By Abi Chamberlain, director of consulting at Davies
In recent years, the financial services (FS) sector has increasingly focused on diversity, equity, and inclusion (DE&I), recognising that an inclusive environment can drive innovation, improve decision-making, and ultimately enhance performance.
Studies have shown time and again that when team members come from different backgrounds and experiences, they approach challenges in unique ways, avoiding the pitfalls of groupthink and contributing to a more dynamic and adaptable organisation.
Yet, despite the well-documented benefits, the financial services sector continues to struggle with meaningful progress in this area. For instance, in 2023, the gender pay gap in finance was nearly double the UK average, and some reports even suggest that diversity in the sector is going backwards.
This highlights a fundamental issue: while companies may understand the importance of diversity, the methods they are using to achieve it repeatedly come up short.
So why is this the case?
The flaws in current approaches
One major flaw in many DE&I strategies today is the heavy focus on raising awareness and recruitment while neglecting the internal dynamics that truly foster inclusivity. Simply hiring a diverse group of employees isn’t enough. If these individuals are expected to fit into existing cultural norms and performance standards, their unique perspectives and talents might get overlooked, leading to disengagement and missed opportunities.
Often, organisations invite diversity but fail to build an environment where all voices are genuinely heard and valued. By definition, exclusion is necessary for high performance because not everyone can be high performing. But too often those traditionally designated ‘high performers’ sound and think the same. This is because these standards may not capture the diverse ways in which people contribute and therefore need to be reviewed to ensure they don’t create a barrier to buying into DEI.
See also: Baroness Helena Morrissey: Why we need to re-examine the business case for diversity
As a result, workplaces might look diverse but remain stagnant, with innovation and growth stifled by a lack of true inclusivity. There’s a misconception that DEI drives a vanilla approach to performance where every voice matters, but actually the benefit is that different voices matter. The most talented individuals may not always be the loudest or most visible, but their skills should still be recognised. True inclusivity means valuing everyone and creating an environment that allows each person to thrive, ultimately benefiting the entire team.
Rethinking DE&I: Asking the right questions and using data to drive change
To extract the maximum benefit of diversity, businesses need a strategy that creates truly inclusive workplaces that allow employees to share their unique perspectives. Before even constructing a strategy, organisations should consider several critical questions, such as:
- Do we understand our desired markets?
- Do we represent the clients that we want?
- Do our solutions solve their problems?
- Are we thinking differently? Are we evolving in how we think?
- Are we spotting the real problems?
- How do we challenge our thinking? Who do we need on our team to do that?
By addressing these questions, organisations can better identify their weaknesses and determine how their strategy needs to shift to address the right areas. Even then, knowing the answers to these questions is only half the battle – implementing a solution that creates meaningful change is the real challenge.
The best solution to both problems is data – it can help organisations understand how different groups within their workforce experience the workplace, where barriers to inclusivity exist, and what changes are necessary to create an environment where everyone can thrive.
See also: The Diversity Project’s Whiteman and Aujla: Social mobility can transform and save lives
Data-driven insights allow for a greater understanding of the inner workings of their businesses, while also providing the foundation for targeted actions. This ensures that the strategy is not just a set of broad, one-size-fits-all initiatives, but a carefully considered approach that addresses the unique challenges faced by diverse employees.
Beyond data
However, data alone is not enough. For DE&I initiatives to be truly effective, they must be supported by a strategy embedded in the very fabric of the organisation, with everyone demonstrating a commitment to these values in everything they do.
This means going beyond merely endorsing DE&I initiatives; they must actively participate in creating an inclusive culture. This involves re-evaluating what ‘high performance’ looks like, ensuring that diverse voices are not only present but also influential in decision-making processes. It also requires a willingness to challenge legacy norms and make adjustments that allow every team member to contribute their best work.
Without this level of commitment from those who reward and recognise role model behaviour, DE&I efforts are likely to remain superficial and ineffective. Employee Resource Groups (ERGs) and people teams can play a crucial role, but they cannot drive change on their own. Inclusivity must be a core leadership priority, woven into the fabric of the organisation’s strategy and operations.
An inclusive future
The financial services industry’s efforts to embrace diversity may be well-intentioned, but it cannot afford to keep falling short due to a lack of accuracy in its approach. To truly reap the benefits of a diverse and inclusive workforce, organisations must move beyond awareness and recruitment, focusing instead on creating environments where all employees can thrive.
See also: Reboot: Lack of ethnic diversity red flag for 40% of institutional investors
Building the right workplace requires a comprehensive approach: asking the right questions and implementing a data-driven approach that identifies and addresses barriers to inclusivity, as well as a top-down commitment from leadership to drive meaningful change. Only by going all in and making a full commitment can financial services companies achieve the inclusive environments they aspire to create.
