D&I in Financial Services: A Slow and Bumpy Road to a more Diversified and Inclusive Workforce

Lynn Strongin Dodds assesses the progress that has been made, the long lasting impact of COVID-19 and the many gaps still needed to be filled

There are a host of studies outlining the benefits of having a diverse and inclusive workforce. It not only increases profitability and creativity but enhances governance and problem-solving abilities. Progress though has been slow in the financial service sector despite the rhetoric. There is hope that the Black Lives Matter movement and the global pandemic, which showed flexible working is sustainable, will give the industry the impetus to make meaningful changes. 

A recent report from Refinitiv – Key Factors Driving Diversity and Inclusion in the Workplace – confirms that  financial services has made great strides over the past five years, with banking, investment services, and insurance firms scoring high on the data provider’s top 100 Diversity & Inclusion (D&I) Index. The sector, where 28% of institutions had a diverse board, came third behind the 37% for energy and 32% for telecommunications.

BlackRock led the way with an overall score of 81 followed by Allianz, which placed seventh with an overall score of 77.75. See the Refinitiv 2020 D&I top 100 list here.

Regardless of the advancement, there is still a lot of work to do as a recent report from Deloitte- Diversifying the path to CEO in financial services shows.   This is particularly true with the C-suite where breaking that ceiling still remains elusive.

The report reveals all but six of 111 CEOs at the 107 largest US public financial institutions (including four with co-CEOs) are men. They were typically groomed to climb the ladder and occupied three types of leadership roles in one of their prior two jobs – leading lines of business, finance, or operations. By contrast, women are in leadership positions in talent, marketing and business development, administration and legal – none of which are commonly included on the path to CEO. 

The COVID-19 pandemic effect

While some believe that the COVID-19 pandemic will accelerate change, others are more circumspect. There is a particular concern the aftermath could mirror the financial crisis when D&I was pushed down the itinerary as firms fought for survival. “It is on the agenda and there is greater awareness,” says Julia Streets, Founder and CEO of Streets Consulting and host and executive producer of DiverCity Podcast. “The data shows how important diversity is in terms of commercial contribution and gaining a competitive edge. One of the biggest risks we face [throughout COVID] is that senior managers under pressure revert to old style behaviours and decisions about who sits at the top table, at a time when we need to be mindful of the mistakes of the past and need fresh ideas.”    

To date, the signs have not been that encouraging. Although it does not single out financial services, research from McKinsey & Co, the consultancy shows almost a third of organisations in general have put all or most diversity initiatives on hold because of the pandemic. 

The hope, though, is that in the long run, the COVID-19 pandemic will have a positive effect, leading to a permanent paradigm shift to a more flexible working environment. Traditionally, financial services companies required a physical presence and were sceptical when a person worked from home. This is particularly true with trading functions such as in derivatives. Studies show that they have been surprised at the level of output during the lockdown and ensuing period. 

A PWC survey which polled 50 executives and 114 employees at US based financial service firms showed expectations were in fact exceeded. Around 69% said their staff were as productive or more productive than before the crisis while over 75% of employees felt they were at least as productive as they were pre-pandemic. 

This change in mindset could be significant for people with disabilities who have typically faced high physical barriers working in an office as well as working mothers where there is still a stigma if they have shorter working day. As Deb Clarke, Head of Investment Research at Mercer put it, “We know that what women in the workforce would appreciate is flexible working hours and that has become much more acceptable today. Even just 12 month ago, there was still a question mark and a rolling of the eyes if a woman left early even if she logged on later in the day.”  

Gemma Young, founder of the 3,000 strong community, Women of FinTech, concurs, adding. “I have been in the industry for 18 years while it has changed exponentially, that has not been the case for working mothers. Things stayed the same. There was flexibility if they stayed in the same company, but they often found it difficult to find a new job with the same arrangement.  Lockdown though has shown that they can be just as productive working remotely.”

Currently most of the focus on D&I is focused on women mainly because the data and benchmarking are more advanced and detailed. There is a recognition though that much more needs to be done in recruiting Black, Asian and other ethnic minorities where for example, only one in ten are in management jobs in U.K. financial services firms,  according to a report by global HR consultancy Randstad.

Walking the walk

Financial service firms are increasingly not just talking the talk but setting clear targets and key performance indicators across their organisations. They are getting senior manager buy-in as well as holding them accountable for D&I. Moreover, they are providing training and showing them how to apply the lessons to their day to day management of people. 

This, of course, starts with the recruitment process to ensure than managers do not fall into the trap of hiring into their own mould. As Anita Karppi, Co-founder of K&K Global Consulting and the Buy-side Trading Community, notes, “one of the biggest challenges is how do you attract the next generation into a career in the financial markets. The employers require diversity of thought and need to look at individuals in terms of how they can add value to a team and organisation. Hiring managers have to think ‘outside the box’, not just get blinkered by only seeking candidates within a narrow range of degree qualifications and university rankings but also evaluate the potential value add from a wider talent pool.”

Monika Jankowska-Rangelov, EMEA Head Inclusion & Diversity at State Street. also underlines the importance of a broader approach. She notes that recruiting from traditional talent pools and shortlisted universities could mean firms are overlooking the capable traders of the future being much better suited for the new market needs. “During pandemic situation globally, online recruitment has discovered endless sources of ‘fresh’ candidates from all over the world irrespectively of their physical location,” she adds. “New products of online gamisation and virtual talent assessment processes need to adjust to be equally effective than in the reality, but all this customisation is undergoing a natural evolution.”

However, it is not just about hiring and retaining a diversified workforce. “Diversity is a fact in globalised world but the real game-changer is the inclusion of it – the question if the organisation focuses on I&D or D&I where the last one might result in organisation culture challenges and the diverse individuals might find themselves in an unwelcoming or even a hostile environment with the managers or support functions not capable of facing and managing natural tensions coming from diversity,” says Jankowska-Rangelov.

She notes that “inclusion is not self-standing cultural aspect, but it is highly important that the employees can see the integrity of workplace in policies, procedures and also benefits that need to cover different needs of groups of employees and take into account external conditions of the location and its legislation and markets.”

Clarke believes that the COVID-19 pandemic provides an opportunity for companies to become more inclusive. “To me inclusion means that your voice is heard, and you are treated with respect,” she says. “Firms that get people to talk and listen to each other will make everyone feel valued and be comfortable talking not just about their work but also about their backgrounds.” 

• Diversify your target groups: To find diverse entry level talent recruit where diversity thrives, target schools and colleges with underrepresented students your criteria.
• Establish your company’s diversity brand and showcase it: Establish your diversity brand.  And if you already have significant Employee Resource Group (ERG) activities, then prominently showcase them on your firm’s career page and social media channels. Does your company have a diversity statement from the CEO? If so, proudly publish it on your firm’s career page.
• Collaborate with professional groups: Partner with Professional Associations focused on diversity. There are many national and regional diversity professional associations focused on specific minority groups so you can build your brand in these diverse communities through strategic sponsorship, thought leadership, and events.
• Enhance the employee referral program: Enhancing you employee referral program one of the best recruiting sources and specifically promotion through ‘word of mouth’. Diverse employees know and talk to other diverse individuals. Your employees share what it is like to work for your company and because of this, your diverse candidates’ perception of your company spreads throughout their communities.
• Use social media: Use social media to source and market to diverse talent. Social media not only helps you to build your employer brand but also allows you to identify and target very specific candidates
• Leverage ERG activities: Engage your company’s ERG activities to boost your recruiting efforts. Members from your ERGs should act as effective ambassadors for your recruiting and outreach efforts to diverse professional organisations. For instance, many firms use their ERGs to directly interview and hire diverse candidates.
• Measure and monitor: Use the right metrics to monitor your diversity recruiting efforts because what get measured gets done. Establish clear, measurable diversity recruiting metrics to track your progress.