The ‘Rooney Rule’ Might Not Improve Diversity at Banks

Five big banks have announced they will step up efforts to hire and promote a more diverse group of employees. Their intentions are good, but the banks’ various tactics are likely to have divergent outcomes. They would do better to adopt the approaches most supported by evidence, and not waste time and money on efforts that might not work.

Both U.S. Bancorp and JPMorgan Chase & Co. have adopted limited versions of the “Rooney rule,” named after a National Football League mandate that all open coaching positions consider at least one Black candidate. U.S. Bancorp will consider at least one woman or person of color for all roles at the company. JPMorgan will consider at least one woman and one person of color for any opening. Bank of America Corp., for its part, will consider at least one woman and one minority candidate for all senior roles and some midlevel ones. These goals are relatively modest and aren’t likely to have a major impact.

The Rooney rule itself may not have worked all that well. While the NFL has more coaches of color now than it did when the rule was adopted, economists are divided as to whether the rule drove the increase. One study found that the bigger challenge was to build a pipeline of Black and Hispanic coaches in college football and among defensive and offensive coordinators. In any case, after 18 years of the Rooney rule, NFL coaching remains predominantly White — even though three-quarters of the players are Black.

Similar efforts have been shown to fail elsewhere. In academia, a large study led by Stefanie K. Johnson at the University of Colorado’s Leeds School of Business found that when the pool of job candidates contained only one woman or person of color, the chances that person would be hired were essentially zero. A lab experiment asking students to evaluate resumes showed similar results.

These studies are part of a larger body of discrimination research that aims to untangle gender and race bias — feelings of animosity toward women and people of color — from cognitive biases that prefer the status quo and punish outliers.

For me, these cognitive biases recall the old Sesame Street segment “One of These Things.” The screen shows three red balloons and a blue one, while a song encourages children to figure out which one of these things “doesn’t belong.” Even as a child, I remember being disturbed by this game. Just because the blue balloon is different doesn’t mean we have to exclude it! But that is what our brains naturally do.

When adults see a resume that’s not like the others, they assume it doesn’t belong. When there is only one candidate who is not White, or not male, people tend to disqualify the outlier.

The solution is to gather a more diverse pool of candidates. Johnson’s research found that when one candidate out of four was a woman or person of color, that person was never hired. But when two candidates were women or people of color, they suddenly made up 50% of hires.

This makes Wells Fargo & Co.’s approach to diverse hiring more promising. The bank will now insist that half the candidates for open roles are women or people of color (though, disappointingly, only for jobs that pay more than $100,000 a year).

Another major pitfall lies in the way that the banks treat all “diversity” candidates the same. This stands to disproportionately benefit White women, who are typically the biggest beneficiaries of affirmative action, even if those policies are meant to address race.

Nor is it especially helpful to lump into one category all people of color. The experiences of Black, Latinx, Indigenous, Asian-American and multiracial people are distinct, and they differ by gender as well as race. Some employers also include in diversity metrics employees who are LGBTQ or have disabilities, adding yet more dimensions. A policy that paints “diversity” with such a broad brush may not be tailored enough to recruit a truly diverse cohort of employees.

One positive aspect of the banks’ diversity efforts is that they aim squarely at company processes, which is likely to be more effective than bias training or programs that encourage mentoring but don’t link back to core business systems. The softer approaches are popular but haven’t paid huge dividends — probably because they don’t challenge the status quo. I think of them as attempts to fix people’s brains or fix the women/POC. Fixes to the business would stand a better chance of producing measurable improvements.

So, good start, banks. But if your new strategies haven’t worked for you in, say, six months, maybe ramp up your efforts. After all, the Rooney rule itself got an update last year: NFL teams now have to interview at least two minority candidates for head coaching positions, and at least one for lower-level roles. That’s a change in the right direction.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Sarah Green Carmichael is an editor with Bloomberg Opinion. She was previously managing editor of ideas and commentary at Barron’s, and an executive editor at Harvard Business Review, where she hosted the HBR Ideacast.

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