According to a sample of 12 firms across sectors analysed by the Financial Conduct Authority (FCA), businesses tended to focus on improving diversity at senior levels despite data suggesting that representation was falling behind at junior and middle management levels.
The regulator said: “Such focus, in isolation, risks creating a culture where firms attempt to ‘poach’ diverse senior talent rather than develop their own pipelines. This is not a sustainable approach and is unlikely to bring meaningful, long-lasting change.”
The FCA said this indicated that firms were looking externally for talent, which one respondent described as businesses “cannibalising” each other.
Gender and ethnicity most recognised
The FCA also noted that gender representation was the main focus for most firms, with ethnicity starting to garner attention. However, other characteristics such as neurodiversity, disability and sexual orientation were being ignored by comparison.
Where social mobility was acknowledged, the FCA said most strategies focused on entry points and not the cultural experiences of people from lower economic backgrounds. It said this oversight could also explain the lack of progress for some ethnic minorities.
The regulator said most firms were failing to acknowledge intersectionality, which is where multiple characteristics impact one person in different ways.
Generic goals in infancy
The regulator described the strategies of most firms as “generic” and warned that there was no clarity in how diversity and inclusion goals would be achieved. However, it said nearly all of the people it spoke to as part of its sample were “committed and passionate about making progress”.
It said most firms were new on their journey towards being more diverse, with most serious strategies beginning in 2019 or 2020.
The FCA said diversity and inclusion as a “fundamental culture issue” did not seem to be understood by the majority of firms, nor did the need to form inclusive cultures at work. Further, none of the firms sampled had done any work to address the needs of a diverse consumer base, though there was an awareness that this needed looking at.
The FCA said firms had initiatives which it felt would result in positive outcomes but noticed an “overreliance” on training, network groups and allyships which it said would not result in systemic change on its own.
Additionally, firms which had international operations tended to implement measures which were not tailored to the UK.
“These firms typically had less ambitious and well-defined strategies and were often reliant on global, rather than UK-specific, data,” the regulator said.
It was also found that few firms collected data beyond ethnicity and gender, but where information on disability and sexual orientation was collected at recruitment and onboarding, there were higher response levels compared to existing employees.
The FCA said firms were not using their data to inform their strategies.
Worthwhile initiatives
Firms showed a “willingness to pursue initiatives for change” and the FCA noted support for people returning to work. Some firms offered to carry forward performance grades for people who had taken long periods of leave, such as maternity, so future pay and progression opportunities were not as impacted.
Businesses appeared to pay more attention to diversity at the recruitment stage, and some firms established employee network groups to encourage allyship and empower people.
It was found that firms did not appear to recognise the importance of an inclusive culture at work, which allows people to feel safe and welcome at work. Also, firms did not seem to be interested in asking employees what was missing, which could help them understand different organisational dynamics.
The FCA said: “Collecting this information could help organisations understand why there are divergent outcomes, not just where they occur.
“In our view, firms are likely to struggle to make sustainable, meaningful change without greater attention to culture, including a long-term plan to deliver change, backed by senior level commitment.”
