Diversity has long been a hot topic for leaders in HR. Beyond being an important goal that’s often worth pursuing for its own sake, diversity has long been touted by HR frontrunners as a harbinger of good business. Now, more and more data support that claim. In addition to the fact that diversity positively impacts a company’s creativity, innovation, and even reputation, research indicates that companies with diverse executive boards have 15% higher EBIT margins on average. To put it simply, diversity matters, and for financial services companies, the growing diversity of their client base demands an increasingly diverse and inclusive workforce.
In the finance industry, perhaps no discussion around diversity and inclusion has received more attention than the equitable representation of women. Research by McKinsey & Company has found that companies that rank in the top 25% for gender diversity are 21% more likely to be more profitable. However, the overall representation of women in finance hasn’t budged in over a decade. Studies show that women enter the industry with the same levels of representation and ambition as men. But around mid-career, a major gap opens between men and women, leading fewer than 1 in 5 executive roles to be filled by women. How does an industry go from nearly equal numbers of men and women at the bottom to almost no women at the top?
How low inclusion affects gender parity in finance
There are many potential causes. However, according to a report on women in finance by the management consulting firm Oliver Wyman, 2 of the 3 top factors causing this leak in the leadership pipeline stem directly from issues around inclusion and culture. Women in finance are faced with persistent sources of low inclusion. In addition to sexual harassment, which has affected more than 60% of women in the industry, women in finance deal with unconscious biases and exclusionary behaviors (bigotry, sexism, threats) that often go unnoticed by HR leaders and managers. Whether or not these behaviors amount to legal or policy violations, all of them prolong the problem of female turnover in finance and make it harder for women to rise.
So how can HR leaders in finance help restore parity and equity? With a bigger seat at the table, HR leaders have a newfound responsibility to partner with CEOs and establish a new standard of professional conduct in the industry. Showing that women can thrive in finance is a critical first step to achieving parity, and companies can get there by screening for the behaviors and biases that keep women from ascending the ranks. By leveraging new technologies to identify toxic behaviors, HR has an opportunity to deal with unnecessary risks before they can create turnover in your organization.
Profit will always be a motivator, and reducing toxic behavior will help increase profitability both immediately and in the long term. But beyond being good for business, helping women succeed is the right thing to do, and the change that many industry leaders have been advocating for a long time.