Despite the general population being more diverse than ever, homogeny remains a stubborn issue among senior management at leading organizations.
In an October 17, 2019 testimony before the United States House of Representatives Committee on Financial Services, Dr. Laura Sherbin, economist and senior leader at Seramount, testified about this issue, particularly in financial services firms.
In addition to outlining diversity and inclusion drought among banks and insurance companies, Sherbin offered a number of proven antidotes to accelerate greater representation of under-represented groups, especially women, in senior leadership.
Even as headlines tout the number of women CEOs at Fortune 500 companies at an “all-time high,” there are still just 33 women at the helms of the nation’s largest businesses in 2019.
And, while women represent half of all financial services and insurance employees overall, there are no women running major financial services companies. Fewer than one in five have C-suite roles, according to a recent report by McKinsey & Company. The concrete ceiling remains firmly in place in this sector.
It’s not for lack of effort. Financial services companies were among the first to embrace the cultivation of greater gender diversity, and 90 percent say they’re committed to it.
Despite decades of effort, the financial services sector’s gender equality movement has not made necessary gains. Why?
Diversity-focused tactics don’t work without an effort to create an inclusive culture that not only attracts women but makes them feel welcome and valued.
To truly change the ratios of women and other marginalized groups who are in power, it’s important to first look at the factors that cause the gap, and then devise solutions to overcome them.
The Value Proposition of the Industry. Financial services careers are known for offering lucrative salaries and benefits packages in exchange for often unrelenting career demands.
Long hours, extensive travel, and personal sacrifices make senior roles unsustainable for and unappealing to many women, who still take on the majority of home responsibilities.
The now well-understood mental load of household management places additional demands on professional women.
While many financial services players have implemented policies and programs to tweak the value proposition at the edges, they have not examined or addressed the core reality that the way work gets done in the industry does not attract or capitalize on the changing face of the U.S. talent pool and its largely untapped potential.
Relationship capital. The right relationships make or break a career. They provide access to the power and information needed to achieve career success.
According to Working Mother Media’s research, men are more likely than women to receive advice on how to advance (54 percent vs. 31 percent) or be invited to a roundtable with senior executives (63 percent vs. 39 percent).
Women’s networks tend to be focused on content and emotional support rather than power.
Hidden off-ramps. The financial services sector’s notoriously closed networks, as well as the gender bias that permeates many organizations, are costly for women.
High-potential women managers may not be chosen for—or may not know about—growth opportunities simply because of their gender. Seramount’s research found that men (46 percent) are more likely than women (14 percent) to be encouraged to take on more profit and loss (P&L) responsibility, as managing budgets and spending is an important stepping stone for growth.
Before they realize it, they’re shut out of important stretch assignments and growth opportunities because of the micro-opportunities they haven’t been privy to along the way.
Opportunity-undercutting bias. A large body of research reminds us that women are likely to be perceived negatively or even penalized if they negotiate their salaries or other compensation.
This robust finding appears unchanged even in the face of considerable investment in unconscious bias training.
Strategic leadership and cultural support is the critical step to address the financial services sector’s gender diversity gap. There are proven solutions that can lead to real and lasting change.
Secure commitment and modeling from leaders. Any culture shift needs to start with the support and participation of leadership. C-level management should be vocal about not just the company’s commitment to advancing women but also why it is critical to business success and future sustainability of the company.
Leaders then need to be visible in their participation in making sure the cultural shift happens.
This includes measuring the things that matter–the leading indicators of a diverse and inclusive culture–and holding other leaders accountable for their results. Diversity is a business problem and it needs to be treated as such.
Establish new work norms. Forward-thinking companies in the technology, pharmaceutical, and professional services industries have made impressive strides in improving the way work gets done in their industries.
They have asked the critical questions that have lead to new, more sustainable, demands around travel, 24/7 availability, unpredictability of assignments, team composition and allocation of work, and location of work.
They have provided employees with the ability to manage both work and personal needs, including taking time off when a child is added to the family or other caretaking needs emerge and, critically, how to manage stress and mental health in the workplace.
Build relationship capital opportunities. While nearly two-thirds (62 percent) of men have a strategic network of coaches, sponsors, and mentors, just 41 percent of women can say the same, according to Working Mother Research Institute’s findings.
Companies should teach leaders how to sponsor high potential talent across lines of difference and hold them accountable for developing talent across the spectrum of diversity. It should be considered a core competency of leadership to develop the talent pipeline.
Managers and individual contributors should know and understand how to effectively build relationships across difference–the proven strategies to interrupt bias and the subtle ways their behavior may inadvertently cut off their networks from people who are not part of the majority group.
Measure what matters. Conduct regular pay equity audits and ensure that employees are being paid fairly for equal work. Track not just the lagging indicators of diversity (e.g. representation at level and turnover) but also the leading indicators of inclusion (e.g. leader behavior, candidate access to stretch and development opportunities, perception of bias within the system).
Communicate to all employees where gains need to be made and why they should work toward this shared goal.
Ensure progress is being made for all women, not just white women. Most of the gains made by women in corporate America have been made by white women. The falloff between entry-level jobs and C-suite jobs is steep for white women but it is far more dramatic for women of color.
Without proactive efforts to ensure that women aren’t addressed as a monolithic group the financial services industry is at risk of repeating the same mistake.
By treating diversity and inclusion like the business problem it is, companies in the financial services industry can make impressive strides to ensure their competitiveness for the future of work.