New Financial have created this report on diversity and culture. The report analyses the differences and similarities in how companies approach diversity and culture and why it matters.
Highlights of the report:
- Moving up the agenda: in recent years, both diversity and culture have moved up the financial services industry’s agenda in the face of pressure from government, regulators, investors, customers and employees. While the two issues are interconnected, they are often treated separately within organisations.
- Accountability and ownership: ownership of culture and diversity reveals how different organisations are tackling them. Culture tends to sit with the board and the chief executive’s office, while diversity tends to be owned by the HR department, which often doesn’t have a seat at the top table.
- Mutually reinforcing: the financial services industry is in the early stages of drawing the links between diversity and culture, but a growing number of firms are moving towards folding their approach to diversity and culture – and responsibility for them – into one.
- Disclosure indicates intent: there are stark differences in what organisations are required to and choose to disclose about diversity and culture. Disclosure on diversity is more comprehensive, but the quality of narrative disclosure about what organisations are doing to address both is patchy. We found very little public disclosure of how the two issues are linked.
- The measurement challenge: the way in which firms measure and evaluate diversity and culture are very different. Diversity reporting is more clearly defined and quantified, but shortfalls in self-reporting impedes accurate measurement. Most firms see culture as something that is unique to them and more intangible, leading to a wide range in the quality and consistency of measurement across the industry.
- Dispersal of power: more organisations are devolving the implementation of diversity and culture initiatives to the business units from the centre. While this gives teams more ownership of the issue and can accelerate progress, it can also lead to inconsistencies in the approach and prioritisation within an organisation.
- Making it happen: diversity initiatives tend to be implemented by HR with input from representatives from across the business on diversity councils, while culture initiatives tend to be focused on conduct and sit within the risk and compliance functions.
- Stuck in the middle: while the tone from the top in both diversity and culture may be clear, it can often get stuck in middle management. Without clear incentives, structures and training, middle managers will default to focusing on their day jobs and on the metrics that define their pay and career prospects.
- Aligning incentives: for all of the noise about diversity and culture, there has been limited progress in aligning change with incentives. While the Women in Finance Charter has made some progress in linking diversity targets to pay, this only represents a small part of potential reward. And culture is usually only linked to pay in the form of reduced bonuses for poor conduct.
- Joining up the dots: efforts have been fragmented and uneven, but the most advanced companies are starting to knit together their diversity actions as part of a more holistic approach to encouraging a broader cultural shift. Diversity and culture do overlap – each can help the other embed desired behaviours and outcomes. It is now time for firms to join the dots and accelerate change.