The response to COVID-19 has enabled financial services firms to reimagine what the immediate and long-term leadership of the sector can look like. New working models have opened up access to talent, and could enable alternative routes to senior management.
By acting on this potential for positive, lasting change, financial services businesses can ensure female colleagues reap the benefits of this altered working landscape. And by building more diverse teams, they will increase resilience within their organisations, and their ability to thrive.
Notwithstanding the current circumstances, diversity and inclusion (D&I) is a key area of focus for financial services. There is growing regulatory pressure for firms to respond to greater stakeholder demand for leadership that reflects the market and their clients. According to our 2021 International Business Report (IBR), which surveys the global mid-market, 72% of businesses in financial services believe stakeholder pressure to improve gender balance is only going to increase.
Many financial services firms are already acting on these external and internal influences. Our IBR data reveals that financial services and banking businesses are a short step ahead of the curve when it comes to diversity, compared to the cross-sector aggregate. The percentages of women in senior leadership in both financial services and banking are higher than the global average: 33% and 37% respectively, compared to 31%. For financial services, this is a three percent rise since 2020.
But despite this improvement, there is still a long way to go in achieving gender parity at the top for women in financial services. Research from Catalyst showing that in 2019, women’s global representation on executive committees in major financial services firms stood at just 20%.
Responses to the current circumstances have had a striking impact on the way a business' people operate, which may potentially accelerate the rise of female leaders. Three-quarters (75%) of IBR respondents in financial services believe new working practices caused by coronavirus have empowered women in business to assume stronger leadership roles, while 82% believe these will benefit women’s careers in the long term.
The lockdown restrictions have demonstrated that you can work effectively in an agile manner from home. This virtual and flexible way of working has created more ‘trust’ between employer and employee – people are measured on effective quality output and delivery rather than hours in the office.
Enabling people to be more productive through hybrid working – splitting time between home and office – will drive a better work-life balance, increase staff performance, and attract a broader talent base. Agile, flexible working creates a more inclusive culture, allowing firms access to a more diverse talent pool, which in turn will lead to strong business outcomes.
Effectively utilising this window of opportunity will depend on financial services leaders taking deliberate action to propel what continues to be a traditionally office-based, hierarchical sector into a more inclusive future. There is a risk that financial services will return to a focus on presenteeism over productivity. Recent announcements by Goldman Sachs and Morgan Stanley, in the UK and US respectively, suggest that they may eschew a hybrid working environment, expecting staff to return to the office full time.
Failure to fully appreciate the correlation between inclusivity and performance was also apparent among financial services firms when working from home was most widespread. Our research reveals that financial services firms were slow to act on engagement in 2020, and are less effective at creating an inclusive company culture than other industries. Only 32% of financial services respondents instituted new working practices to better engage all employees, compared to 37% across all sectors. Similarly, at 36%, financial services businesses were nine percent behind the global score in promoting work-life balance and flexibility.
The seeming contradiction between the relatively encouraging numbers of women in senior management and the belief that flexible working benefits women’s careers within the sector, and its sluggish progress on inclusion, may reflect that quantitative diversity policies and quotas around gender balance are being undermined by an established organisational culture that has yet to evolve.
To change this state of affairs, cultural tone must be set by those at the top, and cascaded throughout the business.
"The issue of gender diversity and female leadership is not just a women’s problem, it is a business issue, and until such time as senior males are on board with representation and diversity at all levels, we’re not going to get there", says Madeleine Mattera, national head of financial services, Grant Thornton Australia.
So should quotas and D&I metrics be abandoned in favour of organisational transformation?
"It should be the right person for the job in every circumstance, and it’s a falsehood to force that", says Andree Bourgon, managing director for insurance strategy & transactions for Grant Thornton US. In the financial services industry, leaders tend to hire the people they recognise and trust, rather than those who are different from them, she suggests. Tracking hiring practices rather than staff demographics might encourage leaders to use a more diverse lens.
"One data point we don’t get a view of is how many people of which genders are long listed for a role, how many are short listed, how many get interviewed, and who gets hired", agrees Madeleine. The intention to increase gender parity in senior leadership is insufficient: there needs to be a strategy. "You say you want to recruit women, so you show me what you’re going to do".
One such strategy being pursued by financial services firms is mentoring, an action which consistently features in Grant Thornton Global's Women in Business research on the female talent pipeline problem. In this area, the financial services sector appears to be ahead of the curve. IBR data shows that 45% of financial services firms, and 41% of banking organisations, provide mentoring and coaching to promote gender balance. This stacks up against a global average of just 32%.
Coaching and mentoring play very specific and different roles, says Andree. "Coaching is synonymous with leading a sports team. We’re there to help them understand the field, and pick up a specific set of business skills". Mentoring, by contrast, is more about life skills, she opines, and mentors need to be carefully selected. "Forcing mentorship will not yield success. We need to be creative about how we match people up so that we can help them develop career life skills".
Coaching and mentoring should be available throughout women’s careers to stem the pipeline problem, beginning from day one. "If we don’t start coaching them as they come out of college, and allowing natural mentoring to take place, then we don’t fix this problem", concludes Andree.
To enable effective mentoring, a sense of psychological safety must prevail, giving people the belief to speak out, step up and self-lead. But Grant Thornton Global’s research shows financial services workers feel less empowered to contribute than those in other sectors. In 2020, only 35% of financial services firms focused on creating an environment where all colleagues can speak up with ideas, issues and questions, compared to a global average of 43%.
This needs to change, because inclusive leadership is about creating an environment where everyone is heard, believes Amanda Ward, financial services advisory partner at Grant Thornton Ireland. "We need to facilitate constructive arguments and give actionable feedback, reward authenticity over conformity, and allow people to express opinions without feeling disadvantaged", she says.
Emily Lai , business risk advisory partner at Grant Thornton Singapore, points out that local differences can significantly impact employees’ sense of psychological safety. In particular, she says, it is not yet embedded in Asian businesses. "Psychological safety is not a naturally occurring concept in Asian culture. People tend to be less inclined to speak up or go against the bosses".
However, reports Emily, progress is occurring. "The dynamic is slowly changing. With the adoption of a more diverse, open culture, there’s promotion of communication and direct access to senior managers". Leaders need soft skills to respond to employees’ needs, she suggests, especially among the emerging diverse, multi-generational workforce. "Millennials have a different mindset. We need to connect with them on a personal and emotional level".
Madeleine concurs that local culture has a huge impact. "We are a product of the society in which we live. In Australia, the paradigm is that women stay at home or work part-time, but men are the breadwinners. To create change, we need to create a work environment that can transcend what goes on in suburbia".
It looks like the UK had experienced a tremendous culture shift in acceptance of gender diversity, but there remains a long way to go. Amanda points out that, across all geographies, business structures are still arranged to suit a model worker – most often male, middle-class, able-bodied, from the ethnic majority, and free from caring duties. She concludes, "only by breaking through these long-standing stereotypical norms can the situation change".
After a wave of regulatory and stakeholder pressure, financial services firms now stand before an open window of opportunity to increase gender parity in senior leadership. To do so will help everyone to reap the business benefits of engaging more agile, flexible, diverse, purpose-driven teams, but it will require conscious action to create a change of culture from the top down.
For more insight into how to create an inclusive culture for your people and deliver a gender parity strategy that breaks down barriers to female leadership, download the 2021 Grant Thornton Global Women in Business report and explore our Diversity and Inclusion hub.