Financial services employee engagement is one of the many reasons why firms in the sector are increasing their commitment to diversity, equity, and inclusion (DEI).
Another is compliance. DEI is an important part of the environmental, social, and governance (ESG) priorities that the Financial Conduct Authority (FCA) laid out in its Business Plan for 2022-2025.
But going down this route also helps create healthier company cultures. As a result, employees feel able to truly be themselves and speak up if there are any issues. This, in turn, helps protect consumer interests and ensure better market integrity.
A more diverse and inclusive culture likewise leads to the expression of a wider range of perspectives and thought. Such a situation fosters innovation, products and services better suited to the diverse needs of customers, and greater competitive advantage.
A more diverse and inclusive environment also results in better decision-making, risk management and governance. Interestingly, research led by Bayes Business School’s Francesca Arnaboldi revealed that firms with gender-diverse boards received significantly fewer fines for misconduct.
Plus, the importance Millennials and Gen Z candidates attach to inclusion makes it a crucial factor in recruitment and retention.
Bridging the gap between intention and reality
Unsurprisingly then, the FCA has been encouraging financial services organisations to put more focus on DEI for several years now. But despite some progress and many public commitments to change, it points out ‘there is still much to be done‘.
The findings of our 2023 DEI study back up this statement. They indicate that 70% of financial services staff believe employers are talking more about DEI than acting on it. What’s more, three out of 10 have felt alienated or unwelcome in the workplace because of who they are.
To address these challenges, the FCA highlights the need for organisations to move beyond focusing most of their efforts on gender. Although firms are starting to give ethnicity more attention, the same is not true in areas, such as disability, neurodiversity and socio-economic background.
But even within a gender and ethnicity context, employers still tend to concentrate their efforts on boosting representation at the senior leadership level. This is despite data from the Financial Services Culture Board (FSCB) showing that female and ethnic minority employee numbers drop most steeply when moving from junior to middle management roles.
A clear lesson here is the importance of investing in DEI strategies that are sufficiently broad-based to cover all employees. This involves taking a holistic approach towards nurturing internal talent pipelines. Other important considerations are developing and supporting diverse talent and undertaking thoughtful succession planning.
In other words, organisations need to live up to their public commitments and make consistent efforts to bridge the gap between intention and reality. Key to doing so is to create an inclusive company culture.
Boosting financial services employee engagement
Fostering an inclusive environment will boost financial services employee engagement, enabling all demographics to feel part of things and reduce the inequities women and ethnic minorities can face in the sector.
Such inclusivity is foundational to achieving meaningful, sustainable change. Only when one is in place can firms realise the benefits of creating a more diverse workforce.
For example, providing employee resource groups for networking may be useful. But if financial services HR professionals don’t address fundamental issues like creating psychological safety, such activities will inevitably be limited in scope and effectiveness.
But a big challenge here is that all too few companies systematically address inclusion in the same way as they approach diversity. This situation manifests itself in a failure to adopt a thorough enough approach towards measuring success.
The issue here is that most firms evaluate inclusion using staff surveys. Significantly fewer combine it with qualitative feedback from focus groups or exit interviews to provide them with vital insights into the lived experiences of employees.
But taking this kind of rounded view enables employers to craft strategies tailored to their own specific DEI problems. Following implementation, it also enables them to undertake a process of continual improvement.
The importance of data quality
Another key challenge in this context relates to data quality. Without good quality data, it is almost impossible to identify and design either appropriate interventions or a wider DEI strategy.
Organisations with accurate diversity and inclusion data, on the other hand, are in an advantageous position to pinpoint their own areas of strength and weakness. This helps inform sound decision-making and ensures leaders are held accountable for progress.
Collecting and appropriately using D&I data lifts the fog of uncertainty. Good data allows firms to identify where they are doing well, and areas where intervention might be needed. It also allows firms to measure, and hold themselves accountable for, progress they are making.”Sheldon Mills, Executive Director, Consumers and Competition, FCA
Zellis has created a dedicated system for this: the MyDiversity Data module in our MyView self-service HR and payroll platform. The module enables employees to securely share their personal information.
This information then feeds into the Zellis DEI Dashboard. Visualisations on this platform enable HR and business leaders to easily understand trends and patterns in the data. They can also identify target areas for action and measure progress. We tried and tested it in-house before rolling it out to customers across the UK and Ireland — find our key principles for data collection in this report.
Growing emphasis from the regulator
To show the seriousness of its intent, the FCA is introducing mor regulation to speed up the rate of change in the DEI space. For example, last year it mandated that all listed financial services firms report on progress towards gender and ethnic diversity targets.
These targets stipulate that at least 40% of the board should be female. At least one senior board position should be occupied by a woman and one by a member of an ethnic minority.
Later this year, the FCA also plans to publish draft rules on how firms will be required to address DEI. These rules are expected to have a strong focus on how organisations gather, interpret and use data to this end. This once again underlines the importance of collecting information to yield insights that drive action.