How to Achieve Gender Diversity in Financial Services

The UK has a “Peter Problem.” There are more CEOs called Peter in the FTSE 100 than there are women CEOs. In the FTSE 350, only 4% of investment managers are women and although female board representation is improving, there is still a lack of women in key profit and loss roles on executive committees. We work in Financial Services where the transition has been better. A year ago, UK Finance announced 37% female board representation across its 250+ company membership. However, when identifying candidates for senior roles, including those on Executive Committees, we still face challenges in finding suitable women candidates, even though some clients proactively request them.

infographic showing data and solutions to UK corporate gender diversity

In this blog, we look at further discrepancies in female representation and propose some of the ways we believe this could be improved by consultancies and client organisations working together to achieve an optimum balance.

Is Gender Diversity Worth It?

Some people see diversity as window dressing that does nothing to help a business. They are misinformed. As we said when launching our Step-Up initiative, taking a diverse approach to recruitment gives search consultancies the best range of talent to select from. Jacky Crisp also explained how the cultural fit that corporate recruitment strives for can still be achieved through diverse recruitment policies. Not only that, but the acquired diversity that is built up by recruiting people with different life experiences tends to improve decision making and makes departments and businesses more successful. On average, FTSE 350 companies with executive committees that are at least 33% female have net profit margins of 15.2%, compared to 1.5% for those that have no women. This type of comparison produces similar results every year and, although the numbers don’t explain cause and effect, the consistent correlation suggests that having more female decision-makers reflects a healthy business, especially when around 50% of your customers are women.

The Impact of COVID-19

No 2020 commentary can be complete without reference to the pandemic. It has been a reported feature of lockdown that women have been disproportionately affected, partly due to the sectors where they outnumber men being badly disrupted and partly due to childcare requirements. A less obvious reason is down to male-dominated management structures; in a working environment where limited staff numbers can attend physical locations, the tendency is for managers to call in people who they feel most comfortable working with one on one, and men are generally more comfortable with other men. This issue has been notable in STEM sectors [Science Technology Engineering and Maths] where female representation lags behind that in Financial Services. At the mid to senior management level that we work at we believe the impact has been less pronounced but are aware that any effect has been in the same direction.

Achieving Gender Balance

Different types of diversity are impacted at different stages in different sectors. We discussed how people from BAME communities can be filtered out of the Financial Services talent pool while still at school. Similar issues affect white working-class people living in the same areas. Girls are channelled away from STEM careers at school age across socioeconomic groups due to various misconceptions and stereotypes. For Financial Services, the barriers arrive later. Banks typically employ as many women as men but this ratio does not persist into senior management. Many leave or step back in their mid-30s and face barriers if they try to return. As the imbalance grows, the effects of unconscious bias are exacerbated and women are left without sufficient role models to look up to.

Initiatives like the Women in Finance Charter from UK Finance that is pushing for 40 per cent female representation within senior management in the three years leading up to 2020 have seen success. Diversity consultancies like The Pipeline, who provided several of the statistics we have used, provide guidance and also scrutinise headline inclusivity figures to identify less positive trends. For example, women are well represented in administrative roles, HR, marketing and origination but are underrepresented in the profit and loss roles that sit on the pathway to senior leadership.

When our clients proactively adopt gender diversity initiatives, executive search consultancies like ours are ready and motivated to help redress the balance. Not every initiative works, Professor Iris Bohnet of Harvard Kennedy University explains that, for example, “Diversity training doesn’t change attitudes, let alone behaviour.” Below, we share some of the ideas used in Financial Services that have enabled successful diversity programmes. Some of these ideas would be equally applicable if refocused on other diversity issues.

  • Empower new hires to aim for leadership. Be mindful of the “Ban Bossy” campaign promoted by Sheryl Sandberg, COO of Facebook. It challenges the unfair idea that male executives lead whereas female leaders just boss people around.
  • Ensure senior management champions gender equality and does something tangible to back it up.
  • Ensure that there are female role models, not just on the board but at each level of the organisation.
  • To achieve this, make sure talented women are factored into succession planning. Like-for-like changes perpetuate the status quo.
  • Identify talent, especially those suited for P&L responsibility and provide individuals with sponsors (which works more effectively than excessive mentoring).
  • Manage career progression from mid-level roles where the drop-off tends to be.
  • Provide adequate maternity leave, paternity leave, childcare and routes back to employment. Conversely, the remote working revolution triggered by COVID-19 may facilitate this.
  • Share diversity data on a departmental basis. It’s easy to mask problem areas like senior management or financial management by reporting at the organisational level.
  • Facilitate the rotation of roles to improve understanding and achieve best fit for existing resources.
  • Try to remove gender pay discrepancies in order that they don’t present barriers to progression.

Job Ads and the Recruitment Process

Recruitment consultancies can help financial services companies to meet their diversity targets when the client’s policy is designed to help achieve this. Our consultancy has helped clients to work on how they present vacancies to achieve these goals as part of their wider diversity strategies.

Men typically respond to job ads when they have 60% of the required criteria, whereas women look for 100%. The reason is not that they feel unable to do the job but that fear they won’t be selected. When drafting job descriptions, avoid starting with the existing role description, think about what’s essential for this specific position. Be clear that the “nice to haves” can be learned in the role. Also avoid describing an incumbent, who may have qualifications and skills that, while valuable, aren’t required for the role. Gender-neutral language should also be used, this may seem a more superficial point but talk of “man management” and “man-hours” etc can still present a tangible, psychological barrier.

chart of why women only apply when they have 100% of criteria

Consider adding a line seeking the ability to communicate effectively with diverse stakeholders or client segments. In this way, women (and other groups who face bias) feel they are specifically advantaged in the process. Academic qualifications are an area for caution. Vocational diplomas can be critical whereas automatically requesting a university degree, that could be unrelated to the role, may be acting more like a barrier than a quality filter. Avoid jargon and abbreviations that may alienate people. Once candidates have been identified to take through the recruitment process, it is important to protect against unconscious bias as far as possible. Make sure there is a diverse recruitment team, remove names when passing candidate CVs to line managers and, as far as possible, use identical, competency-based interview questions for all candidates. There are arguments against the corporate adoption of blind recruitment (that has its origins in the trialling of classical musicians behinds screens in Boston) but some large firms like Ernst and Young have adopted it to an elevated level. Practicality will dictate processes to some extent but the aim to remove bias from the process is to be supported.

Summary

In Financial Services, gender discrimination has been managed far better than in some sectors but there is still a distance to go. We enjoy the challenge of helping companies to overcome the imbalance but can only make a difference when the policy framework permits us some flexibility. As COVID impacts more heavily on women’s careers we hope to help our clients continue to make the progress that has made Financial Services a good example of what can be achieved.

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