The financial benefits of diverse workforces are no longer speculative — they’re proven. Today, mountains of evidence, including McKinsey & Company’s 2020 “Racial Equity in Financial Services” report, have established a direct correlation between profitability and the diversity of senior teams.
The McKinsey report, for example, found that “For every 10 percent more racially or ethnically diverse a company’s senior team is, earnings before interest and taxes are nearly 1 percent higher.”
In a 2019 analysis, McKinsey also found that companies in the top quartile for gender diversity on executive teams were 25 percent more likely to have above-average profitability than those in the fourth quartile. Companies in the top quartile for ethnic and cultural diversity also outperformed those in the fourth quartile — in this case, by 36 percent.
“These reports reaffirm the strong business case for gender, ethnic, and cultural diversity in corporate leadership,” Paul Newman, Co-Founder of the Association for Diversity in Financial Talent, said while moderating a recent Nicsa webinar. “The most diverse financial services companies are now more likely than ever to outperform non-diverse peers on profitability.”
The webinar, which also featured experts from Wilbanks Partners and DEI hiring solution provider Mathison, highlighted other benefits of hiring diverse talent, including enhanced innovation, better decision making, improved employee engagement, and reduced employee turnover.
“We’re all in agreement around the why — this conversation is for us to get into the how,” said social entrepreneur and LGBTQ+ leader Arthur Woods, co-founder of Mathison.
The panelists outlined several steps that leaders can put into effect to foster diversity, equity, and inclusion in the workforce:
Two years after the murder of George Floyd, many organizations now view DEI as a strategic imperative rather than an elective procedure. Still, Woods said many struggle to make real progress.
“At Mathison, we’ve had the chance to study the hiring practices of hundreds of employers,” Woods said. “We’ve found that the vast majority of organizations today have done very little to even consider what they mean by diversity.”
This lack of clarity prevents diverse hiring initiatives from gaining momentum.
“There are many underrepresented job seeker communities, ranging from the neurodivergent community to people with disabilities all the way to refugees and immigrants,” Woods said.
He added that it’s essential to acknowledge the intersectionality of these groups, as interconnected social categorizations and identities often create unique experiences with discrimination and oppression.
“If there’s one fundamental point we can start with, it’s having intentional conversations with our teams about what we mean by diversity and thinking of the historically marginalized cross-sections of communities that we may be able to recruit from.”
Clearly defining what diverse hiring means to an organization is just the beginning.
“In addition to identifying those individuals, it’s also important for leaders within financial services to do a better job of communicating what cohort of diverse individuals they would like to see in their organizations — and how these decisions are aligned with business goals and outcomes,” Newman said.
“This is an exciting moment when organizations can start to reconsider not only how they’re setting goals, but involving the rest of their organizations in their effort, making it communal and not led by the talent team alone,” Woods said.
Mathison’s analysis revealed several decision points during the lifecycle of a candidate’s hiring process that create systemic barriers for those from underrepresented communities. Improving accessibility, reducing bias, and creating more inclusive job-seeking experiences can help reduce these barriers.
“At every stage of the process, the more we slow down, follow structure, and train our teams beyond unconscious bias and around specific decision points, the more that we create a level playing field for all communities that can apply for a job,” Woods said.
Beverly Love, Head of Search Operations at Wilbanks Partners, stressed the importance of diversity at the decision-making level.
“Members of a diverse cohort should be present as key-decision makers at every level throughout the organization, including the hiring process, promotion process, and compensation discussions,” she said. “Networking with and supporting organizations like Girls who Invest also goes a long way in building more diverse pipelines and providing the social capital underrepresented groups need to succeed.
To achieve cultural change over time, firms must set targets, measure progress, and acknowledge wins.
“If you look at entry-level roles, diversity is often high, especially among women,” Newman said. “However, as you continue to progress across the hierarchical ladder, you begin to see people dropping off. If you’re not inquisitive enough as to why, if you’re not doing the research and studying the data, you potentially will lose strong, qualified candidates to your competitors.”
While It’s easiest to default to the path of least resistance, Love said leaders must overcome the all-too-common hurdles of time, energy, and investments, adding that managers should be held accountable for pursuing diversity targets and rewarded for their success.
“Measure your progress; pay your managers to take their time and make the systemic changes that will give you the inclusive culture you want,” she said.
While the business outcomes that come from diverse and inclusive workforces are undeniable, Woods said cultural change won’t happen overnight.
“We’re talking about changing hearts, minds, and systems all at the same time,” he said. “We’re talking about changing the fundamental way we’re hiring, the mindset with which we’re making decisions, and the behavior of our teams. A lot of leaders are disappointed in how long this work has taken, and that’s why it’s so important that we’re having these amazing conversations, and that everyone’s engaged in this work as it continues to evolve.”
May contain forward-looking statements subject to various uncertainties. Personal views and observations of individuals contained herein are as of the date of the live event or written material and do not necessarily reflect the views of Nicsa or its member organizations. Nothing herein is intended to be or should be construed as legal advice. Contact your own counsel in order to obtain legal advice regarding these or any other matters. The information contained herein is for informational purposes only and does not constitute a recommendation of best practices.