverse and inclusive workplaces will come up woefully short.
The authors thank Accenture, Kearney, Bain & Company, Booz Allen Hamilton, The Bridgespan Group, Deloitte, EY-Parthenon, McKinsey & Company, and Strategy& for their participation in the interviews and survey used in this research.
ABOUT BOSTON CONSULTING GROUP
Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholders—empowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact.
Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place.
© Boston Consulting Group 2024. All rights reserved.
For information or permission to reprint, please contact BCG at email@example.com. To find the latest BCG content and register to receive e-alerts on this topic or others, please visit bcg.com. Follow Boston Consulting Group on Facebook and X (formerly Twitter).