Jim Turley, chairman and CEO of Ernst & Young, recently sat down with DiversityInc CEO Luke Visconti to explore the intersection of talent development, global cultural competence, innovation, and current and future profitability. Click here to watch a video from this interview.

Visconti: You made the decision to put Billie Williamson, a senior partner in the firm, in charge of diversity management (as Americas inclusiveness officer). For people who are not so aware of accountancy firms, partners drive revenue. Why did you put such a senior executive in this position?

Turley: We’re an organization where people that get the most respect internally are those that have proven that they can actually perform on the ground what we all do, which is serve our great accounts. I suspect that’s why I was asked to lead the firm too, because 10 years ago, I had the reputation of being a great client guy, somebody who could serve big accounts and small accounts, make them happy and deliver a wide range of services. Billie is a lot better than I ever was. What was so important was to put in someone responsible for diversity and inclusiveness who has that respect.

Visconti: How do you see your global diversity initiative taking shape?

Turley:We haven’t done enough globally because it is really complicated. If you think about how important it is to lead cultures but not get too far out ahead of the culture on all of these issues from the center, we haven’t been doing what we need to do in terms of driving it. The cultures around the world are so different. I was on a panel in Saudi Arabia. Saudi women are treated very differently than men. Picture a room of 750 people, almost all men, right in front of the stage, and a big ceiling-to-floor curtain with 150 women behind the curtain, and that’s the culture. The panel was about economic issues and competitiveness. The panel was just about over and we got a question from behind the curtain. They can’t even see the stage, they’re watching from the monitor, and she says to the panel: “Do you think the way the kingdom of Saudi Arabia treats women will be a risk factor to our growth?”

I’m sitting at the far end of the stage and I look to my right down the panel and I see the entire panel and the moderator (all men) looking at their shoes, and so I conclude that I should pick up this hand grenade. I explained that I’m the chair of the Catalyst organization and I’m very involved in women and business. I said, “From my perspective, this is actually an opportunity for the kingdom, not a risk,” and that in my view, “the culture in Saudi will evolve … and when it does, this is going to be a further engine in economic growth.” I get off stage and I’m worried that I’m going to be tossed out of the country. My BlackBerry is going crazy and one of our senior partners is e-mailing me and forwarding e-mails she got from a couple of women from behind the curtain, saying: “Your CEO just took on the kingdom and said this culture is going to change.”

It shows you how connected the world is and how important this issue is. Cultures will change, but this can’t be an exporting of an American culture, a British culture, or a French culture to anywhere else. This has to be an evolution of a culture on its own. I always say to our people around the world that if we are leading that cultural change within each geography, then we’re doing the right thing. If we try to be too far out ahead of it, that’s not going to work.

Visconti: This is something that globally we’ll all be looking at—the cause of liberation.

Turley: This is an important point because when you think about a global strategy, there are two trends that are really shaping the future. One is the shift in capital from the west to the east from the north to the south, developed markets to emerging markets. Just as important is the demographic shift that people coming out of universities today around the world are much more diverse around gender, ethnicity, orientation. Those two shifts are the transformational priorities that drive Ernst & Young’s thinking. They drive where we’re investing in the emerging markets. They drive where we make the bets, where we take global funds and invest hundreds of millions of dollars. That is key. But just as important is being the best organization we can be and the best in the profession in the world in terms of diversity and inclusion. It’s all around being able to work together effectively with people that aren’t like you, whether that’s somebody who is a white male like me but who is French. We might look alike but our cultures are fantastically different in a very rich way.

Visconti: It’s a big shift for white males in this country because our generation was all about the “melting pot” and now it’s about valuing differences as assets.

Turley: It’s an enormous shift because we’ve also been taught over the years that if you treat everybody the same, then you’re doing the right thing. Guess what? If you’re treating everybody equally, they’re interpreting it very differently, so it’s not equitable. We’ve seen a lot of research that the teams we’re all going to be working on in the future, whether it’s here in the United States or around the world, are going to be more diverse around every dimension of diversity. Historically, too often you’d have a white male who would keep the ideas off the table and try to dominate the conversation instead of really collaborating. Getting the culture right is very important.

Visconti: Your firm’s website focuses on talent management, and the Ernst & Young global talent-management study ties management to return on equity for investors. What metrics would you advise companies to track to recognize ROE, and how does diversity talent relate to talent management?

Turley:The metrics are always tough. At first, it is vital to tie talent management and diversity and inclusion to business strategy and how it drives directly to the transformational priorities. We do global people surveys regularly. We find it is a great way to actually measure not just feelings of comfort and perception but how the organization is being received. We can slice and dice that data by geography, by country, by city, by gender, by ethnicity, by nationality, and just in the last cycle, we began asking voluntarily for people to self-identify if they’re LGBT or have a disability. Separately, we look at things like retention statistics, performance-evaluation statistics, and where we assign our people. In our world, if you’re not getting the right job assignments when you’re younger, then your own development is not going to be what it can be.

Visconti: There’s still a dearth—not just at your firm but in your industry—of women partners at the top of the company. How do you keep women engaged? How does your leadership style encourage and tell those women that this is your trajectory?

Turley: First, you have to be totally transparent about it and admit that we aren’t where we need to be and want to get. Having said that, we’re actually seeing some good success in women in some very visible and very important leadership roles. Look at our Americas board, for example; it’s about 25 percent women. When you look at the seven geographically based business units in the United States, three of the business leaders are women, and one woman leads our whole tax business.

Visconti: Would you say that in essence with the change that you’ve gone through all these years—you’ve been on top for a long time now with this organization speaking quite clearly about your holding people accountable—would you say that the style of the management of this firm has become more feminine over the years?

Turley:The firm has become less masculine. I would say it’s become more neutral and more balanced. It’s become a lot less of a macho organization, a lot more of a “Let’s challenge each other and make the right decisions.” One of the learning experiences was a board meeting where a couple of our women said something and then our men said something and I picked up on it when the men said it … one or two of the women on the board tackled me. The second half of the story is that it hasn’t happened again. That’s how you learn.

Visconti: They felt secure enough to talk to you about it. In 99 percent of organizations, they would have kept their mouths shut, and that contributes to them walking out the door.

Turley: It’s really the organization. We’ve got the best people, the best focus on teaming in all the things that underlie people culture.

Visconti: Your website stresses global business with the emergence of global accounting standards. Does your firm consider diversity management or a lack thereof as a consideration when assessing potential liabilities a company is facing?

Turley: I view it more as being like a slow-growth cancer. If an organization lacks the culture to lead in talent and in diversity inclusiveness, over time, it’s going to impact their talent base negatively; over time, it’s going to impact their ability to compete negatively; and over time, they just won’t win.

Do we talk with them about it? Sometimes, not as often or as directly as we perhaps should, but we have discussions probably more frequently with the audit committee around broad issues of talent in the finance staff than we do in the cultural staff. We’re seeing a lot more peer-to-peer exchanges around how to be successful in diversity and inclusion. I’ve been involved in talking with very large companies and I’ve been asked by Billie and others if I will go see the CEO of XYZ company and share stories. I’m honored to do it because they’re asking us because they think we’ve accomplished something, but I’m also pleased to do it because we also learn from them. We’re all trying to learn from each other.

Visconti: In your firm’s global business-risk report, failure to innovate is an emerging or below-the-radar threat, so in other words, it’s below the top 10 but it’s emerging. Do you see a connection in innovation and diversity?

Turley: Absolutely; there’s a connection there. Innovation comes from constructive clashes of different ideas, and from that, the sparks create some brilliance. It’s getting people in the room with different thoughts, who come from different experiences … It’s getting all of our people to understand the direction of the world, to understand the demographic shift, to understand the capital flow shifts, and to realize just what a business imperative this is. At Ernst & Young, it’s making sure that all of our people think about the world outside the windows and not about the world here. It’s a high-level understanding that’s programmatic and measuring and we work at it every day.

Visconti: You set an expectation of what the culture is here, so if you want to succeed here, you have to think this way.

Turley: It’s funny you say that. This time of year we celebrate the Chairman’s Values Awards. Many times in the first four or five years, I was asked to give my name or title to an award, such as a chairman’s award for sales for revenue generation or for innovation or for quality. It never felt right. Then someone proposed an award around getting nominations from within on people, just everyday people, who are living the values of the firm in a positive way. Those values start with people who demonstrate integrity, respect and teaming. You might come here and you see the values when you’re being recruited and hired, and you might not really believe in them, but I hope that people see that we take them seriously. It’s the only thing in a decade that I’ve said yes to lending my name to, and we celebrate this around the world. Thousands and thousands of recommendations from our staff that end up going through blue-ribbon committees … and I get to pick nine or 10 people to come to a major event in the firm just to be recognized by our leadership team.

We all will make mistakes in our professional jobs. We’ll do things that turn out to be not the right business decision. But if we have the right values, if we have the right mindset, if we have the right ethics, then none of these mistakes will be devastating to the organization. I always like to say that if all of our people wake up knowing what’s right and wrong, knowing what’s expected, that’s what culture’s all about.

Visconti: Your industry has evolved to provide consultancy services, not just tax and audit services. Why are you focused on this? What advice would you give to companies that are not yet coming up to this?

Turley: You’ve hit on one thing that does make us, in the service business, different—we have no equipment, no machinery, no fixed assets, no inventory; all we have are our ideas and the people. I like to say that every one of our assets goes home every night. We want to be the kind of place they want to come back to the next day … Increasingly, all organizations that I talk with are saying that the key to success long term is winning the battle for talent, and once you get to the stage where you value people and you value their ideas, it’s possible to think that the best ideas come in any shape, any size, any gender, any skin color, any sexual orientation, any anything.