A recent BrightPool survey has uncovered a gap between the level of diversity and inclusion (D&I) in financial services firms and the perception senior leaders have of how diverse and inclusive their organisations are. However, HR directors who work on the frontline of D&I have the most accurate view of the current state of diversity in their organisation. Despite their best intentions, without true oversight of D&I, CEOs cannot effectively drive positive change. Greater communication and collaboration between HR and senior leaders will help firms make progress in addressing issues.

This change for the better is a pressing requirement for the sector due to the Financial Conduct Authority's (FCA) sharpened focus on D&I in its supervision of financial services firms. The FCA is making a clear, intrinsic link between a lack of inclusive culture and non-financial misconduct. Senior managers can now be personally liable for non-financial misconduct and/or failings in D&I that result in harm to either customers or financial markets.

The consequences of poor diversity

A lack of diversity has far-reaching implications across financial services. Corporate reputations are at stake, for example, with leaders in financial services particularly concerned about the publication of gender pay gap figures and also whistleblowing. 64 per cent of survey respondents said they are worried about having a reputation for a lack of diversity, 53 per cent about the gender pay gap issues, and 49 per cent about whistleblowing.

It is widely accepted that a diverse and inclusive workforce mitigates ?conduct risk?. The FCA believes an inclusive culture (where employees feel free to speak up) often prevents scandals such as insider trading or sexual harassment from happening.

It states that D&I is a ?commercial imperative? for financial services firms. Diversity comes in many forms: background, experience and, critically, thinking.

An inclusive workplace is one where different views, background, experiences, cultures, etc., are valued and nurtured. Without D&I, firms cannot ensure they have the right mix of people to serve the complex and wide-ranging needs of customers.

Effective D&I needs collaboration

Senior leaders have many reasons to improve diversity. For any initiative to work, however, everyone must start with the same metrics and ideas of success.

That's where greater collaboration comes in. Currently, 46 per cent of chairmen/owners and 46 per cent of finance CEOs believe that their company performs better for ethnic diversity compared to competitors. In contrast, only 25 per cent of HR directors second this view. 50 per cent of chairmen perceived their disability diversity as better than competitors, versus just 13 per cent of HR directors. Finally, 54 per cent of chairmen and 46 per cent of CEOs saw their organisations as performing well in educational diversity, compared with 25 per cent of HR directors.

Setting accountability

No organisation can work together and drive change if everyone begins at a different start-line. This is further complicated by a lack of consensus on ownership and accountability for D&I. A third of leaders believe that responsibility lies with individuals, whilst a fifth feel that the government should be accountable for poor diversity in the sector. Just over half believe that the board should be responsible.

Ultimately, improving diversity is an organisation-wide endeavour that requires senior management oversight. Because senior leaders could be held personally accountable for misconduct resulting from poor D&I, they must step-up and take ownership of it. The board is as accountable, as well as the HR team, for supporting day-to-day diversity improvements.

Other benefits of collaboration

Promoting greater collaboration between HR and the cC-suite will have benefits for other business-critical areas. HR will move into more of a strategic role, giving direction on diversity, plugging skills gaps, preparing for automation and other emerging workforce trends. Leaders who work closely with their HR directors will be better prepared to tackle the full spectrum of workforce challenges.

Regular meetings and reports are a good start, as is defining success metrics for D&I initiatives. Measuring a diverse culture is tough without clear KPIs that link to wider business goals and bottom-line performance. Leaders must communicate their diversity objectives to HR, and vice versa, so that everyone is on the same page.