What Is Diversity in the Workplace?
Diversity is about embracing differences in people — their racial backgrounds, perspectives, identities, gender, age and orientation. Workplace diversity initiatives aim to improve inclusion and build a culture where every individual and group feels valued, respected and safe.
According to research conducted by the House Committee on Financial Services, the industry — including banks — remains primarily white and male. The lack of diverse representation goes beyond bank employees and executives and extends to the board of directors, asset managers and suppliers.
Impacts of Diversity in Banking
Diversity matters because people with different attributes bring different strengths to the table. Diversity delivers a balance of viewpoints and introduces new ways of doing things. For example, different attitudes toward risk and collaboration allow employees to complement each other in the workplace, resulting in superior growth and income for the business.
Over the past decade, multiple studies have confirmed that inclusivity boosts productivity and profits. For example, a 2019 McKinsey & Co. study showed that top-quartile companies for racial and ethnic inclusion were 36% more profitable than those in the fourth quartile. A 2019 report from the Harvard Business Review also found diversity initiatives to be vital in attracting and retaining the best talent, building employee engagement, increasing innovation and improving business performance.
Given the correlation between diversity and performance, nurturing an inclusive workplace can be a crucial way for a bank to differentiate themselves from their peer institutions.
What Bankers Need to Know About Increasing Diversity
There are many opportunities for banks to encourage and increase diversity:
- Linking diversity to performance and pay. Rewarding inclusion efforts is a necessary step if banks want to turn a talking point into action. While few financial institutions tie diversity-related performance measures directly to compensation, many award year-end bonuses based on efforts to increase in diversity among their teams. Performance can be measured through hiring decisions, promotion rates of underrepresented groups, employee survey responses and feedback from focus groups.
- Looking for talent in different places. Banks should ensure that they are connecting with underrepresented groups as part of its recruitment drive. By collaborating with organizations that support and promote diverse talent — high schools, universities and non-profits — banks can reach out to those who may not have considered a career in banking.
- Creating opportunities beyond recruitment. Not all banks measure how much they spend and invest with diverse businesses. However, taking this step allows banks to be more intentional about choosing women or minority-owned suppliers, vendors and asset managers. Banks can also take a customer lens and increase lending to diverse firms.
- Disclosing data to demonstrate transparency. An important piece to the diversity effort is to establish accountability. By publishing diversity and inclusion data, banks hold themselves responsible for making progress on key initiatives.
- Uncovering unconscious bias with technology. Artificial intelligence can be used to detect learned assumptions, beliefs and attitudes that affect recruitment, promotion and compensation. It can also be used to evaluate how hidden biases are affecting business decisions around lending and sales.
The benefits of diversity are well known. Banks can start their journey to becoming a truly diverse organization by assessing the presence of underrepresented groups in their workforce, leadership and suppliers while also developing measures to track the success of inclusion initiatives.