A similar trend of imbalance appears on Google News, with “Diversity in Tech” resulting in nearly 63% more articles than “Diversity in Finance.”
While these numbers don’t tell the full story, what they make clear is that many more people and publications are at least interested in discussing the diversity issues that still pervade the tech space. Unfortunately, that same level of interest and inspection has not been found as strongly in the finance industry, even after the latest Black Lives Matter movement.
This is not to say the tech industry has come close to solving its diversity problems. But there are a few things the finance industry can learn from tech, both as it relates to its progress and its shortcomings, to at least begin a more widespread conversation about how to improve, and begin tactically addressing the systemic lack of gender and racial representation.
Remove Education-Based Barriers to Entry
The tech industry is widely known to accept, and often incentivize, dropping out of college to pursue a startup idea. The collective realization that a degree doesn’t translate into skill has allowed talented people to get a head start on innovating and contributing to the space. Collegiate accolades or university ranking have been replaced by competence and drive.
Even beyond tech, there is no substantial evidence that there is a correlation between job performance and education. Education provides only 1% predictive ability and yet financial firms continue to use it as their primary source of filtering and selecting candidates.
Because most companies in finance are still making hiring decisions based on where a candidate attended college, and only 6% of freshmen at elite universities are Black, many people confuse this as the “pipeline problem” — the often employed justification that there simply are not enough Black Americans to adequately stack the hiring slate.
Some firms are experimenting with making systemic changes to remove these barriers. Ernst & Young in the UK conducted an internal study finding that there is little evidence that academic success is correlated with how well new hires perform on the job. Since that discovery, they have removed the requirement for candidates to have college degrees at all and instead rely on the results of a series of skill-specific pre-employment tests. This move has opened up their recruiting process to talented individuals, regardless of their background.
While that may be a bridge too far for some firms, another solution to the “pipeline problem” is to simply consider a wider range of schools to be exposed to a more diverse set of candidates.
Release Data on Diversity
In 2014, tech companies acknowledged their diversity issues and publicly promised to strive towards increasing representation among their employees. Since then, many of the tech giants have released annual reports on their progress.
On the other hand, the majority of financial institutions have denied requests for the release of their employee demographic data. It is difficult to begin addressing problems that have incomplete data, as it is impossible to track progress or hold anyone accountable to the numbers. If large banks and institutions begin openly providing this information and insights into their diversity strategies, small to mid-sized firms will have applicable examples after which to model.
Being transparent about where you stand on diversity will only help you attract young, high-potential talent. Millennials and Gen Z alike care deeply about D&I and want to see data-driven, direct conversations happening about how to address it.
Establish Consequences or Incentives
Unfortunately, the public availability of tech companies’ diversity data has not resulted in exceptionally significant improvements. In the last 5 years, Facebook went from having 3% to 3.8% Black employees, and Twitter moved from 2% to 6%.
This may be because there are no widespread consequences or incentives to materially improve. According to Payscale, “bonus programs, when they’re well-designed and implemented, can be an effective accelerant for change. When a company ties business goals to financial benefits, it sends a strong signal the firm takes the goals seriously.”
Finance may be more financially motivated than any other industry, and tying leadership bonuses to diversity initiatives could set the sector on a fast path to D&I success.
Support Inclusive Non-Profits
Accompanying Silicon Valley are dozens of education, mentorship, and program-based nonprofit organizations dedicated to supporting women and minorities in tech. Organizations like Girls Who Code, Girls Develop It, Code2040, and so many others work to provide an easier path for those who have been historically left out of the industry.
There are analogous groups for finance (such as Rock The Street, Wall Street, Wall Street Bound, and SEO Career) but they are not as widespread or as tapped for talent. Firms should look to work directly with these groups to ensure that the industry is as welcoming as possible so that others are motivated to start similar organizations. By supporting underrepresented pre-college students, the industry will ensure a more robust and diverse future pipeline of talent.
Commit to a Culture Shift
Even with all of tech’s efforts, many women and POC report feeling unwelcomed, with many of them leaving after only a few years. How can finance do things differently?
Both industries have histories of being “boys clubs”, and that is a difficult categorization to shake, though not impossible to break. An apt example to look towards is Congress. More women than ever are represented and leading committees. While many factors are at play here, much of it is cultural. Accordingly to Politico, there are fewer “late-night cigars and drinks...behind closed doors,” and many more instances of “lawmakers sharing of cellphone videos of their kids.” Changing the standard of how people interact with one another at work can have a big impact on who feels inclined to stick around and lead.