"Setting out principles and targets alone, however, doesn’t necessarily deal with the core issues around culture."
The Financial Conduct Authority (FCA) is worried about a lack of diversity and inclusion in the sector, and the implications for recruitment and retention.
The underlying issue is the concern about workplace cultures and the power politics that might be involved: how finance employers are dealing with sexual harassment, bullying and other kinds of non-financial misconduct.
Research has signalled symptoms of cultural issues that need to be addressed. The Race to Equality report in 2021 (carried out by the Reboot professional network among 800 mid-to-senior level financial services employees) suggested that 66% of respondents from ethnic minority backgrounds had experienced discrimination at some stage in their careers; only 36% believed their companies were “fully committed” to diversity and inclusion; and 48% that their career progression was slower than their white colleagues’. Deloitte recently flagged how just 19% of executive positions in banking, capital markets and payments are held by women.
A healthy workplace culture — where people at all levels trust their employers to be fair and reasonable, and know they can speak up about concerns around unacceptable behaviours — is critical for attracting and keeping hold of the best people, opening up new pools of talent and encouraging innovation. For this to happen, there has to be a culture of psychological safety.
The success of the UK’s financial services sector, making up around 12% of total GDP, is critical to economic stability and growth. The FCA knows that future growth and stability within its industry will be dependent on becoming more representative of the UK population as a whole, being in tune with the needs of a diverse customer demographic. And that means a more inclusive workforce where there is more diversity at senior levels, confidence in the opportunities for career progression, and in management styles and behaviours.
The FCA is encouraging the largest firms to be models of best practice by developing their own diversity and inclusion strategies, setting out objectives and goals; setting targets to deal with under-representation; and reporting publicly on their progress. This is in addition to previous announcements by the Authority making it clear that non-financial misconduct such as sexual harassment would be treated as misconduct for regulatory purposes.
Setting out principles and targets alone, however, doesn’t necessarily deal with the core issues around culture. In 2021, for example, the FCA threatened to issue fines and even bans to senior managers found to be in breach of expected standards of behaviour. Similarly, managers who don’t deal with problems being raised by their line reports could face punishment. Rather than encourage openness and more staff to come forward, this led to a sharp fall in the number of ‘whistleblower’ reports.
On a practical level, HR teams in the finance sector can create a positive workplace culture built on a foundation of psychological safety. There are key steps that can be taken depending on where organisational needs are and what’s already in place:
• Creating a behavioural framework which all employees understand and know what is expected of them (in addition to clear policies and procedures);
• Ensuring robust and fair HR investigations are in place when allegations of misconduct are reported;
• Having a triage process to signpost to informal mediation or other restorative interventions when appropriate;
• Using highly skilled mediators, coaches and trainers when needed to restore relationships, develop emotional intelligence, address unconscious bias and early conflict situations;
• Building a psychologically safe workplace - assisting to break down any possibility of ‘imposter syndrome' amongst under-represented groups, supporting career progression, before and after promotion and more generally enabling teams to thrive;
• And overall, by creating ‘a Clear Air’ culture, one where people working at all levels feel able to speak up and challenge in positive, constructive ways, because they have been equipped with the skills to have better conversations. We believe enabling conversational integrity is key, based around developing five capacities: situational awareness, curiosity, reflective listening, empathy and self-awareness.
