An ongoing initiative aims to help investment firms shift their focus from compliance to intentionality
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Over the past few years, firms across the world have become more concerned with fostering diversity in their workforces. The impetus behind this movement usually boils down to external pressure, which can come from multiple directions — regulatory forces, shareholder activism, a strong societal push for corporate responsibility, and so on.
The investment industry is no exception. “As we had meetings with leaders of the investment industry, the topic of ‘diversity and inclusion’ came up over and over,” said Rebecca Fender, head of the Future of Finance initiative at the CFA Institute.
“CEOs have consistently told us that it’s important to them, and it’s also important to their board and clients,” Fender said. “And with 170,000 members and 300,000 people a year taking the exam for CFA membership, we definitely need to understand the diversity within that group better.”
Focusing on diversity is particularly important for the financial industry, where companies stand to fend off technological disruption with a people-powered edge. Building a diverse team can provide a range of benefits including reduced likelihood of systemic bias in decision-making, the ability to cater to a wider spectrum of clients, and a stronger pipeline of talent for recruitment and succession planning.
With that in mind, firms have started taking stock by establishing different KPIs focused on diversity, which encompasses groupings such as gender — encompassing both female and LGBT representation — age group, and ethnicity.
But ultimately, measuring the problem is one thing, and working to fix it is another. “We had a lot of executives saying that they have new personal metrics, but they weren’t sure how to achieve their targets,” Fender said. “I’ve even had a chief diversity officer tell me that they don’t really have the tools to make quick change.”
With that in mind, the institute held a series of roundtables with more than 300 participants from October 2017 to May 2018. Through the workshops, attendees were able to discuss what they were doing and what solutions have been working for them, as well as what comes next. The discussions yielded a list of 20 concepts and recommended actions for firms to implement.
Some may be tempted to consider the guidelines as a definitive, one-size-fits-all checklist. But as Fender pointed out, the effort to improve diversity contains a seed of meta-ness, as the firms that are interested in cultivating a more diverse workforce are themselves quite varied.
“We quickly determined that the best practices are more like a moving target,” she said. “Clearly, a firm with 25 people is not going to do some things the same way as another with 10,000. So oversimplifying things by saying there’s only one way to improve diversity is clearly antithetical to the idea itself.”
Similarly, firms should resist the idea of fixating on numbers to drive their efforts. For instance, while some firms can focus freely on increasing the male-female ratio within their workforce, others hesitate to recruit women at the entry level as it could result in an apparently wider gender pay gap — something that practices in the U.K. are required to pay attention to.
“That’s why we shy away from being overly prescriptive and rigorous,” Fender stressed. “It’s good to have specific numbers and metrics, but looking at them myopically can lead to things like token appointments, which isn’t what we want. We encourage firms to reflect on why they’re doing this, and what their thinking is behind it.”
