Summary
- The most important consequence of the war in Ukraine is the lives lost and the humanitarian crisis associated with the huge numbers of besieged and displaced people. There are also, however, numerous significant economic implications.
- Prior to the outbreak of the war, most key global macroeconomic variables were seen as returning to normality over 2022-23 following the COVID-19 pandemic.
- Global growth in 2023 was projected to return to rates similar to those prevailing in the immediate pre-pandemic period.
- Most OECD economies were expected to get back to full employment by 2023, and inflation was seen as converging on levels close to policy objectives, though later and from higher levels than previously expected in most countries.
- Policy settings were also expected to normalise, with exceptional monetary policy accommodation being progressively removed and emergency fiscal measures, taken in response to the pandemic, phased out.
- Although Russia and Ukraine are relatively small in output terms, they are large producers and exporters of key food items, minerals and energy. The war has already resulted in sizeable economic and financial shocks, particularly in commodity markets, with the prices of oil, gas and wheat soaring.
- The moves in commodity prices and financial markets seen since the outbreak of the war could, if sustained, reduce global GDP growth by over 1 percentage point in the first year, with a deep recession in Russia, and push up global consumer price inflation by approximately 2½ percentage points.
- Well-designed and carefully targeted fiscal support could reduce the negative impact on growth with only a minor extra impetus to inflation. In some countries, this could be funded by taxation of windfall gains.
- Faced with a new negative shock of uncertain duration and magnitude, monetary policy should remain focused on ensuring well-anchored inflation expectations. Most central banks should continue their pre-war plans, with the exception of the most affected economies, where a pause may be needed to fully assess the consequences of the crisis.
- In the near term, many governments will need to cushion the blow of higher energy prices, diversify energy sources and increase efficiency wherever possible. For food, higher production in OECD countries, refraining from protectionism and multilateral support for logistics will help the countries most affected by a disruption to supply from Russia and Ukraine.
- The war has underlined the importance of minimising dependence on Russia for key energy imports. Policymakers should reconsider the appropriateness of market design with a view to ensuring energy security and putting incentives in place to ensure the green transition in a publicly supported way.
The war between Russia and Ukraine is a major humanitarian and economic shock
The Russian invasion of Ukraine is a major humanitarian crisis affecting millions of people and a severe economic shock of uncertain duration and magnitude. This note provides a first assessment of the potential impact of the conflict on the global economy, based on the shocks seen so far, and the policy implications.
Prior to the conflict, the global recovery from the pandemic was expected to continue in 2022 and 2023, helped by continued progress with global vaccination efforts, supportive macroeconomic policies in the major economies and favourable financial conditions. The December 2021 OECD Economic Outlook projected global GDP growth of 4.5% in 2022 and 3.2% in 2023 (Figure 1, Panel A). Subsequent national accounts data and high-frequency indicators in early 2022 remained broadly consistent with this outlook, with business activity bouncing back quickly after the disruption from the Omicron variant in most countries (Figure 1, Panel B). At the same time, higher food and energy prices, supply constraints associated with the pandemic and a rapid recovery in demand from mid-2020 resulted in an acceleration and broadening of inflation in most OECD economies, especially in the United States, Latin America and many Central and Eastern European economies.
The war will hinder global growth and aggravate inflationary pressures
The war in Ukraine has created a new negative supply shock for the world economy, just when some of the supply-chain challenges seen since the beginning of the pandemic appeared to be starting to fade. The effects of the war will operate through many different channels, and are likely to evolve if the conflict deepens further.
In some respects, the direct role of Russia and Ukraine in the global economy is small. Together, they account for only about 2% of global GDP at market prices and a similar proportion of total global trade, with limited bilateral trade for most countries (Figure 2). Financial linkages with other countries are also generally modest. Stocks of foreign direct investment in Russia, and by Russia in other economies, account for between 1-1½ per cent of the global total. Consolidated cross-border bank claims by BIS reporting banks on residents of Russia and Ukraine represented less than 0.5% of the global total as of the third quarter of 2021.
In one respect, however, Russia and Ukraine do have an important influence on the global economy. This is via their role as major suppliers in a number of commodity markets. Russia and Ukraine together account for about 30 % of global exports of wheat, 20% for corn, mineral fertilisers and natural gas, and 11 % for oil. In addition, supply chains around the world are dependent on exports of metals from Russia and Ukraine. Russia is a key supplier of palladium, used in catalytic converters for cars, and nickel, used in steel production and the manufacture of batteries. Russia and Ukraine are also sources of inert gases such as argon and neon, used in the production of semiconductors, and large producers of titanium sponge, used in aircraft. Both countries also have globally important reserves of uranium. The prices of many of these commodities have increased sharply since the onset of the war, even in the absence of any significant disruption of production or export volumes (Figure 3).
A complete cessation of wheat exports from Russia and Ukraine would result in serious shortages in many emerging-market and developing economies. There would be an acute risk not only of economic crises in some countries but also humanitarian disasters, with a sharp increase in poverty and hunger. The disruption in fertiliser manufacturing risks making these disruptions more long lasting, by putting next years’ agricultural supply under stress. In many economies in the Middle East, wheat imports from Russia and Ukraine represent around 75% of total wheat imports (Figure 4).
Despite the small economic size of Russia, the war and related sanctions are already causing disruptions of a global nature through financial and business linkages. Financial sanctions placed on Russia have targeted selected individuals and banks, reduced access to foreign capital and frozen access to the foreign exchange reserves held by the Central Bank of Russia (CBR) in the Western economies. As a result, the rouble has depreciated sharply, the CBR’s policy interest rate has risen by 10.5 percentage points to 20 %, and risk premia on Russian sovereign debt have soared. Delays and difficulties in making international payments are disrupting trade and could result in debt defaults in Russia. Conditions have also tightened in financial markets around the world, reflecting greater risk aversion and uncertainty, with higher risk premia and currency depreciations also occurring in many emerging-market economies and Central and Eastern European economies with relatively strong business ties with Russia. Commercial air travel and freight are also being rerouted or ceasing operations altogether, increasing the costs of doing business, and many multinational companies have suspended operations in Russia.
There are also some possible longer-term consequences from the war, including pressures for higher spending on defence, the structure of energy markets, potential fragmentation of payment systems and changes in the currency composition of foreign exchange reserves. A re-division of the world into blocs separated by barriers would sacrifice some of the gains from specialisation, economies of scale and the diffusion of information and know-how. The exclusion from the SWIFT message system could accelerate efforts to develop alternatives. This would diminish the efficiency gains from having a single global system, and potentially reduce the dominant role of the US dollar in financial markets and cross-border payments.
Model simulations suggest a sizeable hit to global growth and higher prices if the conflict persists
The magnitude of the economic impact of the conflict is highly uncertain, and will depend in part on the duration of the war and the policy responses, but it is clear that the war will result in a substantial near-term drag on global growth and significantly stronger inflationary pressures.
Illustrative simulations suggest that global growth could be reduced by over 1 percentage point, and global inflation raised by close to 2½ percentage points in the first full year after the start of the conflict (Figure 5). These estimates are based on the assumption that the commodity and financial market shocks seen in the first two weeks of the conflict persist for at least one year, and include a deep recession in Russia, with output declining by over 10% and inflation rising by close to 15 percentage points. (The full set of factors considered are set out in the Technical Appendix.)
- The impact of the shocks differs across regions, with the European economies collectively being the hardest hit, particularly those that have a common border with either Russia or Ukraine. This reflects greater gas price rises in Europe than in other parts of the world and the relative strength of business and energy linkages with Russia prior to the conflict.
- Advanced economies in the Asia-Pacific region and the Americas have weaker trade and investment links with Russia, and some are commodity producers, but growth is still hit by weaker global demand and the impact of higher prices on household incomes and spending.
- Growth outcomes in the emerging-market economies reflect a balance between stronger output in some commodity-producing economies and deeper declines in the major commodity-importing economies, and the adverse impact of higher investment risk premia. Higher food and energy prices also push up inflation more than in the advanced economies.
- Monetary policy reacts to the upturn in inflation around the world, with policy interest rates raised by a little over 1 percentage point on average in the major advanced economies and 1½ percentage point in the major emerging-market economies.
These simulations provide an initial look at the potential impact of the conflict based on the market dislocations observed in the first two weeks of the war. They do not incorporate many factors that could intensify the adverse effects of the conflict, such as further sanctions or consumer and business boycotts, disruptions to shipping and air traffic, the unavailability of key products from Russia, trade restrictions such as export bans on food commodities, or undermined consumer confidence.
A key potential economic risk is that energy exports from Russia to the EU could cease completely. The impact of such a shock is difficult to quantify, but could be abrupt given limited possibilities to substitute to supplies from world markets in the short term and low levels of gas reserves. One illustration of the possible additional pressures is provided by the one-day peak in European gas prices since the start of the conflict. Prices that day were 170 % higher than in January, twice the size of the gas price shock assumed in the simulations above. A persistent return to prices at this level would add an additional 1¼ percentage point to inflation in Europe (taking the full shock on euro area inflation to over 3½ percentage points) and further reduce European growth by over ½ percentage point.
Input-output tables can also be used to assess the direct effects on output of a reduction in energy inputs. An illustrative decline of 20% in imported energy inputs (from direct and indirect imports of fossil fuels, refined fuel products and electricity and gas supply) would reduce gross output in the European economies by over 1 percentage point, with significant differences across countries (Figure 6). The hardest hit would be the domestic energy-producing sectors, air transport, chemicals and metals manufacturing. These estimates may understate the disruptions from lower energy availability as there could be discontinuities in the impact on output, rather than the smooth adjustment implicitly assumed in the calculations. However, it is also possible that some reduction in imported energy could be offset by stronger domestic production, drawing on reserves or improved energy efficiency.
The fastest refugee flow in Europe since the end of the Second World War is underway
The humanitarian cost of the war is high and growing. Around three million people have already fled Ukraine in the first three weeks of the war (Figure 7) and that number is likely to increase further. This is considerably more than the annual flow of asylum-seekers into European countries at the height of the Syrian refugee crisis in 2015-16. Looking after the refugees from Ukraine will require spending on social and housing assistance, food provision, medical assistance and childcare and schooling.
The spending challenge is difficult to predict due to uncertainty about the number of refugees, the length of time they will stay, and the amount of spending per refugee. The cost for processing and accommodating asylum seekers for the first year in 2015-16 was estimated to be around EUR 10 000 per application by the OECD, and up to EUR 12 500 per refugee in national studies for Germany –though to varying extent across countries, depending on the level of support. At this level, the inflow of 3 million refugees seen so far could result in a direct first year cost of at least 0.25% of EU GDP, and much more in the major host economies. So far, refugees have primarily gone to a small number of countries, with Hungary, Moldova, Poland, Romania and Slovakia taking in large shares. The initial costs are manageable for the EU as a whole, but difficult to support – and deliver – by individual neighbouring countries. Burden sharing and EU support to the major host countries would allow support to be delivered more effectively.
The cross-country productivity approach
For nearly a quarter century, the McKinsey Global Institute has focused on the role productivity growth plays in economic performance. Along the way, MGI’s findings have challenged conventional thinking about the sources of productivity growth and clarified two primary lessons for policy makers and executives. The first lesson is to accept no sweeping generalizations regarding the state of a country’s competitiveness or the prospects for its future economic performance; macrolevel insights can be generated only by rolling granular examination of individual businesses up to the industry, sector, and country levels. The second lesson is to recognize productivity improvements as the primary source of sustained and long-term economic growth. To raise economic performance, we must focus on the causes of productivity differences among companies, industries, sectors, and countries.
Some examples help illustrate these lessons. The first requires going back to the 1970s and 1980s, when the export prowess of Japan led to a consensus, in the United States and Europe, that its economic performance had surpassed theirs. MGI tested this pervasive thinking through a set of cross-country comparisons at the sector level in each economy. These revealed that while Japan’s steel industry, for example, was 45 percent more productive than the US one, its food-processing industry was only a third as productive (Exhibit 2). By examining a range of representative sectors at the microeconomic level, MGI debunked the popular notion that the Japanese economy, overall, was outperforming the US economy.
This same set of cross-country productivity comparisons also highlighted the ways in which operational factors, from scale to production processes, had a far greater influence on productivity than education, the usual suspect at the time. Moreover, MGI found that productivity was highest in industries and countries that are exposed to, rather than protected from, competition. The research also revealed a shadow side of Japan’s strong productivity in the automotive and consumer-electronics sectors: weak service-sector performance (Exhibit 3). Low productivity in the service sectors, which accounted for a growing majority of jobs, soon became the Achilles’ heel of Japan’s overall economic growth.
The overarching insight to emerge from this early MGI research continues to hold a powerful validity: companies, industries, and nations can change their economic prospects only by identifying what it would take to improve their productivity growth. Sweden, for example, raised it by removing land and pricing barriers identified in a 1995 MGI study. These policy actions enabled the productivity of Sweden’s retail sector to rise at up to twice the rate of most of its counterparts in the rest of Europe during the decade that followed.
Breaking down the numbers
To get a handle on the prospects for global growth going forward, MGI took a comprehensive look at the sources of growth in the past. The global economy today is six times its size in 1964, having risen from USD 14 trillion to USD 84 trillion. In that time, the global economic balance has shifted between regions, particularly from Western Europe and North America to Asia. The story behind global GDP growth over the decades can be broken down into two pieces: growth from an increase in the number of employed persons and growth from labour productivity, or an increase in the average productivity of employed people. This approach usefully accounts for a comprehensive set of factors—from production inputs, like manufacturing technology, to operational factors, such as capacity utilisation—in a single productivity rate.
This methodology shows that more than half of the 3.8 percent average annual historical growth in GDP has come from rising labour productivity—53 percent, to be exact. The balance has come from increases in the total number of employed persons. But the relative contributions of that growth and of labour productivity have not been consistent over time. The last four decades have seen relatively more and more growth come from productivity increases, particularly in emerging markets.
Looking forward
The rising share of labour productivity’s contribution to global growth is important because the coming years will see the dramatic effects of a slowdown in the growth of population as it ages in many countries. In the world as a whole, the United Nations forecasts an average of just 0.03 percent annual growth in the number of employed persons during the next 50 years, compared with 1.8 percent in the last 50. Thus, for global economic growth to match its historical rates, virtually all of it must come from increases in labour productivity.
Can we deliver? As a thought experiment, consider what would happen if the average productivity-growth rates of individual countries during the past half century were to remain unchanged over the coming one. This is arguably an aggressive assumption, as it assumes that South Korea, China, and other economies that had exceptionally rapid growth in the past can sustain it as their incomes rise. Even if we extrapolate forward historical productivity assumptions, when we apply lower employee-growth forecasts on a country-by-country basis and then aggregate up to an average annual global GDP growth rate, we see it falling from 3.8 percent over the last 50 years to 3.2 percent over the next 50.1
This isn’t the end of the story, though. The lessons of MGI’s earlier work suggest that the smaller and more specific the scale we use to look at this problem, the more likely we are to understand the differentiators between growth that surprises or disappoints. We draw on dozens of country and industry studies to point out two broad categories of issues that will tell the tale in the years ahead. The first is the ability of individual countries to catch up to the productivity level of the world’s top performer, or what might be called the labour-productivity frontier. The second is the potential to push out that frontier further through advances in management, tools, technology, and the organisation of functions and tasks.
Catching up
Tremendous growth opportunities would come from catching up with the labor-productivity frontier. If every country were to perform at that level, global GDP would grow to nearly three and a half times its current size. Currently, however, many countries lag significantly behind, especially in emerging markets (Exhibit 4). Even China and India, which have experienced high levels of recent productivity growth, lag substantially behind front-runners, such as the United States, in absolute productivity levels.
Yet history shows that some countries, notably South Korea and Japan, have made striking gains. Looking forward, which countries and sectors might hold a similar potential? Is it possible to identify leading indicatiors of real growth opportunities, particularly where the gap between current performance and the global benchmark is wide? The possibilities stand out at three levels: across economies, within economies, and within industries:
Falling barriers to trade and foreign direct investment. MGI case studies show that countries and sectors can make rapid productivity gains when international barriers to trade and foreign direct investment fall. In the 1990s, removing these barriers led to rapid gains in areas as diverse as the automotive sectors of India and Mexico, Europe’s freight-transport industry, and Brazil’s agriculture.
Similar leaps forward may be possible if, say, Mexico’s nationalized energy industry or India’s protected retail industry are successfully opened up for foreign investors to pour in capital and increase competitive intensity.
Regulatory changes that increase competition and performance pressure. These types of reforms, which occur within rather than across economies, are particularly important in local services. Sectors with high potential for upcoming productivity improvements include retailing in Japan and South Korea if land-related constraints to large-scale retailing are opened up. (The sector is currently subject to restrictive zoning rules and to regulations governing the maximum size of stores.) Liberalizing the environment for Europe’s professional-service providers—from architects to notaries—also holds strong potential given the restrictive laws that currently constrain them. Nearly all industries in India stand to benefit if protections for small-scale production are removed, which would allow for economies of scale. Public services, whose efficiency and quality could rise dramatically through new incentives and managerial practices, are another very large opportunity across the globe.
Private-sector companies that catalyse industry change. In the United States, Wal-Mart contributed to a retail-productivity boom in the late 1990s through managerial innovations that increased the sector’s competitive intensity and propelled the diffusion of managerial and technological best practices. The rise of leading companies in emerging markets may drive a similar dynamic. In the near term, for example, Alibaba holds tremendous potential for productivity increases in online retailing. Our colleague John Dowdy’s firm-level research (see “Why management matters for productivity”) shows these dynamics at work in virtually every country and industry.
Beyond boundaries
Pushing out the labour-productivity frontier is also important. In general, the boundaries of productivity move outward when engineers and managers innovate and implement more effective and efficient ways of producing goods and delivering services and when designers and engineers create new and better products and services.
The labour-productivity frontier has grown four times over since 1964, and there are many good reasons to expect it will advance. As machine learning takes holds, for example, deep-learning algorithms may substitute for people in some jobs that were previously their sole province. (It’s hard to know how this will play out, though history suggests we could be pleasantly surprised by the productivity benefits from redeploying people to new areas, as was the case in the shift from agriculture to manufacturing.2 ) Simultaneously, a range of technological changes in manufacturing, such as advanced robotics, large-scale factory digitisation, and 3-D printing, are enabling shorter supply chains and greater proximity to innovative supply ecosystems.
Related opportunities exist in ostensibly mature operational techniques, such as lean production, which may be turbocharged in the years ahead as sensors and new analytical tools make it possible to understand, with greater precision than ever before, what customers truly value. That, of course, would eliminate additional forms of waste.3 Parallel efforts to restore rather than expend the material, energy, and labor inputs used in making a wide range of goods are giving rise to a circular economy, with far-reaching productivity implications.4 Finally, small and midsize businesses will almost certainly get a productivity boost as mobile applications, cloud computing, and other novel technologies make it easier to innovate.
Pushing out the frontier will require a willingness to make significant changes in business processes and organizational structures, as well as trade-offs between mature businesses with healthy cash flows, on the one hand, and disruptive (often digital) business models, on the other, with the potential for self-cannibalization even as they offer a transformative productivity potential. Another transformative opportunity, in many countries, continues to be the status of women, whose greater employment could alter the demographic equation and boost growth independently of productivity advances.
Expanding the frontier will also require continuing to build skills through public- or private-sector investment within specific industries. The US Department of Defence and the Apollo project, for example, catalysed innovations in semiconductors—which rippled out into other technology sectors. Similarly, the Finnish army’s demand for reliable and efficient communications in the field led to the development of wireless technologies.
Caution and concern have underscored nearly every recent discussion surrounding the potential for global growth. To be sure, a simple examination of demographic trends suggests that we may see a slowdown, particularly in mature economies. A closer look at productivity possibilities by country and sector, however, suggests reason for continued optimism.
Report: The Fabric of Belonging: How to Weave an Inclusive Culture
This report would not have been possible without the valuable research, analysis, writing, and editing support of many colleagues: Ruchi Singh, Dylan Joyce, Ronnie Westmoreland, Jesse Wilkinson, Somtochukwu Dimobi, Tiffany Chiang, Colleen Lin, Regina Ceballos, Dawn Kix, and Aimee Caffrey. The authors thank them for their important contributions.
At a Glance
- Building inclusive teams improves performance and is the right thing to do. It also pays off in recruitment, retention, and better teamwork.
- People describe what being included looks and feels like in remarkably similar ways.
- Helping everyone feel included is deceptively difficult, but organizations can navigate the complexities by marrying systemic change with more inclusive behaviors.
- Across all groups, a common thread is the desire to grow and succeed. But organizations can pinpoint additional specific steps that will improve inclusion by looking at their population through the lenses of demographics, geography, and seniority.
- There’s no quick fix, but getting started—testing and learning, prioritizing the actions and populations that most need support, and demonstrating commitment—produces immediate value.
We all know what it feels like to belong somewhere—to be included—and naturally, we want all team members in our organizations to feel that way. We all know intuitively that this is the right way to run an organization; we also know from neuroscience that when people feel excluded, it sets off biological alarms in the brain resembling those associated with physical pain—not something conducive to employee well-being and performance.
Besides being the right thing to do and stimulating better individual and team performance, building inclusive teams pays off handsomely for companies by helping them attract and retain the most diverse and talented employees. Despite the clear benefits, however, most companies struggle to foster feelings of inclusion for the majority of their people.
It is hardly surprising that organizations find it difficult to determine which specific changes they must make to promote greater inclusion for their diverse employee bases. So we at Bain & Company surveyed 10000 individuals—across diverse industries and demographic backgrounds, in seven countries, at all levels of seniority and organizational size—to learn what actually makes employees feel the most included. One of our first and most stark takeaways is that most employees, regardless of race, gender, or sexual orientation (including straight white men), don’t feel fully included.
The good news is that, despite all the noise in the organizational world around what inclusion really means, it turns out that most people, regardless of their identities and experiences, describe what being included looks and feels like in remarkably similar ways. Our view, backed by data, is that the experience of inclusion is almost universal and has a few distinct components that people—across populations—find important. Asked to describe what an inclusive organization looks like, the wide range of individuals we surveyed converged on these points: An inclusive organisation is one that is diverse and in which people are heard, valued, and supported (see Figure 1).
When asked what inclusion feels like, employees across all demographics say it is being treated with dignity, able to bring their authentic selves to work, able to contribute, and feeling connected to others—which is our definition of inclusion.
We define inclusion as the feeling of belonging in your organization and team, feeling treated with dignity as an individual, and feeling encouraged to fully participate and bring your uniqueness to work every day.
How an organization helps all its people feel included in these ways, however, gets complicated. Rigorous analysis of our data has also shown us that the specific paths to that universal sense of inclusion are unique to an individual’s identity—an identity that is informed, of course, by a variety of factors including not just race or ethnicity, gender, and sexual orientation, but also geographic location and level in the organisation.
Even so, there are ways to navigate these complexities and identify concrete actions that can help an organization foster higher and more widespread inclusion—unlocking the full set of benefits that diversity can bring. Our research has found that the enablers of inclusion are highly textured and varied across every population, but that this heterogeneity can be addressed by combining systemic change with more inclusive behaviors.
This raises an obvious question: Which specific enablers and combinations of enablers matter, and to whom, and how can companies identify and take the actions that will actually bring about change? In this report, we share what our research tells us about the answers, turning first to the larger question lying behind all these other ones: What is the value at stake in creating more inclusive organizations?
Why inclusion matters
Many companies today pursue diversity by itself as a priceless asset. But our research shows that they cannot realize and sustain the full value of that diversity—enabling diverse talent to thrive, fully contribute, progress, and want to stay—without a truly inclusive culture. Organizations understand that having a diverse workforce pays off—or should pay off—by stimulating innovation and challenges to the status quo from different points of view. But the only way to realize these and other benefits of diversity is to continuously progress toward a more inclusive environment for all team members.
Inclusive organisations have an easier time attracting talent across demographics: Approximately 65 % of people across identity groups view an inclusive environment as “very important” when considering new roles. But recruiting a diverse group of employees is only the beginning. A truly inclusive environment is critical for retention and provides a variety of other tangible, measurable benefits. Our research finds, for example, that employees experiencing low inclusion are up to six times more likely to actively pursue new jobs compared with those in similar demographics experiencing high inclusion. It also shows that those who feel “fully included” are much more likely to promote their place of employment to others (+71% vs. –83%, using Bain’s employee Net Promoter Score℠ methodology of calculating the percentage of promoters minus the percentage of detractors) than those who feel “not at all included” (see Figure 2).
Our research also finds that respondents in a more inclusive organization are much more likely to feel free to innovate and to feel comfortable challenging the status quo—and that the gains in creative thinking are much higher as inclusion increases in an organization, compared with the gains from increasing diversity alone. Respondents who viewed their organizations as both diverse and inclusive were the most likely to feel comfortable bringing new ideas to the table (see Figure 3).
To truly maximize retention, performance, innovation, and comfort in challenging conventional thinking, organizations should aim for both diversity and inclusion. But while diversifying a workforce can take time, there are tangible benefits to working on inclusion immediately, even if an organization isn’t currently as diverse as it could be.
Fostering inclusion is deceptively difficult
Although everyone wants to build inclusive organizations, few (if any) companies have “cracked the code” for consistently fostering inclusion for employees. There are several reasons for the difficulty of creating truly inclusive companies:
You can’t easily predict who feels excluded. According to our research, fewer than 30% of employees feel fully included—a finding that holds across industries, geographies, and demographic groups, including members of racial, gender, or sexual orientation majorities. No single demographic variable pertaining to race, gender, or sexual orientation cleanly “predicts” lower levels of inclusion in companies, and underrepresented groups do not report feeling significantly less included than majority groups (e.g., straight white males in the US, Canada, Australia, and Western Europe) (see Figure 4). The reasons why people may feel excluded can vary based on context and identity, but the end result is that everyone can and does feel excluded at points.
Every employee’s sense and experience of inclusion benefited from both behavioral and systemic enablers, but the mix of effective enablers—what we might call the texture of inclusion—varied across groups with respect to identity, geography, and level within their companies (see Figure 6).
People do not always know what enablers will most increase their own experiences and feelings of inclusion.
We found that for many populations, the perceived impact and actual benefit of particular enablers can be mismatched. In reality, people have not always seen or directly experienced “what good looks like,” and may not be fully aware of which enablers will actually increase their feelings of inclusion, even for themselves. When we looked, for example, at the responses of Black women, we found that coaching and professional development did more to increase their sense of inclusion than other enablers that they ranked higher in perceived value (see Figure 7). The larger point across all populations: Leaders should listen first for problem identification, not solution design.
Cutting through the complexity
Because every demographic group has its own unique texture with respect to what enables members to experience inclusion, and because people do not always understand what precise actions will make them feel included, it can be complicated to sort out what makes inclusion real for a particular group. One piece of good news, however, is that there is a common denominator that boosts inclusion for virtually everyone: opportunities for professional development and growth (see Figure 8).
This still leaves a great deal of complexity for organizations to navigate. Because no single demographic variable cleanly predicts lower levels of inclusion in companies, targeting broad categories of people with reference to single factors is much too blunt a strategy for increasing feelings of inclusion. But there is a method for cutting through the complexity: looking at employees through an intersectional lens that incorporates geography, demographics, and seniority. Properly applied, this intersectional approach can show an organisation where, and with what groups, it can take specific actions that will actually advance the goal of greater inclusion for all (see interactive below for a few examples of how this can work).
In identifying such actions, is it essential to note that employees’ feelings of inclusion are grounded in everyday experiences, which consist of their encounters with both the mindsets and behaviors of others and a company’s systems, structures, and processes—what we have classified as behavioral and systemic enablers, respectively. Our analysis, moreover, reveals a bedrock “hierarchy of needs” according to which almost everyone requires underlying systemic support to feel fully included, with people’s focus shifting to behaviors once systems more fully support them. It has also given us insights into some ways that geography, demographics, and seniority tend to influence the kinds of enablers that most increase inclusion for particular populations:
- Some Western European countries (France, Germany, Italy, and the UK, in our research sample) have more comprehensive workforce regulations—encouraging or mandating the creation of organizational systems that serve broad populations in more inclusive ways—compared with countries such as the US, Canada, and Australia. This baseline of supportive systems tends to make behavioural enablers a more important factor in increasing employees’ sense of inclusion in Western Europe.
- Many organizational systems were designed with the majority population in mind, and therefore have unconscious biases embedded in them. Underrepresented populations often find that such systems do not serve them adequately, and therefore tend to benefit more from systemic enablers.
- For junior employees, supervisors often are “the system,” and the latter’s behaviours tend to be the most important factors in these junior employees’ sense of inclusion. This tends to make behavioural enablers more effective for increasing experiences and feelings of inclusion among this group. More senior employees, by contrast, are often more focused on career progression and how the architecture of the organization helps or hinders their success—thus making their sense of inclusion more dependent on systemic enablers.
Weaving the fabric: Making inclusion a reality
Our findings tell us that creating genuinely more inclusive organizations, while challenging, is something companies can actually do. Moreover, organizations that want all their people to feel included need not—and indeed cannot—rely on some combination of lofty aspirations, sincere intentions, and the right messaging. Real, sustainable change comes from doing. Making a more inclusive organization is about employees—and leaders—throughout the organization adopting new mindsets, changing behaviors, and learning to operate in and adapt to new and different systems. Agile methods of testing and learning, along with repeated practice, are key to making this happen.
People are looking to see if their organization understands and cares about their unique needs for inclusion and is prepared to make a real commitment to addressing them. Meaningful analysis, authentic listening, visible action, and feedback are all key to demonstrating deep commitment. In practice, this means starting out by understanding the organization’s current state, establishing its ambitions and goals, and developing an inclusion game plan that prioritizes target populations for specific initiatives and sets up a leadership team with clear roles and responsibilities for execution.
Our research—and particularly our findings on the centrality of success and growth opportunities for all groups—suggests a few basic priorities organizations should then act on right away. While these steps are challenging in themselves, our data suggests that organizations can employ them effectively even while taking stock of the current state of inclusion and formulating longer-term goals.
- Signal commitment. Clear goals, by themselves, increase feelings of inclusion for many groups. The first step is often showing people that inclusion is truly important to leadership—for example, by articulating concrete diversity, equity, and inclusion (DEI) ambitions and goals and communicating them clearly across the organization.
- Promote growth. Because access to growth opportunities and career advancement are consistently strong enablers of inclusion across all populations, immediate actions might include: installing stronger rituals around professional development and coaching, training leaders on growth mindsets and team development, and introducing effective sponsorship and mentorship programs that help people navigate the organization.
- Facilitate connection. People feel more included when they have support—both from peers who share their identities (and challenges) and from allies. Early steps here might include expanding employee affinity group offerings, developing programming to help underrepresented employee groups find one another and bond, and promoting networks of allies (see Figure 9).
After an organisation has attended to these cross-cutting initial priorities, the journey quickly requires more rigor and focus. We believe that a practical—and effective—approach to becoming more inclusive will be based on a few key principles:
- Focus on intersectionality. Creating inclusion for people requires accounting for the many identities people have both at and away from work, and the interplay among them.
- Use data and narratives to formulate answers that will inspire change. Data can provide a “single source of truth” to align leadership on the right path forward, while real-life stories of lived experiences can touch hearts in an organization and motivate collective change.
- Identify the behavioral and systemic changes needed. Employee experiences are affected by their relationships not just with colleagues but with the company itself.
- Prioritise and customise your roadmap. Every company will have unique “bright spots” and “blind spots”; focusing first on groups in the organization that have the most to gain, and building momentum through actions that will actually increase inclusion most for those groups, are ways to start setting priorities and addressing an organization’s particular needs.
- Focus on doing, not just explaining, to bring about sustainable change. People learn and retain their ability to change through real-life practice and coaching (rather than reading about best practices).
We have called inclusion a fabric because it is something woven of diverse strands that retain their individual integrity even while being part of a whole. It is also a fabric in the sense of an underlying structure, a framework in which people in the organization, and the organisation itself, can do their best work when the structure is sound. It is about how people feel, but also about the design and the workmanship that creates a texture in which they can belong and feel supported—by being respected, able to be themselves, able to contribute, and able to be connected.
Weaving the fabric of belonging, then, is work for both the heart and the head. Done successfully, it makes both people and organizations better by making inclusion not just something we talk about but something we live—thus bringing us all closer to realizing our potential as both diverse individuals and members of teams.
Net Promoter®, NPS®, and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld. Net Promoter Score℠ and Net Promoter System℠ are service marks of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld.
Marina Abramović on Why the Best Ideas Are the Ones That Surprise You
The performance artist also talks about why she doesn’t keep regular studio hours: “You’re kind of like a bank employee, where you’re going to work every day.”
By guest author Lane Florsheim rom the Wall Street Journal Magazine.
Marina Abramović, 75, is known for performance art that pushes the limits of the body and the mind. In one of her most famous works, The Artist is Present (2010), she spent eight hours a day for nearly three months sitting still and silently on a chair in a gallery at the Museum of Modern Art in New York. Museumgoers could take turns sitting in a chair opposite her, looking into her eyes. “I literally changed my entire way of living for one year,” she says of her training and preparation. “I had to eat and drink water in the night because during the day; I absolutely didn’t move. It was like [being an] astronaut, adapting yourself to a totally different way.”
A version of that work—a video installation, featuring the show’s participants on one wall and Abramović’s face across from them on the other—is on view at Sean Kelly gallery through April 16, as part of a career-spanning show of her work.
Abramović, who lives in New York City and upstate New York, also embraces regimented discipline in her daily routines. Every morning, she wakes up before sunrise to go to the bathroom. “People never talk about these things,” she says. “I’m very obsessed with being healthy, [and I believe that] when the sun rises, all energy goes up, so if you don’t go to the bathroom before sunrise, all the toxins of your body go up, too.” She goes back to bed afterwards and says it took awhile to train her body to cooperate. “In the beginning, I would just go to the bathroom, sit, nothing happened. Then the body really started learning that I had to do this thing before sunrise.”
Born and raised in Belgrade, Serbia, which was then part of Yugoslavia, Abramović studied at the Academy of Fine Arts there and completed her postgraduate studies in 1972. In 1976, she met the German performance artist Ulay, who became her collaborator and romantic partner. In 1988, they commemorated the end of their relationship by walking from opposite ends of the Great Wall of China and meeting in the middle, in a performance called The Lovers: The Great Wall Walk. (When conceiving it, they’d originally planned to get married at their meeting point.)
For decades, Abramović has also been teaching, both as a professor and at workshops through her own Marina Abramović Institute. Her performances have taken place at museums including the Guggenheim, the Whitney Museum of American Art and the Louisiana Museum of Modern Art in Denmark. Next year, she will be the first female artist to host a major solo exhibition across the entire main galleries at the Royal Academy of Arts in London. Here, she speaks to WSJ. about her yoga routine and why she doesn’t go to her studio on a regular basis.
What do you do after you wake up for the second time?
I like to bring tea into bed and I like to read the newspaper. I like to read what’s happening in the world, what’s happening in New York, the art section, real estate, climate change, the new restaurants around the world, things like that.
After that, I stand up and I do yoga. I have my routine, which takes about 55 minutes, which is not just yoga. It’s a mix between yoga and push-ups. I’m very big on stomach exercises. And then I do the bicycle for cardio. Then I start the day. I make my breakfast and then it’s mostly Zoom calls I have to do. When I finish, I do my own work.
What do you eat for breakfast to start the week off right?
It depends. Sometimes, like now, I’m eating raspberries and almonds for breakfast. Sometimes I wake up really hungry. Then I would eat rice with one egg on top and kimchi. I like porridge with lots of berries inside, very simple. In the summer, if I can get good papaya, I will only have papaya for breakfast. Papaya feels the best for the body in the morning. But the papaya in America is terrible, unfortunately. If you go to Asia—I was just in Sri Lanka during Christmas—the papaya is to die for. Mango, papaya—it’s another world.
Do you take vitamins?
I only take them for hair and nails. Everything else I’m taking is ayurveda, it’s mostly herbal powders.
Is there a time of the day or week when you’re most creative?
Any time after 5 o’clock, it’s not productive. When I was young, I wouldn’t sleep all night. [Now] I go to bed at 9:30. I don’t like evenings, I don’t like dinners in the evening. The ideal time that I eat the last meal is 4 o’ clock. I really like to sleep eight hours or more. I really like sleeping.
What are your routines like as they relate to working on your art? Do you have certain hours every day?
No. I don’t like the studio. I always think that if you go to the studio, you’re kind of like a bank employee, where you’re going to work every day. I believe that ideas have to come as a surprise. What you have to do is life. Life has to be interesting, and ideas come from life. I’m only interested in ideas I’m afraid of, ideas that are difficult or mysterious. Then I go to the studio to realize them, but not before. The idea has to come as a surprise.
As we continue to come out of the pandemic, how do we create and foster the deep human connection that some of us have been missing?
The pandemic has been so difficult for relationships. I have so many friends who divorced, so many friends who stopped talking. But also people get together on a much deeper level. So I think the pandemic is some kind of cleaning process for relationships. Everything that wasn’t important fell off. I think the pandemic is a huge teacher for us for how we can manage life, because life is so temporary and we have to live every day like it’s the last, be really full of joy.
Have you been going to a lot of parties?
My boyfriend took me to Detroit to see the Rolling Stones’ last concert. Fifty thousand people without masks. I was thinking, OK, this is the time I’m going to get Covid. I was so interested to see the Rolling Stones. Mick Jagger is 78, so he’s older than me. So I wanted to see how someone who’s 78 could hold 50,000 people onstage and what kind of energy he had with a two-and-a-half-hour-long concert. Two and a half hours of hell. He did it. He is really unbelievable, I have to say.
And then I just go around to places to see jazz, to see concerts, whatever’s available. Three days ago, I went to this burlesque place, to see that scene, which is something that I don’t know anything about. I’m one of those people who are like a child, new and different every single day.
How do you feel about the present and future of performance art?
Performance is one of the most difficult art categories. You have to be there in the place that it happened; it’s time-based art, it doesn’t cost money. You can’t really buy performance in the way you can a Van Gogh painting or the sculptures of Jeff Koons. Performance never can be an investment, but at the same time it’s very important, because performance can lift human spirits like other arts can’t.
What do you do to relax?
I love reading good books and I love the movies, but also [I love watching] something which is very simple. What I like about [TV] series is something that has many, many seasons. I found a Canadian series about some horse ranch which has something like 12 seasons, unbelievably long. Literally nothing happens. They wash the horse, they make the meal, they cook pie, then they wash the dishes. It’s fantastic. I watch a little bit of this and then I fall asleep.
What’s one piece of advice you’ve gotten that’s guided you?
I like the piece of advice I got from my professor of painting many, many years ago when he said to me, “If you’re drawing with your right hand and you become so good you can even make the drawing with closed eyes, immediately change to the left.” And then he said, “Never repeat yourself.” That’s the important thing.
See Birkenstock’s New Collection With Manolo Blahnik
The two brands meld their signature styles by mixing crystal buckles and jewel-tone velvets with low-key comfort.
By guest author Jessica Iredale | Photography by F. Martin Ramin for WSJ. Magazine | Styling by Jill Telesnicki
“Of course!” says Spanish shoe designer Manolo Blahnik via email when he’s asked if he’s ever worn Birkenstocks. In fact, the stiletto king of the Canary Islands loves his Birkenstocks so much, he and his niece Kristina Blahnik, the CEO of his namesake brand, appeared in the company’s ad campaign two years ago. He prefers the Boston, a closed-toe slipperlike style, in black. “I wear them in my garden almost every day,” he says. “They have practically molded to my feet.”
Manolo Blahnik has been on the Birkenstock bandwagon since the 1970s, when he got his first pair. “They’re timeless!” he says. “Probably every single person in the business owns a pair of Birkenstocks and has done forever,” says Kristina Blahnik.
Fifty years into his own shoe empire, Manolo Blahnik is now collaborating with Birkenstock on a collection of seven styles that merge his signature glamour with the German shoe giant’s comfort and practicality. For the first drop, out March 24, the Boston and Arizona get the royal treatment not just in black leather but also in fuchsia and peacock-blue velvet, all with crystal buckles. A second batch releases in June.
The collection will be part of Birkenstock’s 1774 platform, which has included collaborations with Rick Owens, Jil Sander, Proenza Schouler, students from Central Saint Martins and Dior. “Focus is on product, real creation and bringing something new to the brand while respecting Birkenstock’s heritage, which is rooted in quality and function,” says Oliver Reichert, Birkenstock’s CEO, via email of the collaboration program, noting that it has sold out for the past 10 years. “We have to pass on nine out of 10 collaboration requests,” he says.
Though Birkenstock and Blahnik may appear to dwell at polar ends of the shoe-aesthetic spectrum, “in fact, we are not opposite at all,” Manolo Blahnik says. “Confidence is only possible when you feel comfortable.” Kristina Blahnik agrees that it’s not a stretch. “I’d say every customer that Manolo Blahnik has owns a pair of Birkenstocks,” she says. “It’s not necessarily about creating a new category in his or her wardrobe but adding the combined efforts of our teams into one beautiful object. We’ve added sparkle into Birkenstock, which hasn’t been done before.”
Newsletter of last Week
Mitsubishi Corporation’s green transition – Behind the Metropolitan Museum of Art’s Huge Overhaul – Saint Laurent and Bottega Veneta: Best Looks of Fashion Week Fall 2022 – US apparel store sales in January up 37.6 % https://textile-future.com/archives/86173
The highlights of last week’s NEWS, for your convenience, just click on the feature to read.
Awards
Red Dot Award: Brands & Communication Design 2022 – open now for entries until June 17, 2022 https://textile-future.com/archives/86316
Companies
Baldwin to showcase key innovations optimising converting, printing and film-extrusion processes at ICE Europe https://textile-future.com/archives/86109
BASF to increase capacity for plastic additives in Europe https://textile-future.com/archives/86266
VF Corporation Named One of the World’s Most Ethical Companies by Ethisphere for Sixth Consecutive Year https://textile-future.com/archives/86310
Swiss Forbo completes current share buy back programme https://textile-future.com/archives/86370
Swiss Bühler hands over first Prime Masa plant in India https://textile-future.com/archives/86434
Crypto
Bored Ape Yacht Club creates a cryptocurrency to fund games, events, and merch https://textile-future.com/archives/86465
Data
Swiss Economic forecast: Ukraine conflict dampens recovery https://textile-future.com/archives/86128
Statistics on Swiss business demography – A record number of new businesses in 2019 https://textile-future.com/archives/86136
Key indicators of labour productivity show recovery https://textile-future.com/archives/86165
Swiss Producer and Import Price Index rose by 0.4 % in February https://textile-future.com/archives/86276
G20 GDP growth slows in the fourth quarter of 2021 says OECD https://textile-future.com/archives/86296
EU Excess mortality down to 8 % in January https://textile-future.com/archives/86364
Largest EU energy producers: decreasing market shares https://textile-future.com/archives/86375
Citizenship granted to 729 000 people in 2020 https://textile-future.com/archives/86475
The McKinsey week in Charts https://textile-future.com/archives/86527
Digitisation
Roksanda’s CEO Jamie Gill explains why digital dresses are the future https://textile-future.com/archives/86094
Divesture
UBS Asset Management to sell its holding in its Japanese real estate joint venture, Mitsubishi Corp.-UBS Realty Inc to KKR https://textile-future.com/archives/86382
EU
Ukraine: EU agrees fourth package of restrictive measures against Russia https://textile-future.com/archives/86271
EU signs agreement with Moldova on Frontex cooperation https://textile-future.com/archives/86443
Ukraine refugees: Operational guidelines to support Member States in applying the Temporary Protection Directive https://textile-future.com/archives/86482
Events
ICE Europe: Reifenhäuser Cast Sheet Coating presents new Ultrathin Coating process for film/nonwoven composites https://textile-future.com/archives/86139
The JEC Composites Startup Booster celebrates its 5th anniversary https://textile-future.com/archives/86249
Switzerland and Canada launch first Cleantech Innovation Summit https://textile-future.com/archives/86341
Trevira CS at BIG Show in Oman https://textile-future.com/archives/86385
TASHKENT FASHION & TEXTILE EXHIBITION 23 – 25 JUNE 2022 TASHKENT – UZBEKISTAN https://textile-future.com/archives/86506
Finland
FIVE FROM FINLAND: Plant-based innovations https://textile-future.com/archives/86485
Partnering
Fashion Enterprise announces new traceable supply chain partnership https://textile-future.com/archives/86403
Personalities
Former Starbucks CEO Howard Schultz to Return as Chain Faces Union Push, Rising Costs https://textile-future.com/archives/86424
Intellectual Property
NAGOYA INTERNATIONAL PATENT FIRM NEWSLETTER’22 No.5 March 15, 2022 https://textile-future.com/archives/86321
Manufacture
Boohoo’s transformation programme puts end to modern slavery allegations https://textile-future.com/archives/86104
Personalities
Meet M&S’ new bosses: Stuart Machin and Katie Bickerstaffe profiled https://textile-future.com/archives/86086
Salvatore Ferragamo appoints Maximilian Davis as Creative Director https://textile-future.com/archives/86145
VF Corporation appoints Kevin Bailey as Global Brand President, Vans® https://textile-future.com/archives/86469
Retailing
M&S CEO Steve Rowe stands down as Machin and Bickerstaffe take over https://textile-future.com/archives/86081
Burberry Autumn/Winter 2022 collection https://textile-future.com/archives/86119
Almost 90 % of Debenhams stores are still empty a year on from its collapse https://textile-future.com/archives/86447
Sustainability
Fashion For Good selects 8 firms for global innovation programme https://textile-future.com/archives/86355
Switzerland
Chemicals and Pharma are pushing Swiss exports to an all time high in February 2022 https://textile-future.com/archives/86454
Ukraine: Switzerland – Adoption of further EU sanctions against Russia https://textile-future.com/archives/86494
Tourism
EU tourism recovering in 2021 https://textile-future.com/archives/86158
Ukraine
Why Does Ukraine Have a Jewish President? Ask Isaac Babel https://textile-future.com/archives/86115
Underwear
Cut-resistant ski undergarment protects against sharp edges https://textile-future.com/archives/86232
WTO
WTO Members updated on high-level talks aimed at finding convergence on IP COVID-19 response https://textile-future.com/archives/86099
Join the ride: EU webinar on transport statistics https://textile-future.com/archives/86349