The profitability differential is getting bigger — diverse companies are winning by ever-wider margins.
McKinsey reports that “the profitability spread between the most and least gender-diverse companies is now 48%.” And “the relationship between diversity on executive teams and the likelihood of financial outperformance has strengthened over time.”
McKinsey’s findings mean that most companies in the hospitality industry are leaving money on the table, either by not hiring for diversity or by not enabling all of their diverse workforce to progress. The opportunity for improved profitability is lost.
We know that the hospitality industry will undertake massive hiring in 2021 and 2022. It furloughed or fired 479,000 people during 2020 — 35% of the workforce. Now it has to hire to run the hotels and corporate offices. It is how the industry does this that will define which companies will be the strongest performers in the future.
Who we hire has never been more important to future profitability. How we develop employees has never had more upside benefit.
In 2020, in spite of rhetoric about diversity, representation of women in hospitality industry leadership barely moved. Castell Project statistics show that the odds of a women reaching the executive leadership level (e.g., CEO, partner/principal, president, C-suite) were one woman to 5.7 men at the end of 2020, slightly worse odds for women than a year earlier.
For Black representation in hospitality, not just at the executive level, there were 5.7 white employees to each Black employee in year-end 2020. Black employees lost share from 2019 when there were 5.3 white to each Black employee.
Changing the numbers will not be easy for individual companies or the industry. We let go of 32% more women than men during the pandemic. We clearly demonstrated to women that their future in the industry is uncertain. We let go of a higher proportion of Black employees as well, which also sends a clear message.
The most successful companies have systematic, business-led approaches to inclusion and diversity; blueprints and best practices exist.
Intending to hire diverse talent isn’t enough. Prospective employees have choices and can discern differences between a company’s rhetoric and its actions.
Hospitality is not the only industry hiring. In the competition for talent, it’s about money and also about quality of life. We offer exciting and aspirational opportunities involving travel, which is part of an appealing lifestyle to potential employees. It’s time to position our companies as desirable employers.
People evaluating jobs want to know that their company will be there. This is a difficult message to convey to people who remember the shock of pandemic layoffs. However, we are heading into a time of rapid growth for the hospitality industry which means potential opportunity for employees who give the industry a chance.
Company credibility is a real thing. A company that advertises smiling multi-racial teams and has all-white, all-male leadership loses credibility. For instance, there is no Black representation on the boards of 20 of the 31 public companies in the hospitality industry. Only about half of hospitality public companies have more than 20% female board members. Corporate leadership of these companies is even less diverse than their boards. Hospitality visibly lags other industries.
For individual hospitality companies, the good news is that adopting best practices and systematically embracing diversity can rapidly put a company ahead of the pack. Among the many challenges this industry and its executives face, this is one that can change the trajectory of the company and escalate its future in a competitive market.
Peggy Berg chairs the Castell Project, a non-profit advancing women in leadership in the hospitality industry.
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