FCA diversity and inclusion review: Firms should use review findings to help assess strategies
The Financial Conduct Authority is encouraging regulated firms to use its recent review findings to help them assess their current diversity and inclusion strategies and practices. Interesting findings from the FCA’s review include that some strategies such as training, network groups and allyship are being relied on too heavily and that consequently some firms are not implementing effective measures.
FCA review aim and findings
The review of 12 larger firms across multiple sectors looked at how they are designing and embedding diversity and inclusion (D&I) strategies. The aim of the review was three-fold:
- To give reviewed firms and others a picture of the current position, allowing leaders to consider where initiatives might be relevant in their own firms.
- To encourage further industry action.
- To help the FCA to develop a supervisory approach that it can use as the basis for future engagement with firms.
Findings of the review included:
Firms are not focusing on all areas | Firms focused most on addressing gender representation, with ethnicity starting to receive more attention. Other demographic characteristics received much less attention. Few firms had taken steps to address social mobility. Work around sexual orientation was often limited to supporting employee network groups and performative actions (such as support for Pride). Few firms had given serious consideration to disability and very few firms had paid attention to neurodiversity. Firms generally had not considered whether there were compounded issues for people belonging to more than one minority group that could lead to disadvantages (‘intersectionality’). |
| Strategies are too generic | Many firms’ strategies were generic and did not take a holistic view. They did not clearly articulate their purpose and actions aimed at achieving their goals. Firms that were part of international groups had generally adopted a group-wide international strategy, without tailoring it to the circumstances of the UK organisation or the characteristics of the UK. These firms typically had less ambitious and well-defined strategies and often relied on global, rather than UK-specific, data. |
| Data is not being put to best use | Firms were not making the best use of the data they collect to identify the most appropriate measures to implement. For example, on both gender and ethnicity, firms tended to focus most on improving representation at senior leadership level, despite data showing that the biggest drop-off in representation was from junior to middle management grades. This risks creating a culture where firms attempt to ‘poach’ diverse senior talent rather than develop their own pipelines. |
| Quality of data varies widely | There was a wide variation in data quality, with firms with better diversity data better placed to decide what actions to take. Few firms had actionable data beyond gender and ethnicity and where they had tried to collect data on characteristics like disability and sexual orientation, they had not been able to obtain as much data. Poor quality data affected firms’ ability to carry out intersectional analysis to understand the experiences of different groups. |
| No monitoring of effectiveness | Firms were not tracking whether their diversity measures and initiatives were effective, leading to a lack of understanding of what really works. Some firms relied too heavily on measures such as training, network groups and allyship. Although these measures are important, the FCA considered they will not bring about the kind of systemic change needed on their own. Sponsorship and mentoring for under-represented groups were often used as tools to improve representation. Although the FCA considered these worthwhile, it noted there are limits to the number of candidates these programmes can feasibly serve. There was also little awareness that because selection for these programmes was discretionary, they could be subject to bias. |
| Accountability unclear | Although most firms said senior managers were accountable for diversity and inclusion and that diversity and inclusion goals could affect pay and bonuses, it was not clear how this worked in practice. |
| A compliance approach | Some firms focused almost exclusively on gender representation at senior levels because there are external targets and expectations for this. This suggested that a compliance approach was driving some strategies, rather than a genuine commitment to diversity and inclusion. |
| Initiatives are not effective | Large gender pay gaps persist across the industry and there is little sign that action to close these has been effective yet. Bonus gaps tend to be even wider than hourly pay gaps which is indicative of the fact that the highest bonuses are paid at senior levels, where women and ethnic minorities are still under-represented. Firms that have launched numerous initiatives had yet to see any substantial improvements. This could be because:
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As these possibilities have very different implications, the FCA considered it important that firms understand the reasons where initiatives are not delivering change.
You can read more of the reviews findings here.
All firms implementing strategies and policies to address diversity and inclusion should be wary of the findings in this report. They underline that using measures to improve diversity and inclusion is not enough, and it is just as important to monitor the effectiveness of those measures and consider how they work in conjunction with other strategies and policies.
Posted by Charles Herbert
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