This information is reproduced courtesy of Demos
Social challenges beyond the market
One of the core themes running through this pamphlet has been both the ingenuity and the shortcomings of markets. The trends we have described, and the ways in which they might interact with one another in the future, will present huge challenges - many of which will be overcome through the market. New social values will filter through into corporate decision-making and behaviour; changing demographics will tilt the focus of those operating in the market closer towards those groups that currently suffer employment penalties; new technology will probably give rise to business models that no one has even thought of yet as people identify new opportunities to create value.
Yet for all their uses, markets often produce imperfect results. They can produce disparities in power that undermine people's ability to shape their own lives. Their outcomes can overlap with social goals, such as more inclusive workplaces, without ever fully achieving them.
And markets can be very poor forums for collective decisions about the kind of society that we want to live in; the sum of our individual choices often produces outcomes that none of us are comfortable with.
This chapter explores some of those shortcomings, raising a set of distinctly social concerns and offering recommendations for government and others to help address them. Some of the issues touched on in this pamphlet are not discussed here - helping the whole population access education and training in adult life, and finding ways to support work-life balance are vital issues, but deserve more attention than can be offered to them here. They are already the focus of specific pieces of work at Demos, and will be the subject of further published reports in 2007.
Keeping our focus on recruitment, we make recommendations in three specific areas:
Making markets work for people
The foundation of capitalism is the promise of the future: the promise of repeat business with existing customers, or further business with new customers. Game theory tells us that we will work co-operatively with others when we know the decisions that we make today will affect us in the future75 and nowhere does this apply more than to markets. Reputable companies provide good services and therefore win future contracts, or disreputable companies provide poor services and do not.
Future business success therefore is the risk of poor or unethical performance. This reality was captured neatly in a remark made by BP Chairman Lord Browne in an interview with the Spectator in May 2006. He commented: ‘Our values are to do business in such a way that it can be done again and again. It is very unwise to think that anything is the last transaction.'76
Lord Browne's remark was seized on in some quarters as proof that capitalism will, after all, regulate itself. Adam Smith's modern-day representatives described the comment as ‘a remark that so neatly says what capitalism is really about, rather than what its critics think it is about'.77
The difficulty, however, is that this is not necessarily true. Because Lord Browne was not describing what capitalism is all about - but rather what it can and should be like - when the right conditions are in place. In a market with strong information, consequences for unethical behaviour, and a realistic set of alternative options, it is unwise to think that anything is the last transaction. However, in markets with poor information and few consequences for unethical action the dynamics change. This truth - that markets can function either effectively or ineffectively - is reflected in the rather more nuanced interpretation of how markets work provided by another man who has made millions - Pierre Omidyar, the founder of eBay.
His short explanation of the idea behind his multi-million dollar company contains this:
Most people are honest. And they mean well. But some people are dishonest. Or deceptive. This is true here, in the newsgroups, in the classifieds, and right next door. It's a fact of life. But here, those people can't hide.We'll drive them away. Use our feedback forum. Give praise where it is due; make complaints where appropriate.78
What the founder of eBay has done has been to find a way of ensuring that more people behave ethically, by strengthening feedback loops that can be weak in markets with a poor sense of the future. EBay provides this sense of the future through its peer-to-peer feedback system. eBay users provide star ratings and written feedback on others who they have traded with, collectively building up a picture of who else in the market is efficient, trustworthy and reliable. Those who perform well are rewarded with a strong (clear) reputation, while those who perform poorly or unethically are likely to be driven away as Omidyar describes. Through doing this, eBay has become both a free market and a highly regulated one - because information is so rich that people within the market become everyday regulators. Activists can exist within markets as well as within civil society. And the truly important point here is that the information provided by these everyday activists captures the experience of working with a company, rather than merely a set of credentials that they lay claim to. Because while credentials can be an important indicator of compliance with minimum standards, companies understandably want excellence rather than a guarantee of a basic minimum when they are making decisions as important as who to employ.
This offers an important lesson for those interested in improving the overall quality and reputation of the recruitment industry.
We recommend that leading players in the industry should find a way of creating an eBay-style site to help provide information and feedback to future clients of the industry.
This web tool could incorporate much of the work that has already been done to provide clear information - bringing together feedback and reviews from customers with accreditation and other evidence of strong future credentials such as ethical pledges. Taking eBay as its model, this approach would seek to combine the dynamism of an open market with the information, feedback loops and sense of the future required to make that work.
Helping organisations to diversify their workforces
It has become commonplace to argue that there is a generic business case for diversity in organisations. In a comprehensive study published in 2004, the Institute for Public Policy Research identified the following benefits to building an ethnically diverse workforce:
Such benefits looks persuasive, particularly when set alongside demographic trends which show that 8 per cent of the workforce will be from a minority ethnic group by 2030. Beyond ethnicity, there is also good evidence to suggest that open and inclusive organisations will be best placed to attract and retain staff with a range of personal backgrounds. The campaigning group Stonewall, for example, has found that 36 per cent of gay employees will change careers if discrimination is continued.80. The numbers of men and women at work are almost equal in the UK, highlighting the importance of workplaces that are welcoming of both men and women.
As a 2006 Recruitment and Employment Confederation (REC) report on the recruitment industry - undertaken in association with Ernst and Young - suggested, ‘with changing demographics in the UK, recruiters' very business success will increasingly depend on their ability to reach out to the widest possible candidate market'.81 In this sense, one thing is clear: there certainly appear to be few downsides to employing a diverse range of employees.
Highlighting the ‘business case' that appears to stem from these benefits is a comfortable position for politicians to adopt (it absolves them of responsibility for diversity beyond providing businesses with information and stamping out clear cases of racism and discrimination); it is a fortuitous position for businesses and business lobby groups to take up (it absolves them from more legislation to comply with and is, in fairness, true in some cases); and it is a natural position for campaigning groups seeking to promote social inclusion (it fits with their own values and worldview). However a crucial question is whether, given the painfully slow progress towards workplaces actually becoming more diverse, such a business case exists in practice and for all businesses. Because while employing a more diverse workforce may be beneficial to businesses, achieving that in practice can involve considerable time, effort - and money.
A glimpse at best practice in recruiting to promote diversity indicates this. An organisation seeking to diversify its workforce might decide to advertise in a range of places - not just on its own website but in the minority ethnic press, or the Pink Paper for example. This can be an important way of sending an unambiguous message that people from all backgrounds are welcome and wanted. It might also train its employees to conduct interviews and put together advertising that supports this message. And it might spend time running work experience schemes, or organising events in the community to illustrate its inclusive culture.
All of this costs money - often more money than is available to SMEs acting alone. Many SMEs simply do not have the same economies of scale available to investment banks or large retailers, who are able to spend relatively large amounts of money - yet devote relatively small proportions of their overall turnover - on these activities.
Given this discrepancy, perhaps it should not be surprising that ippr's taskforce found that ‘many SMEs do not see a business case for race equality and diversity in their workforce: 60 per cent of our respondents did not have formal race equality or equal opportunities strategies in place'.82
The interpretation of this finding by the (business-led) taskforce was that more information was needed to illustrate the benefits of diversity. Businesses would see sense with just a little more education. However, the harsh reality that emerged from our own interviews - and which is clearly shown in the statistical employment penalties shown in chapter 3 - is that for many businesses the costs of recruiting for diversity can outweigh the undoubted business benefits of actually achieving it. In other words there is a market failure for diversity: many businesses that would, in an ideal world, like to diversify their workforces, cannot find the time or resources to do so. Instead they settle for hiring those who can be recruited easily and at low cost, through networks or conventional channels.
This rarely spoken of reality can create a negative feedback loop, in which inaction leads to very slow progress . . . leading to further inaction. Yet while the market cannot be relied on to provide the nation with diverse workplaces, we know that diversity in the workplace is of increasing social importance. At a time where social cohesion and social inclusion are major concerns, the workplace - where many people spend five out of seven days every week - is a crucial site for everyday interaction and integration.
Any debate about a role for government in this area requires an injection of realism and some conceptual clarity about the reasons to aspire towards a more diverse workforce at a national level.83 In social terms, it is possible to identify four key reasons to aspire towards diverse workforces:
Each of these reasons has their own logic, but the difficulty is that the reasons - even within the categories assigned above - are not perfectly overlapping. An organisation can be meritocratic without being representative, or visa versa. An organisation can avoid homogeneity without being genuinely diverse. Organisations might access all the talent available but end up becoming very homogenous, contributing little to integration, and so on.
Any policy measures or other interventions designed to tackle the market failure for diversity should be clear about their own rationale for promoting diversity - and of how they plan to affect behaviour. We recommend that businesses should be given support in diversifying their workforces - because SMEs all around the country need help in this area and because the country as a whole would benefit in becoming a fairer,more socially integrated society.
As the Prime Minister's Strategy Unit has written:
The task of promoting the economic integration of ethnic minority groups through labour market inclusion is intimately linked with the long-term aim of promoting social, cultural, civil and political integration. . . . The limited economic integration of some ethnic minority groups can be linked with, and lead to, greater signs of isolation and alienation from the norms of society as a whole.84
The trend over the last century has been towards more legislation - and there is a legitimate debate around whether the private sector should be exempt from duties placed on the public sector. However, as the interim report of the Equalities Commission found, legal measures have had some positive effects but have not been sufficient in tackling the problem alone.85 Similarly, while appeals to companies' sense of ‘social responsibility' will do no harm, the rate of progress to date suggests a more systematic approach based on reducing the costs of promoting diversity should be adopted.
Given this finding - and the difficulty in pinning down a definition of diversity - the goal of government should therefore be to help businesses become as open and inclusive as possible.
One clear way in which to take this forward would be through the nationwide network of sector skills councils (SSCs). These organisations - which cover 85 per cent of the British workforce86 -are in a position to take an overview of their own sectors and to support employers in reaching and attracting people from a much greater range of backgrounds. As things stand, sector skills councils are set four key goals:
We recommend that a fifth core goal should be added:
In this way, SSCs could not only perform a useful business function for smaller companies in particular, but would be responsible for helping to deliver an important set of wider social goals. This is not to suggest a course of positive discrimination, but rather a concerted programme of positive action from sector to sector (an important distinction, which is described in box 3).
Box 3 Positive action
Positive action seeks to increase the number of candidates for positions - and is an approach already adopted by organisations across the public and private sector. It does not seek to judge candidates on their background, but rather to encourage potential candidates from all backgrounds to put themselves forward with confidence. In this sense, it is often used to address the image of an organisation or industry, or to build the confidence of an individual or community.
Positive discrimination, however, deliberately takes an individual's background into consideration in selection procedures, as a means to address past discrimination or on the basis that the challenge of diversifying a workforce is so intractable that it requires a change to the rules. While positive discrimination is unlawful in the UK, positive action is lawful and has much wider public support.
The value of setting a broad outcome goal for SSCs of attracting the widest possible pool of talent into a sector's workforce would be to encourage innovation within and between sectors: diversifying workforces in banking is likely to be a different proposition from achieving the same goal in small, highly networked sectors.
In broad terms, however, SSCs would be expected to focus their efforts on supporting SMEs, through measures like advertising campaigns, staging recruitment fairs and events in disadvantaged areas and potentially match-funding diversity training or schemes designed to provide work experience placements. Under these new arrangements, sector skills councils could be held to account by government against progress made, while providing an institutional focus for collaboration between charities, campaigning groups and business organisations.
Addressing privacy in the information age
Ten years ago making an application for a job was a discreet process. An application would be sent and received. A professional interview would take place. References with previous employers would be taken up and a job would either be offered - or not - based on that set of professional interactions. In 2007, however, we are all becoming searchable. Typing someone's name into Google can be at least as informative as the information that an individual provides in a CV or covering letter.
What are they really like, we wonder. Just as companies lose control of their brands in the information age, the terms of a conversation with a future employer are no longer restricted to what we choose to talk about in an interview. And what is more, Google sees no distinction between personal and private lives. Searching for someone on the internet is just as likely to find the photographs of last year's office party as our professional achievements. Add to this the fact that other people may have posted up those photos without us even knowing - and that once content is up on the internet it can be impossible to remove it altogether - and suddenly applying for a job looks a far more complicated prospect.
The evidence is beginning to mount to suggest that this is already affecting recruitment decisions. According to research from the United States, three out of four recruiters undertake internet research on candidates and one in four has dropped candidates based on what the searches found.88. Meanwhile, job applicants themselves are beginning to identify their internet trails as potential obstacles to employment. Forty-seven per cent of college grad job seekers who use social networking sites such as MySpace and Facebook have either already changed or plan to change the content of their pages as a result of their job search.89
The likelihood is that in the medium to long term we will simply adjust to this level of transparency accepting that employees can have personal lives which have little or no effect on their ability to work effectively. However, the generation entering the labour market in the next five years may be in for a rocky ride as society makes the transition. Today's teenagers - the ‘digital natives' - are those who have embraced the openness and self-expression of the internet, growing up with it as a normal part of their lives. Entering the working world - or at least trying to - where this level of openness is not yet the norm may be a culture shock.
We recommend that the careers advisers in schools and universities alert young people to the potential dangers to their career that could be caused by this culture clash between high levels of openness and often relatively closed organisational cultures.
The internet by its nature cannot be regulated but people can certainly regulate their own behaviour when they are made aware of the possible consequences of their actions in the future.
Further reading…
Recruitment 2020: Changing workforce
Recruitment 2020: Challenges to old busi...
Recruitment 2020: The conclusion
