THE BLOG

It's Not Just Barneys...Unconscious Bias is a Business Risk...How Much is it Costing Your Business?

11/18/2013 06:39 pm ET | Updated Jan 23, 2014

Subjectivity and the tendency to act based on unconscious biases is a business risk that companies cannot afford to ignore. It's not just Barneys or a pricey boutique in Zurich where racial profiling can impact the bottom line. According to a Huff Post writers, Kim Bhasin and Julee Wilson in their recent article entitled "Barneys' Racist Culture Deeply Ingrained In Store, Insiders Say":

"...the situation at Barneys isn't unique, nor is it limited to upscale department stores. In the past decade, Neiman Marcus, Macy's, Dillards and Kohl's have each been sued for alleged racial profiling."

In many of these cases, sales associates acted on their unconscious biases and made assumptions about the worthiness of a potential customer and their ability to pay for merchandise based on the color of their skin. In the case of the Boutique in Zurich, it cost the store $38,000 when Oprah walked out the door. It also cost them reputational capital, as the incident went viral and a public apology was required. Undoubtedly, incidences of unconscious bias are not limited to just retailers and can cost a lot more than $38,000.

For example, I recently worked with the new CEO of a private bank and investment management company to develop and facilitate a senior leadership meeting on objective leadership. One of the key issues that emerged was that the profile of one of their key target wealth management customers: "entrepreneurs", had changed. The wealth management executives were losing market share in this segment and they needed to rethink their assumptions about what "successful entrepreneurs" looked like and how best to attract and service them.

In another example, Ken Chenault of American Express recently spoke at a leadership conference for The Partnership, Inc., a Boston based non-profit organization whose mission is to advance a new conversation about diversity. He talked about the importance of overcoming unconscious biases and that American Express hiring managers had to re-evaluate and change their underlying assumptions about a key talent resource for their organization, IT professionals. His management team learned to adjust to the reality that many young professionals in technical fields may not present themselves conservatively. They could no longer afford to evaluate talent based on unconscious biases and assumptions about appearance.

These are just two examples of unconscious bias risk. What is this lack of objectivity costing your business: lost revenue, talent, or productivity? More importantly, how can businesses effectively mitigate this risk? Here are specific actions and resources that may help businesses address this issue:

1) Conduct an internal assessment of unconscious bias risk
a. Through focus groups and surveys, assess the level of employee engagement regarding inclusiveness, creativity and innovation
b. Measure interactions with customers through call center recordings and other customer feedback mechanisms
c. Analyze the mix of customers to determine if the company is either losing share or not capturing share of specific demographic segments
d. Assess the diversity of the supplier base
e. Evaluate the strength of strategic partnerships, both domestically and globally if applicable, in terms of loyalty, price elasticity and goodwill and determine if unconscious bias is contributing to misunderstandings or distrust

The Partnership, Inc. is an excellent resource that consults with senior leaders of global companies to help assess bias risk within their organizations. https://www.thepartnershipinc.org
Carol Fulp, President and CEO of The Partnership, Inc. said:

"The issue of diversity and inclusion is about the bottom line. Corporations must understand how much unconscious bias is impacting their business and how to mitigate this risk."

2) Diversify the workforce across in all areas of difference at all levels of the organization
Dani Monroe, a corporate consultant talks about the impact of unconscious biases in talent management in her new book, "Untapped Talent, Unleashing the Power of the Hidden Workforce" and what businesses can do to acquire the diverse talent needed in an increasingly diverse and competitive marketplace.

She suggests:

"Most diverse talent is located in the middle of corporations. I like to call it the 70 percent group. This is where the majority of your organization's untapped talent resides, because the people above them - the 10-20 percent - that participate in talent management programs are thriving. Developing talent that already exists ensures you'll have employees that fit your culture, recruitment fees are reduced and employee engagement increases. Organizations must develop a culture of talent stewardship to diversify their workforce. They must identify the talent, instill confidence, and provide the resources and pathway to success."

3) Teach employees how to be objective
Conduct training programs to teach employees how to identify and transform unconscious biases so that they can respond to customers, partners and colleagues in a manner that reflects the values of the organization. In my last blog on this subject entitled, "What if Many of Us are Biased and We Don't Know It" I wrote about how transformative it is for people to recognize and accept, without shame or blame, that they have biases and to learn how to overcome them. The latest research, as well as my direct experience conducting objectivity seminars through Babson Executive Education, concludes that we all have the capacity to change in response to new information. People can weaken the mental connections that link certain groups with negative stereotypes and strengthen the mental connections that link them to positive conscious beliefs. Instead of being ashamed of our unconscious biases, we have the power to choose to respond objectively, to discern what is appropriate, what is right and proper, and to actually do it. Every time we interrupt our automatic stereotypical reactions we are loosening those neural connections and giving conscious unprejudiced beliefs a chance to take over and guide our behavior.

Businesses are constantly confronted with risk, some are unpredictable and uncontrollable but others can be measured, evaluated and mitigated. A business's success often depends on its ability to identify and minimize risk. Does it make sense for some businesses to ignore or underestimate one of its greatest yet controllable risks, the risk of subjectivity and unconscious bias?