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The business case for diversity, equity and inclusion (DEI) is stronger than ever, but many companies’ DEI programs are stagnant or have gone backwards. That’s because intent is not the same as execution and process infrastructure—something Indhira Arrington learned in her first year at global alternative asset management firm Ares Management (Ares), for which she is managing director and first global chief Director of DEI (CDO). Arrington believes Ares needs to embed DEI into many aspects of what it and its portfolio businesses do, including human capital, business and investment processes.
In an interview with McKinsey’s Diana Ellsworth and Drew Goldstein, Arrington discusses why it’s important to listen and gather data before creating a DEI strategy and why she focuses on building a culture of representation, especially when it comes to recruiting, retaining and talent development. As an immigrant from the Dominican Republic, Arrington feels a huge responsibility to open doors for others, as sponsors and mentors have done for her. “Making the world a better place never feels like work,” she says. The following is an edited version of their conversation.
McKinsey: Why is DEI important to Ares?
Indira Arrington: The whole point of our DEI strategy is to be a force for good for Ares, the companies we invest in and the communities in which we operate. We realize the power and influence we have to create change beyond our own walls. And we know that if we can help our portfolio companies become more inclusive, more equitable, that can help drive long-term performance. Before I was hired, DEI at Ares was largely employee driven. But our leadership recognized that we needed a formal structure. And so my role reports to both talent, which means HR, and the CEO.
We apply DEI through our people and culture, and through our business and investment process. We ensure we have the infrastructure, strategy, plans, targets and KPIs to hold ourselves and select responsible portfolio companies. We manage DEI in our investment process because we believe it can lead to better investment returns, and so we have a DEI lens when we make investments. We have deliberately incorporated DEI into our procurement processes, working to identify current divergent costs and then finding areas where we can shift costs to different suppliers. We aim to lead by example so that we can offer advice to our portfolio companies and create a handbook on how they too can approach supplier diversity. We also look at the impact we make on our communities through our philanthropy, maximizing our giving, our employee volunteerism and matching our employee donations.
What I like about our approach is that we are fundamentally data-driven. We set KPIs and hold ourselves accountable for the change we want to see – because we believe that what gets measured gets done.
We hold ourselves accountable for the change we want to see – because we believe that what gets measured gets done.
McKinsey: As your organization’s first CDO, how did you get started?
Indira Arrington: I went in focused on listening. In this business, there is work to be done everywhere you look. It’s hard not to rush and start trying to get things done right away. And I’m super type A, so it drives me crazy not to get into performance. But I took a very pragmatic approach and did the first 90 days of data collection.
We began with a quantitative and qualitative baseline assessment of ourselves and a cohort of our portfolio companies. When I think about data from a human capital perspective, I keep things simple. For me a + b – ° С: recruitment plus promotions minus departures. Slice this by diversity dimension and by title, and you’ll be able to clearly see at each point what your presentation looks like. It’s a nice way to start identifying which people to spend time with and which processes to evaluate to understand how we got to where we are.
I met with over 120 team members one by one. I was after three things: to see how they felt about working at Ares, where they thought we were on our DEI journey, and what they thought success should look like from a DEI perspective. I also looked at some external surveys to gather insight into how employees experience the organization through the diversity dimension. Finally, I met with functional leaders.
The most challenging part of being a CDO is that you don’t own a place to do the work. You do not own any of the features. I aim to drive change through influence, which is great but can also be challenging. So I sat down with functional leaders from Recruiting and HR to understand our talent management process and with business leaders to understand how they view DEI from a business perspective and the procurement function. I worked to gather as much information as possible.
McKinsey: How did you create your strategic plan for DEI?
Indira Arrington: Once we understood where we were from DEI’s perspective, we set about forming a strategic plan. Together with a core set of our portfolio companies, we went through a stage assessment to help identify our diversity gaps, an infrastructure assessment to see if we have the infrastructure in place to implement DEI, and an inclusion assessment that included global survey for inclusion in all participating firms. This last assessment gave us quantifiable scores for inclusion as well as our gaps in the diversity dimension, scope, title and location. We can look within our businesses and be very surgical about how we’re going to close those gaps.
We then worked with these portfolio companies to create strategic plans for each individual firm, in addition to further refining Ares’ own strategic plan. Each developed their own three-year DEI plan with vision, goals, initiatives and monitoring metrics. A total of over 200 DEI initiatives were planned. Some targeted, for example, increased representation of women and Black, Indigenous and Colored colleagues at management level and above. Some are aimed at increasing supplier diversity. We upskilled our own team members who sat on the boards of these portfolio companies to help take DEI out of the boardroom. We have prepared each company to add DEI to the board agenda on a quarterly basis and support them to implement it. We’ve created a community with members from each firm that meet monthly to share best practices.
McKinsey: Where have you seen DEI’s strategy make the biggest difference?
Indira Arrington: One process we were able to change at Ares – and make it the new way we do business – was in recruiting. We seek to increase representation where we have gaps. We found that we were not seeing enough diversity at the level of job seekers and qualified candidates. We also saw that not enough candidates were making it through our funnel and making it to the first round of interviews. We decided to change our process.
We started applying diverse talent to first round interviews. We have launched a pilot project in the US where we require a minimum of four candidates per first round of interviews and at least half must be diverse. We worked with our recruiting team to find diverse talent for the roster and with our search firms so they could also support the diverse roster mandate.
We are also extremely proud to launch the AltFinance Investing in Black Futures initiative. The asset management industry is one of the least diverse in the US, with a significant lack of black talent. We decided to help solve this problem in the industry. Through the Ares Charitable Foundation, along with two industry partners, Apollo Global Management and Oaktree Capital Management, we have jointly committed $90 million over ten years through the Ares Charitable Foundation to launch a non-profit organization focused on engaging, attracting and creating a pathway for HBCUs [historically Black colleges and universities] students to join the asset management industry.
It also provides need-based scholarships.
AltFinance Investing has partnered with the Wharton School of the University of Pennsylvania to create a curriculum for students to understand the various verticals and careers in the asset management industry, go through industry case interviews and join us for a successful summer internship.
After that, it’s about turning the interns into full-time employees and working with our firms’ recruiting teams to hire the students and set them up for success. I’m excited to share that we and other businesses recently welcomed our first batch of interns.
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