The business case for diversity, equity, and inclusion (DEI) is stronger than ever, but many companies’ DEI programs are stalled or have slipped backward. That’s because intentions aren’t the same as execution and process infrastructure—something that Indhira Arrington learned in her first year at the global alternative asset management firm Ares Management (Ares), for which she is the managing director and first global chief DEI officer (CDO). Arrington believes that 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’s focused on building a culture of representation, especially when it comes to recruitment, retention, and talent development. As an immigrant from the Dominican Republic, Arrington feels an enormous responsibility to open doors for others, as sponsors and mentors did 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?
Indhira Arrington: The whole point of our DEI strategy is to be a force for good for Ares, for the companies in which we invest and in the communities in which we operate. We recognize the power and influence that 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, meaning HR, and the CEO.
We’re operationalizing DEI through our people and culture, as well as our business and investment process. We’re ensuring that we have the infrastructure, strategy, plans, goals, and KPIs to hold ourselves and select portfolio companies accountable. We drive DEI in our investment process because we believe it can lead to better ROI, and so we have a DEI lens when we make investments. We’ve intentionally woven DEI into our procurement processes, working to identify current diverse spend and then find areas where we can transfer spend to diverse suppliers. We’re seeking to lead by example so that we can be in a position to offer advice to our portfolio companies and create a playbook for how they, too, can approach supplier diversity. We’re also looking at the impact we have on our communities through our philanthropy, maximizing our giving, our employee volunteerism, and our matching of employee donations.
What I love about our approach is, at the core, we’re data driven. We’re setting KPIs, and we’re holding ourselves accountable for the change we want to see—because we believe that what gets measured gets done.
We’re holding 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 begin?
Indhira Arrington: I came in focused on listening. In this job, there’s work to be done everywhere you look. It’s difficult not to rush in and start trying to get things done right away. And I’m super type A, so it drives me crazy not to jump into execution. But I took a very pragmatic approach and made the first 90 days about data gathering.
We began with a quantitative and qualitative assessment of the starting point for us and a cohort of our portfolio companies. When I think about data from a human capital perspective, I keep things simple. For me, it’s a + b – c: recruiting plus promotions minus departures. Cut that by a diversity dimension and by title, and you can clearly see at any point what your representation looks like. It’s a nice way to start mapping out which people you need 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 glean insight into how employees were experiencing the organization through the dimension of diversity. Finally, I met with functional leaders.
The most challenging part of being a CDO is that you don’t own any place where the work gets done. You don’t own any of the functions. I’m meant to drive change through influence, which is awesome but can also be challenging. So I sat with functional leaders from recruiting and HR to understand our talent management process and with business leaders to understand how they viewed 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 DEI plan?
Indhira Arrington: Once we understood where we were from a DEI perspective, we set out to form a strategic plan. Together with a core set of our portfolio companies, we went through a pipeline assessment to help identify our diversity gaps, an infrastructure assessment to see whether we had the infrastructure in place to operationalize DEI, and an inclusion assessment that included a global inclusion survey across all participating firms. That last assessment gave us quantifiable inclusion ratings, as well as our gaps by diversity dimension, line of business, title, and location. We could look within our firms and be very surgical about how we were going to narrow those gaps.
We then worked with these portfolio companies to create strategic plans for each individual firm, in addition to further refining Ares’s own strategic plan. Each developed a three-year DEI plan of its own, with a vision, objectives, initiatives, and metrics to monitor. In total, more than 200 DEI initiatives were planned. Some targeted, for instance, increased representation of women and Black, Indigenous, and people of color colleagues at the manager level and above. Some targeted increased diversity among suppliers. We upskilled our own team members who sat on those portfolio company boards so they could help drive DEI from the boardroom. We prepared each company to add DEI to the board agenda on a quarterly basis and are supporting them to execute on it. We’ve set up a community with members from each firm, which meets monthly to share best practices.
McKinsey: Where have you seen the DEI strategy make the most difference?
Indhira Arrington: One process we were able to change within Ares—and make it the new way we do business—was in our recruiting. We set out to increase representation where we have gaps. We found that we weren’t seeing enough diversity at the job seeker and qualified-candidate levels. We also saw that not enough candidates were getting through our funnel and making it to first-round interviews. We decided to change our process.
We began implementing diverse talent slates at first-round interviews. We launched a pilot in the US where we require a minimum of four candidates in first-round interviews, and at least half must be diverse. We worked with our recruitment team to source diverse talent for the slate and with our search firms so they also can support the diverse-slate mandate.
We are also extremely proud of launching the AltFinance Investing in Black Futures initiative. The asset management industry is one of the least diverse in the US, with a substantial lack of Black talent. We decided to help solve this industry problem. Through the Ares Charitable Foundation, along with two industry peers, Apollo Global Management and Oaktree Capital Management, we jointly committed $90 million over a period of ten years through the Ares charitable foundation to start a nonprofit focused on engaging, attracting, and creating a pathway for HBCU [historically Black colleges and universities] students to join the asset management industry.1 It also provides need-based scholarships.
AltFinance Investing is partnering with the Wharton School of the University of Pennsylvania to create a curriculum for students to understand the different verticals and careers within the asset management industry, get through industry case study interviews, and hopefully join us for a successful summer internship.2 And then it’s about converting the interns to full-time employees and working with the recruiting teams at our firms to hire the students and set them up for success. I’m excited to share that we and other firms recently welcomed our first cohort of interns.