CA MAGAZINE , May 2010

In today’s world, embracing diversity is good HR, but it’s good for business too. How far have accounting firms advanced in this practice?

By John Lorinc
Illustration: Brad Yeo

Last year, Robert Davis, a partner in KPMG’s transfer pricing group found himself meeting a prospective client — a large Chinese manufacturer setting up a Canadian operation. While much was at stake with the proposed investment, a hurdle stood in the way. “There were significant language barriers,” he recalls.

As it happened, a KPMG associate in the Toronto office spoke Mandarin and Davis assigned her to the team handling the account. The client was “ecstatic,” Davis says, pointing out that this CA’s involvement extended far beyond translation because of the complex transfer pricing aspects of the deal. “In the absence of that [skill set],” he says, “we would have struggled to get this project to completion.”

Such stories are increasingly common in a profession that caters to a global business community. And this one had a happy ending. Indeed, experiences such as the one Davis recounts explains why the accounting industry wants to broaden its base.

But the widely recognized need for diversity exposes a stubborn paradox. Accounting firms have no difficulty signing up young women or candidates from a wide range of ethnic backgrounds when they recruit. But by the time these newcomers reached their early 30s, when they reached the manager level, they started to leave, with the result that the partner strata of the profession remains non-diverse.

When Deloitte’s Jane Allen took on the role of chief diversity officer in 2008, she quickly noticed this dynamic and embarked on a campaign to counter it. One of the keys to leveling the playing field, she felt, was to ensure that everyone who wanted to move up had the opportunity to be coached in what she describes as the unwritten rules for getting ahead. But she and her colleagues were also adamant that any such change needs goals and a means of measuring progress. “Where do we want to be five years from now?” she says.

So Deloitte began tracking such programs to see if  they were making a difference. Last year, the company also decided to publish an annual diversity report, with the first edition released in October. According to the document, 17% of Deloitte’s leadership positions were held by women in 2009, up from 13% the previous year. But there was an even more impressive change attributable to the firm’s diversity plan: in 2009, the percentage of women or visible minorities who made partner was 38.5%, a 10.5% increase from the previous year.

Promoting inclusion has been on the radar of North America’s accounting profession for decades, going back to the late 1960s when Ralph Kent, head of the American Institute for Certified Public Accountants (AICPA), declared in a landmark speech that the industry must embrace integration “in fact as well as in ideal.”

In September 1999, the Journal of Accountancy published a wake-up call showing that while there had been some progress, African-Americans, Hispanics and Native Americans remained at a significant disadvantage, with a tiny fraction of those hired becoming partners in nonminority-owned firms. Overall, African-Americans accounted for less than 1% of all CPAs, making airline pilots and navigators the only groups less diverse than accountants. The Journal concluded that the obstacles to advancement include discrimination, income disparity and lack of familiarity with the profession. Another US study of visible minority women in the profession also identified the lack of role models, negative stereotypes and a dearth of opportunities to establish connections within firms.

While AICPA maintains statistics on the makeup of the profession, there has been virtually no such academic scrutiny of the Canadian accounting sector. Anecdotally, in Canada’s largest urban centres, there has been a proliferation of sole practitioners or small partnerships made up of visible minorities or immigrants who have secured their certification. The composition of midsized partnerships in smaller or midsized cities, however, reveals much less of Canada’s changing ethnic makeup. As for the large firms, the Big Four have diversity programs targeting minorities, women, aboriginals, the disabled and the lesbian, gay, bisexual and transgender (LGBT) community. Yet only one has a visible minority partner serving on the top leadership council, which remains dominated by white males.

At the same time, everyone interviewed for this feature agrees that a diverse workforce is not just about more enlightened HR departments, but is also good for business. Many public-sector clients now have diversity expectations built into their request for proposals as a result of employment equity legislation that extends to contractors. But well beyond the realm of government gigs a growing number of corporate clients function in a global market, where firms deal with a wide range of languages and cultural norms. Indeed, in a country dependant on immigrants and exports, some feel workplace diversity in the profession has become one of the keys to winning new clients.    

Four years ago, a PricewaterhouseCoopers BC managing partner approached Peter Guo, a Chinese Canadian who is a partner in PwC’s advisory services group, about launching a pilot project to develop a regional strategy for making a more formalized plan to address diversity and inclusion by using existing policies. As Guo explains, the BC operation gets a lot of out-of-province or out-of-country transfers because of Vancouver’s quality of life. For recruiters, he explains, those transfers posed some basic questions. “Do we really understand the  communities we’re drawing from? And what are we doing to bolster our human capital?”

Guo put together a regional strategy with three pillars: developing a business case for promoting diversity among both its campus recruits and experienced hires; establishing employee resource groups for various diversity groups; and raising awareness with education and partnership initiatives.

He also wanted to collect data on the composition of the workforce, based on additional questions about diversity on employee surveys and through interviews. The magic sauce, says Guo, turned out to be a buddy system: the associates and managers who succeeded could turn to a mentor or coach who could provide a road map to success. “The strength of the firm is built around these mentoring connections.”

For many accounting professionals who have turned their attention to addressing the diversity deficit at the top ranks, most agree that one of the major challenges is finding ways to allow women and visible minorities to benefit from the same mentoring that is available to white males.

Allen points out that part of the problem is that in most work-places, people gravitate to those with similar backgrounds and experiences. In practical terms, this dynamic means that some younger, female or visible-minority professionals will not be asked out for lunch by more senior people, or their names won’t be put forward for interesting or challenging assignments. The trick to bringing along outsiders, Allen says, is to first acknowledge and then break down this unconscious bias.

Different firms have adopted different techniques for addressing the issue.

Some firms have adopted a hard-nosed approach and set clear targets, based on the well-established accounting industry maxim that what doesn’t get measured doesn’t get done. Two years ago, KPMG Canada decided to boost the proportion of women and visible minorities at the partner level by 10% over five years, moving from the current level of 18% to 28%. “It’s not about quotas or special treatment,” says national director of diversity Michael Bach, who started the firm’s Pride group for gays and lesbians in 2005. Rather, he says, it’s about taking a more broad-minded approach to professional development.

For example, Ernst & Young, one of the leaders in diversity management, established a program called Career Watch, which was designed specifically to identify and encourage the careers of women and visible minorities. The eight-person executive committee meets twice a year to discuss the progress of 48 hand-picked senior managers, all of whom are considered talented but haven’t yet made partner. Each member, says Karen Wensley, an E&Y partner and member of the committee who was most recently national HR leader, takes on six mentees, and at those biannual sessions they make sure their mentees are progressing and getting the right experiences. “We leave the meeting with an action plan,” says Wensley.

She recalls working with an Asian-Canadian CA who, though very talented, told her he didn’t see a lot of partner role models in the firm, nor opportunities for promotion to the partner level. Wensley worked with the young man, offering encouragement, tactical advice and examples of other Asians who have done well at E&Y. When she first met him, he thought he would eventually leave the firm, but now, she says, “I can really see  him gaining that self-confidence.”

E&Y Canada’s inclusiveness leader Jeannine Pereira says the six-year-old program is delivering results in terms of the makeup of the partners. “We have made good progress. The gender/visible minority makeup has changed in the partnership makeup across Canada,” says Pereira, whose parents are immigrants of Goan descent who left Uganda and settled in Montreal. She adds that the company has a talent-management program that brings forth a variety of talent into its leadership.

Other firms have turned to hearts-and-minds campaigns to bolster the acceptance of groups that tend to be on the margins. “It goes beyond compliance and takes diversity to the next stage,which is being an even more inclusive organization,” says PwC’s senior manager, diversity and inclusion Richard Pinnock, an MBA whose background is Caribbean and German and who joined the firm in 2009 with a long track record in marketing and diversity management.

As part of PwC’s diversity strategy, introduced as a pilot project in 2008 and fully rolled out in 2009, a series of half-day seminars were launched across the country as part of a nation-al diversity training program. To date, 1,500 PwC employees (the sessions are mandatory for the approximately 2,500 employees at manager level and higher) have participated in 75 sessions made up of two modules in local cities across Canada, but Pinnock is quick to point out that they do not only follow the traditional mode of a speaker with a projector and a PowerPoint presentation.

Rather, the seminars involve role-playing, using scenarios that may come up in a cosmopolitan business environment. In one example, Pinnock says, participants are taken through a scenario in which a senior manager who doesn’t consume alcohol for religious reasons is invited to a client holiday party. These kinds of sessions allow PwC accountants to experience a virtual situation and share solutions they may well put into practice back in the real-world setting of their offices.

For its part, E&Y seeks to go the next step by encouraging mentors to look for opportunities to soak up some of the culture of the groups represented within their firms. By way of example, Pereira says that this past year, she attended Pride Week events with her mentee, something she hadn’t done in the past. “The point is to get out of your comfort zone and learn something different,” she says.

What is clear, however, is that diversity training and improved mentoring must be accompanied by structures and practices to allow accounting professionals from diverse communities to share experiences and establish links with senior people with similar backgrounds.

The big four firms have established or are creating affinity groups (a.k.a. diversity circles or employee resource groups) — networks made up of associates and partners with a common focus. Some are for women with families, while others were established by LGBT accountants or employees of Chinese, Caribbean/African or South Asian background.

Deloitte, for example, set up a program two years ago called Step Up. Its focus is to provide senior managers aspiring to be partner with specific coaching in how to network and market, both inside and outside the organization.

The Pride network Bach set up encompasses members in almost a dozen KPMG offices across Canada; internal surveys have shown that about 5% of the firm’s employees are gays or lesbians. Deloitte’s gay and lesbian community has also established an LGBT leadership council, which the company recognized so those professionals didn’t have to leave their identities at the door when they came to work. “It made it okay in the firm to use the words ‘gay’ and ‘lesbian’ in meetings and not have people feel shocked,” says Allen.

Yet in some cases, the establishment of such networks is not a risk-free exercise. When an LGBT group was established in PwC’s BC operation, Guo says, the organizers had to use a light touch when sending out invitations to participate. “The point wasn’t to out people,” he says. A Chinese inclusion circle was established last summer, and South Asian one will be launched this spring/early summer.

PwC provides the groups with a budget out of the recognition that it’s not just about mutual support, says Pinnock. When an employee resource group is being formed, it must develop a charter and a plan to forge links outside the firm that may lead to new business opportunities and talented recruits. “We’re empowering our groups with an actual budget and encourage them to be strategic with executing their annual business plan, which is aligned with the firm’s goals and objectives,” he says. “It’s not something that’s nice to do. There’s actually a business case.”

Those with a track record in this field know that the acid test of inclusiveness policies is the degree to which they are knitted into a firm’s day-to-day business operations. Pereira explains that E&Y Canada’s earliest approach to diversity was to avoid acknowledging differences. But over the past decade, the thinking has evolved to not only recognizing differences but leveraging them to the company’s — and the individual’s — competitive advantage.  

She points out that not everyone in a large firm has the same kind of access to high-profile clients and files. Recognizing this reality, the company has focused on creating client teams with a broad cross section of backgrounds. But, she adds, “It’s not just about, ‘OK, do you have an Asian female? Tick box.’ That’s not the purpose.” Rather, Pereira says, the goal is to create teams with competencies geared to the clients. “Diversity to us is a strategy. It’s the thing we’re using as a weapon to achieve market growth.” She says that this is a two-fold strategy: E&Y is focusing on the client-team mix and being fair in opportunities to its accountants.

As an additional incentive, E&Y accountants are also evaluated on inclusiveness as part of the performance-management process. “Everyone owns it,” Pereira says.  

Bach points out that there is mounting evidence from organizational behaviour experts about the importance of diversity of thought in work teams. When everyone working on one file brings roughly the same set of experiences to a set of problems, they will likely come up with similar solutions instead of challenging one another.

But there is an even broader dynamic driving this whole evolution, which is that most companies and organizations are experiencing similar changes in their workforces. Over the next few decades, that process will only accelerate in Canada because the combination of an aging population and declining birth rate means that by 2030, immigrants will account for all new growth in the labour force.

“Ultimately,” says Pinnock, “it comes down to becoming better equipped to meet the needs of our clients who are going through the same transformation toward becoming more inclusive.”

John Lorinc is a freelance writer based in Toronto