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How to make diversity part of your financial firm's business strategy: Five ways to go beyond restating the problem

12 January, 2021

Julien Courbe
Financial Services Leader, PwC US

As an industry that allocates capital and makes decisions on obtaining credit, financial services firms are bound to have more opportunities to evaluate their work through the lens of diversity, equity and inclusion (DEI). By last count, financial services companies have committed over $40 billion to support racial equality and diversity initiatives, far more than any other industry.1 It’s an amount that continues to grow every day.

We’ve spoken with many executives about these commitments. Nobody can pretend to have all the answers given how complex the problem is and how intertwined it is with society. But people are listening, so we want to share some of what we’re hearing to allow others to extend the conversation.

Here’s what we’re learning.

1. Diversity is now firmly on the CEO’s agenda.

There are many reasons for this shift — but what matters now is how to make it stick. One approach: Engrain DEI as a part of the business strategy. As leaders build diversity and workforce inclusion within their business goals, they’re reshaping how DEI is prioritized and the natural day-to-day attention it receives.

Consider the approach of one multinational pharmaceutical company. Over the past several years, the company has worked to strengthen its diversity strategy from one that relied on DEI-focused employee resource groups (ERGs) to one that’s embedded in the business. Rather than confining an ERG to a side project, business leaders now apply to lead these groups full-time. They compete for budget allocations and develop multi-year business plans.

For example, a drug launch for a chronic disease that’s more common among Blacks or Latinx people might tap into an ERG for help. Revamping the marketing campaign or repositioning how the drug is introduced through the lens of the ERG might help change the perception of the drug and lead to wider access and adoption.

The results can mean measurable change across its workforce. The company reached gender parity in 2015 and has set other notable goals such as doubling the executive representation of both Black and Hispanic employees in the United States by 2022.

Many financial institutions are enhancing their way of doing business through affordable housing initiatives and investments in more minority-owned businesses. But considering there are still large racial and ethnic differences in the use of bank credit across all income levels,2 banks still have an opportunity to redefine their go-to-market programs to help bring financial services to broader populations, and often to those that need help the most.

2. Culture is the core.

When organizations build culture and purpose into what they do, they are more effective. Aligning diversity and culture can help redefine the issue and allow organizations to reshape their approaches through communal day-to-day change. Simply adhering to policies or industry-led initiatives can create a false sense of accomplishment.

How can you better measure where your company stands? Look at the representation around you. Are your Board and executive team racially and ethnically diverse? Your workforce can get a good understanding of the company’s culture from representation. Change involves establishing the internal support mechanisms such as mentoring employees or listening to the unique needs diverse talent may have in order to confirm they’re empowered to succeed.

Another approach: Make diversity a part of your business criteria. Investment managers could insist that banks disclose staff diversity data to participate in underwriting opportunities. Municipalities and sovereigns might request information on the success of DEI programs at institutions as a prerequisite to advise on a transaction.

When DEI begins to affect the bottom line, it will not only help reshape the culture but also how business leaders go about making day-to-day decisions.

3. Organic change is needed for lasting change.

In the summer of 2020, PwC released our first Diversity and Inclusion Transparency Report, telling an important piece of our diversity story, and it’s paired with our strategy and the work we are doing to make sure all of our people have a strong sense of belonging and trust. The point isn’t to pat ourselves on the back or issue a mea culpa. The point is that transparency and disclosure are effective ways to track progress and create internal and external accountability.

There are mixed messages on the path forward in terms of disclosures. There’s pushback on legislation that would require banks to publish diversity data, and a proposed quota-based system requiring certain representation has generated controversy.

Financial firms that voluntarily disclose this data could provide good-faith demonstrations of their willingness to tackle these issues. Some may be reluctant to do so because the figures may not show much progress. This is all the more reason to confront the issue directly, define the baseline and acknowledge that there is more work to be done.

Deep change doesn’t happen unless there is a way to track progress and create accountability, both inside and outside of the company. If no one watches, nothing changes.

4. Recruiting alone won’t solve the problem.

The financial services industry measures returns every single day. And while overhauling your recruiting approach can help, returns will be likely shortchanged without rigorous follow-through.

One of the biggest challenges we consistently hear about is overcoming the daily biases that can limit advancement. As organizations welcome employees of different backgrounds, how do we cultivate a culture of belonging and acceptance? Do newcomers receive mentors who understand the challenges? Are they given an opportunity to establish relationships with decision makers to contribute and be seen?

Ways to tackle these challenges include:

  • Candid feedback: racially/ethnically diverse talent deserves access to quality feedback in spite of cultural norms or gender stereotypes
  • Advocacy: they need allies who will pave the way for racially/ethnically diverse talent to succeed
  • Opportunity: they need access to compelling work that allows them to demonstrate promotion readiness. (In financial services, this translates to fair allocation of leads for financial advisors, a path to portfolio management or coverage of tier-1 accounts. It comes down to a deployment and operating model discussion.)

5. Unconscious bias always lurks.

We’re also hearing about socioeconomic blind spots that could be emerging in work-from-home situations. While on video calls, judgments may be made, consciously or not, about an employee’s surroundings or other aspects captured on camera. Organizations should have mechanisms in place to confirm that opportunities, advancements and promotions are free from bias — and, while difficult, these mechanisms should be tuned for a virtual world. Remember, representation is critical but it’s often the output of these types of day-to-day decisions.

Time to lead

More than perhaps in any other industry, the financial services sector has a singular chance now to step up and lead change. By 2045, it is projected that there will be no racial or ethnic majority in the United States.3 Firms will need employees from leadership ranks to entry level who understand the needs of diverse customers and who bring broad life experiences to their work. Those who seize this opportunity will earn customers’ business, employees’ loyalty and their peers’ admiration.

1 Company reports

2 Federal Deposit Insurance Corporation (FDIC), How America Banks: Household Use of Banking and Financial Services, 2019 FDIC Survey, October 2020

3 US Census Bureau’s National Population Projections, March 2019; data revised September 2028, October 2019