I’ve worked with large corporates (normally banks) and global law firms on their diversity and inclusion agendas. Recently I’ve been asked to work with a number of smaller firms in the financial sector. How does a small private equity firm or investment house start to address their obvious gender imbalance? One firm I spoke to recently had an ‘our people’ gallery of perhaps 50 in which there were substantially more white blokes with a particular shade of light blue tie (worn, of course, with a white shirt) than there were women.
Across the financial sector it’s a commonly held view that the primacy of short term financial results will derail any serious, longer term approach to human capital. Whilst a global leviathan might persuade itself that it’s addressing this issue, in smaller houses particularly, the argument is always that every hire must be demonstrably the strongest person for the job. They must hit the ground running.
The existing (predominantly white, male) demographic means it’s difficult to attract the highest quality candidates from minority backgrounds, particularly for more senior positions. Smaller firms haven’t historically enjoyed a powerful, developed HR presence. Senior individuals have been allowed to create the working environment in which they feel most at home. Unsurprisingly those environments attract people from the socio-economic and cultural backgrounds from which the existing senior group is primarily drawn.
However, many factors favour the smaller firm. A committed, charismatic leader can have real, disproportionate influence on culture. Similarly when investor(s) press(es) for action on diversity, this can have a magnified impact. Another factor, for example in the private equity industry, is that investors’ money is often tied up for perhaps five years. Does this possibly allow a longer term approach to human capital?
Smaller settings also facilitate effective purpose led transformations, these can create real traction in the area of diversity and inclusion. It’s a hugely simple idea: the most successful enterprises are often those with a crystal clear sense of why they exist and of the values each person must display in order to generate sustainable, world class performance. This applies to professional sports teams and co-educational schools just as much as investment funds.
Talented individuals whose sense of purpose and values align with those of the enterprise will be attracted to join and they’ll be motivated (both to stay part of the team and to press themselves to perform at those world class levels) by the ideals they share with the firm. People who’ll leave for an extra $50k will do OK. OK’s not what we’re after though!
I’ve talked to many industry figures who get this. This week over coffee one immediately saw how the (globally famous and hugely successful) partnership they joined in early 90s had a very clear purpose and many unwritten rules designed to protect the firm’s reputation rather than maximise short term profit. A decade later they left what they saw as a far lesser firm whose clarity of purpose had been lost and short term profit allowed to become a major driver.
This is about not being just another firm who generates great returns for clients, but the firm who does that by ….. [fill in here your clear sense of purpose.] The caveat on purpose led transformation is that you can’t purpose wash a firm, you can’t chose a brand enhancing mantra, sit back and let it attract and motivate the best people.
This can’t be an initiative led by HR. The firm’s leading lights must genuinely aspire to be the firm that ….. [fill in here your clear sense of purpose.] They must talk authentically and often about the importance of achieving the purpose and it must guide their short term decision making. The firm’s human processes must change to ensure that they are genuinely designed to achieve that purpose. Again this is probably easier in a smaller, more agile environment.
Processes, of course, require real, everyday human behaviour to change. Things like how we interview and who we give work to. Difficult stuff to change. What’s this got to do with diversity and inclusion? Possibly a great deal, particularly if the purpose the enterprise chooses is to be the firm or fund that ensures the optimisation of returns by providing exactly the right environment for its people. Everybody in the finance sector (and elsewhere) understands that happy, engaged people work harder, are more creative and care more about the firm. We just need to start prioritising how people feel.
Most of the firms I work with want integrity to be central to their purpose. I could write (in fact I have written) a whole other post on what integrity actually is. It’s critical though to understand that it’s not just about how we handle other people’s money and protect their confidential information. A really important part of integrity is how I choose to act day to day, how I treat my colleagues. Integrity is very much aligned to inclusion, to creating an environment in which you feel at home and you will thrive (whoever you are).
And my simple message is that that environment may be easier to achieve in smaller, more agile firms where committed individuals can have disproportionate impact.