Peter Thomas and Carol Roberts
That the finance sector – not just asset finance – suffers from a lack of diversity is a recognised problem. There are few businesses led by women for example, and a lack of women in senior roles.
Diversity is not only about gender, though. Diversity is about access, fairness and equality for everyone regardless of ethnicity, age, disability, gender reassignment or sexual orientation.
For example, ethnic minorities make up 12% of the working-age population in the UK but only one in 15 people from an ethnic minority background are in a management position. While only one in 16 of current FTSE 100 board members is from a Black, Asian and Minority Ethnic (BAME) background.
But why is diversity important for business? Apart from the arguments about social justice – that all people, regardless of their background should be able to make their most valuable contribution – the argument is really an economic one, and it is this argument that may just start to create momentum for change.
Diverse businesses benefit from a wider range of thought, experience and expertise and can engage more effectively with an increasingly diverse range of stakeholders, partners and customers; diversity creates a strong corporate culture which is more resilient and can help businesses see opportunities; diverse businesses gain powerful brand benefits because they can act consistently with their corporate culture and values.
Diverse companies are also better able to appreciate and manage the risks associated with global operations, which require an understanding of cultural sensitivities, norms and vulnerabilities. And of course, since the sales of many companies are made outside the UK, customers want to align themselves with companies that reflect their priorities.
If the benefits are obvious, why the lack of diversity?
Often seen to be the obvious solution, diversity training is often ineffective because its effects rarely last more than a few days – it is seen as a distraction from ‘real work’ – and the kind of online training used in many businesses has little lasting effect: thousands of research studies have shown that while people are easily taught to respond correctly to questionnaires about bias they soon forget the right answers.
People also may respond to compulsory courses with anger and resistance – with some reporting more animosity toward minority groups afterward. Experience in the US suggests that 5 years after instituting diversity training for managers, companies saw no improvement in diversity: the number of black women in the workforce decreased by 9%, and the proportion of Asian-American men and women shrank by 4% to 5%.
This data suggests that organisations will become less diverse, not more, if people are forced into diversity training, if hiring and promotion decisions are regulated and if a legalistic grievance system is installed.
One key to levelling a playing field that remains stubbornly uneven is sponsorship: people need sponsors who provide visibility for their protégé, advocate for key assignments and put their own reputation on the line for a talented person.
For those who are marginalised – by gender, ethnicity, age, sexual identity, or educational and economic background – sponsorship is powerful. Research suggests that having a sponsor increases the likelihood of being satisfied with your career and a lack of sponsorship increases your likelihood of quitting within a year.
Sponsorship is only one part of the solution though, and the real need, as Carmen Ene pointed out in our discussion, is that companies should start from the point of view that there are different perspectives, all of them valuable, and that companies need to work hard to explore and identify the range of barriers holding people back.
It requires not just targets, quotas and training – although these may have their part to play – but the engagement of everyone in an organisation. Engaging everyone creates a sense of accountability, and contact with a diversity of people fosters understanding. Interventions such as targeted recruitment, mentoring programs, self-managed teams and task forces have been shown to boost diversity.
The aim of all of these interventions should be to identify, attract, retain and promote the best talent irrespective of the gender, ethnic background, religion or other defining characteristic of any candidate.
The flow on effect is to develop the global talent pool of leaders capable of delivering on the long-term strategy of the company in an increasingly complex, diverse, fragmented global marketplace.
The gender pay gap is alive and well
By closing gender pay gaps in work McKinsey estimates that we would add £150 billion to the UK economy by 2025, but progress has stalled with the gender pay gap now standing at 14.1% with no movement on the figure in the last three years.
While the gap among younger women had almost been eliminated, in the last six years there was a notable increase from 1.1% in 2011 to 5.5%, and women in their 50s are paid on average 18.6% less than their male colleagues. At the current rate of change it will take 100 years to close the male-female gap in pay.
A recent piece of research on education suggested that the downside of women’s hard-won educational equality – women now comprise 56 percent of undergraduates in the U.S. – is an unequal share of the debt burden. Women take on more and bigger loans than men and because college-educated women in full-time jobs earn about 25 percent less than their male peers, it takes them longer to pay the money back.
Inclusion: a misunderstood concept
Diversity and inclusion are not the same thing. Our society is, by its nature, diverse. Diversity in an organisation simply equals representation. Diversity is a fact, but inclusion is a choice.
Inclusion engages each individual regardless of their background and makes them feel valued and essential to the organisation. For individuals, inclusion is about recognising the whole person, not just their education, physical characteristics, cultural background or work experience. Inclusion means very employee sees the opportunity to join in, so that every employee hears supportive language and every employee feels that they are part of an inclusive organisation. Inclusion is a continual and active process, and while diversity is about creating the mix, inclusion is getting the mix to work well.
Diversity and inclusion are linked though, because without inclusion the crucial connections that attract diverse talent, encourage participation, foster innovation and lead to business growth won’t happen. Evidence shows that when people feel valued, they function at full capacity and feel part of the organisation’s mission.
Because inclusion not just about quota-filling, it requires a long-term vision, strong, determined and contemporary leadership and an appreciation of nuance. This is why it’s hard for older generations to fully embrace an inclusion agenda, and why some industries where the senior leadership is not diverse (“old, male and stale” is the phrase often used) have problems fully embracing the diversity and inclusion agenda.
Those organisations that fully embrace an inclusion agenda it creates a powerful shift in culture, values and behaviour that creates higher performing organisations where motivation and morale soar, and diverse and include businesses become the first choice for customers who are themselves diverse, and who value inclusion.
Of course, one of the problems is that while it’s easy to measure diversity- it’s a simple matter of headcount – quantifying feelings of inclusion can be difficult.
It has been hard enough, and has even required legislation, to get companies to reveal how diverse they are, so understanding inclusion will need a complex narrative and more subtle measures that reflect degrees of inclusivity.
Organisations such as Stonewall have worked in this area for many years, and their lists have become a beacon for many of those in the LGBT community when considering a future career.
Organisations are going to have to become transparent about inclusivity as they are being compelled to become transparent about diversity.