The Financial Conduct Authority’s (FCA) latest review on diversity and inclusion (D&I) at financial firms provides some interesting, and at times, disparaging observations.
The review critically stated: “Very few firms seemed to have understood diversity and inclusion as a fundamental culture issue. Generally, we found much less understanding of and focus on building inclusive cultures than on actions to measure diversity and address specific issues.”
This is quite a damning critique. The financial regulator noted that City firms’ diversity and inclusion strategies are not consistently based on a clear diagnosis of their specific circumstances and challenges.
This, warned the FCA, means actions and initiatives may not be appropriately focused.
“Firms are also not systematically tracking the effectiveness of these measures and initiatives,” the review noted. “This leads to a lack of understanding about what really works. Without a strategy informed by a diagnostic process and better tracking of initiatives, some firms risk expending considerable resource without seeing meaningful results.”
Interestingly, the FCA said this fed through to where diversity typically becomes a problem within an organisation.
“It was notable that the step from junior to mid-level roles is where representation falls away most steeply, both for women and ethnic minorities,” the review said.
In addition, there is wide variation in data quality. Firms with better diversity data had a better understanding of their position and were better placed to decide which actions to take.
“This variation was largely the result of differing levels of success with staff declaration rates,” stated the review. “Firms with the best declaration rates have worked hard to achieve this, with focused initiatives to build trust and understanding, and optimising touch points with staff.”
The FCA warned that poor data quality also affected firms’ abilities to carry out ‘intersectional analysis’ to understand the experiences of different groups, meaning companies were not able to design or implement targeted interventions to address these issues.
On D&I objectives, the FCA said that companies are most focused on addressing gender representation, with ethnicity starting to receive more attention. Other demographic characteristics, though, receive much less attention.
Few firms have taken steps to address social mobility, warned the review. “Where they have, this has focused on the entry points, with less attention to the cultural experience of employees from less socially privileged backgrounds. This may also be a contributing factor to the lack of progress for some ethnic minorities.”
For global corporations there is much to ponder. As firms that are part of international groups generally adopted a group-wide international strategy to D&I, without tailoring it to the circumstances of the UK organisation or the characteristics of the UK.
“These firms typically had less ambitious and well-defined strategies and were often reliant on global, rather than UK-specific, data,” said the review.
The review concluded that there is much work to be done, returning to the central point of company culture. “In our view, firms are likely to struggle to make sustainable, meaningful change without greater attention to culture, including a long-term plan to deliver change, backed by senior level commitment.”
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