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Employers across the nation, and across the globe, are working to create diversity and inclusion (D&I) programs, not just due to increased regulation, but also to take advantage of greater opportunity. According to Deloitte, such D&I programs “can improve results, provide different perspectives, and [help companies] better connect with a more diverse customer base.” More and more employers are seeing that D&I can increase innovation, productivity, and even profitability.
Among the many industries seeking to improve diversity, one worthy of special note is the financial services sector. Financial services firms worldwide have noted that “a lack of diversity and inclusion at senior management and board level … [can] be a leading indicator of elevated behavior and culture risks.” As a result, such companies are looking for opportunities to build D&I into their organizations, all the way to the top, including the consideration of candidates for the C-suite. This is vital in that, as cited in Forbes, “the proportion of employees of color at top U.S. banks matches the percentage in the overall population, but that most of these employees are entry-level and not part of senior management.”
In the Deloitte article cited above, it’s also noted that that “financial services firms seeking more diversity in their candidate pool will likely need to recruit and develop more women in the areas in which CEOs have historically come from: lines of business, finance, and operations.” They add that financial services companies are making strides in achieving greater gender diversity in leadership and throughout their organizations to better reflect their workforce, customer base, and society as a whole. However, as these companies do so, they’ll need to consider making significant changes with regard to building culture, developing talent, and planning for succession.
There’s more than a little urgency involved, too. According to PWC, financial services is a “marketplace in transformation, and as a result it increasingly demands new capabilities and a more diverse workforce.” They also note that underrepresentation of gender, generation, ethnicity, sexuality, and disability can deter talented people from seeking careers in financial services, resulting in missed commercial opportunity.
Put another way, an “ongoing lack of diversity is hurting the [financial services] sector, and not just in terms of public perception. Research has repeatedly shown that there are real benefits to bringing diversity into financial firms. Companies that have diverse workforces are more agile and more profitable, as well as more likely to improve their market share.”
So what does better D&I in financial services look like? In a post on its website, Independent Banker describes diversity as “having a team that includes people of different gender identities, ages, religions, races, ethnic and cultural backgrounds, sexual orientations, languages and education levels” in an overall sense. On a more granular level, a financial institution’s D&I policies should be relevant to its particular context, as every FI is “unique in its asset size, number of employees, structure, business plan, community characteristics, geographic location, financial resources, and legal constraints.”
Speaking of legal constraints: these are adding to the urgency faced by the financial sector as the new administration gets up and running. President Biden’s agenda includes a focus on pay equity, as well as changes regarding pay parity, work security, and efforts to close the gender pay gap. Employers would be wise to be proactive in preparing for the building need for transparency in pay data reporting, either as a means of attracting top talent and compliance with state as well as federal law.
The House of Representatives has already put the onus on financial services executives to drive D&I efforts, having released a report, Diversity and Inclusion: Holding America’s Large Banks Accountable, in February of last year. The report notes that some financial institutions are making progress, by “linking diversity and inclusion results to performance; creating employee resource groups; connecting with diverse communities; creating pathways for diverse talent; and collecting data on diversity results.”
The House isn’t relying on such efforts to be voluntary, however. It’s on record as saying that “Congress should consider the following legislative actions to improve diversity and inclusion at America’s largest banks …
- Require that banks share diversity and inclusion data with their regulators and the public;
- Require banks to track and make efforts to increase their spending with diverse firms; and,
- Require banks to publicly disclose the diversity of their boards.”
What’s a financial-sector employer to do? By placing leaders in diversity roles who understand the issues at hand, as well asaggressively managing anti-discrimination policies, such employers will learn how to better serve their employees of color, as well as vendors, clients, and even consumers. They will also have a better grasp of cultivating space within the corporate culture to address differences in an organized and constructive way.
They can also conduct pay equity auditing or pay gap analyses, which serve as a measure(for employees, clients, and investors alike) of where a company stands, and where improvement is needed. To find out more about how organizations can bolster their diversity and inclusion efforts with the help of an expert partner, click here.
To learn more about achieving pay equity, click here.