Once a quarter, at Men for Inclusion we run a free workshop for our clients - past, present and future - to discuss a critical topic around Diversity, Equity and Inclusion. Each event is hosted at the site of a different organisation and this time around, the Bank of England had kindly agreed to be our host.
Given the venue, this quarter's topic was a deep dive into the Financial Services industry - a sector where we at Men for Inclusion had spent most of our prior careers, as well as the sector in which most of our clients operated. However, given how critical this industry is to UK Plc and how it underpins every other industry going, we thought it would also be helpful to hear from other sectors to see how they are going about better solutions to equity.
In the room, we had experts, practitioners and leaders from a variety of organisations, including the Bank of England itself, Alliance Bernstein, Aviva Investors, AXA Health, Gattaca Plc, Ageas Insurance, LGT Capital Partners, Wood Plc, Energy Systems Catapult, Peter Duff Consutlancy, Rathbones, Women in Fund Finance, DC Advisory, Lloyds Banking Group, RWE and Men for Inclusion.
We wanted to explore why the sector struggled to be seen as a diverse and inclusive one, what were some of the root causes and importantly explore ideas that could be implemented to accelerate progress for the industry. This is becoming more and more critical for some parts of the sector as recent research from the Centre of Economic and Business Research suggests that 60% of UK wealth will be in the hands of women by 2025. With only 16% of wealth advisors being women and other research showing that 70% of women seeking a financial advisor preferring to work with a woman, this is an issue that should be at the top of the agenda for most Financial Services (FS) firms.
To start with, we explored the evidence that suggests the sector continues to struggle. We looked at the fact that FS has the biggest gender pay gap across all sectors (28% for gross hourly earnings, versus 21% for education, 17% for construction, 13% for health care) and at how the Asset and Investment Manager firms will not reach 50% women in top quartile earnings until 2054. At how, the % of women in senior management was progressing at just 1% a year from 2020 (reaching 35% by 2023). We also looked at the fact that following the collapse of the Crispin Odey hedge fund, a Treasury Select Committee review into "Sexism in the City" (supported by our very own Mark Freed), found shocking evidence of widescale sexist behaviour and how the regulator was about to implement specific reporting from the industry on their diversity and inclusion efforts.
From these perspectives, this is not a great picture. And this is despite the sector investing considerable amounts of time and money into the subject over the past decade. Has that money been well spent? A question many senior leaders have been asking themselves in recent times as continued investment into the subject is being reduced by many organisations in the sector.
We started by looking at some of the challenges for the sector that could be contributing.
Poor reputation. The legacy of the 2008/2009 financial crisis does seem to live on and their seems to be a self-fulfilling prophecy of the sector not being seen as attractive to many, particularly from under-represented communities. In parts, it is still seen as home for a male-dominated, private school educated workforce. However, the sector has made huge strides in recent years to increase representation at graduate entry level. Perhaps that still needs a few more years to develop through the cycle? In a values driven future employee market, this could still be a big hurdle to overcome.
Lack of flexibility and poor work/life balance. There is an argument that this affects many other sectors (education and law often cite similar challenges), but the banks do seem to be at the forefront of mandatory in-office policies. Will this backfire over time? The research that shows the need for in-person collaboration is also persuasive but most mandatory HR type policies (of almost any nature) have a history of backfiring and this one does seem to be pushing against the tide.
Individualistic compensation practices. More than most industries, the use of performance-related compensation schemes, with more significant sums of money than most, which mainly prioritise / measure individual performance, rather than team performance, can create a zero-sum game mentality. This in turn can create a culture that does not recognise the importance of how things are done, alongside what has been done. All sectors have the challenge of important administrative work that is often not seen as directly related to revenue or profit. In all industries, this work is disproportionatley given to women and others from traditionally under-represented groups. This could have a strong connection to how performance is measured and compensation is allocated.
Societal career alignment biases. Despite continuing to fight against the gendered biases in our education systems, they still lead to more men being steered towards STEM (Science, Technology, Engineering, Mathematics) based careers (including Finance) and more women towards HEAL (Health, Education, Administration and Literacy) based careers. Did Finance always start further behind in the game here and the work that has been done is slowly closing that gap? Alongside that, research into gender stereotypes still show that men value financial rewards higher than women when deciding what careers to pursue? Given that an FS career can generate a higher compensation package than many, does this create an extra barrier that the industry needs to overcome? This is a difficult one to solve, because in a capitalist society, it is always going to be tough to realign rewards into other professions that are traditionally seen as the preserve of women.
As a group, I am not sure we arrived at a definitive view of all the causes, but we strongly suspect the challenge could be a potent mix of all of the above (and a few more causes beyond). However, as we moved on to strategies to help the industry, there was a lot more consensus on what could be done.
There were 3 broad areas where the team felt organisations should be focusing:
Developing an Inclusive Culture
Clarity on what behaviors are not acceptable and making sure it is dealt with when it happens
The need for people to role model inclusive behaviours, especially those in leadership
For those role models to be highlighted, recognised and rewarded for leading the way
A focus on Everyone
Senior leaders - being accountable, being incentivised to change and demonstrating real action
Middle managers - additional support, better communication, making sure there is accurate data and sharing it
All employees, both current and future - make the role models visible externally, set a standard for the employee value proposition, support everyone defining their personal case, supporting flexibility
Supporting process alignment
Deepen wide-ranging channels for attraction - improving the industry reputation along the way
Continued improvements to the transparency of career progression, especially expecting evidence of inclusive behaviours in promotion processes
Long-term workforce planning practices that allow for multi-cycle improvements and multi-pronged approaches to improve representation
Ultimately, there was recognition that there are no silver bullets for the industry. Perspectives from other industries suggested that their challenges are similar, but perhaps the starting point is different, but solutions focused on Inclusion were beginning to be adopted across the firms that are seen as leaders on this topic.
However, there was widespread agreement with the right mindset, focused on continously investing in improvements to culture, with the right investment support from their organisation, a much more diverse and inclusive Financial Services sector is within our grasp.
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