Julia Hoggett: Importance of diversity and inclusion as indisputable as climate change

I hate making the ‘business case’ for diversity and inclusion (D&I). There, I’ve said it. There are numerous reasons for this. First, should the D&I discussion now not be about whether D&I is important to address, but rather how we address it? In that regard, I liken it to climate change. Second, I am innately mistrustful of structural barriers that require those being excluded to make the case to be included, rather than requiring those doing the excluding to justify their right and rationale to exclude.

And finally, there is no empirical evidence that having men dominating the upper echelons of the corporate world in the UK or, in fact, any other country produces the best outcomes. That is not a feminist comment, or even a D&I comment; it is a research methods comment. By definition, we have never had a control group to prove it, but we require more empirical evidence to change an unproven status quo than we do to keep it.

But fundamentally, the business case for diversity and inclusion in any industry, but particularly in any human capital and highly regulated industry such as financial services, is founded on two fundamental pillars: effective resource management and fostering good conduct.

Effective resource management

I describe D&I as about giving everyone an equal opportunity to thrive. As Dame Minouche Shafik, the head of ‘the other LSE’ (the London School of Economics and Political Science) once said: “Talent is equally distributed across the world, opportunity is not.” 

To put it bluntly, if any organisation has created a situation where only 35% of its population has that opportunity to thrive (a guess at roughly the population of straight white men in the global workforce of many organisations), then it has, by definition, created an environment in which it is not providing those same opportunities to 65% of its workforce. In an industry founded on human capital, forgive me, that strikes me as rubbish resource management.

Fostering good conduct

I am no longer in a position to speak for the Financial Conduct Authority (FCA), but I know that it has long said that culture is the flipside of conduct. A firm’s culture is the beliefs and principles that make up an organisation and result in the behaviours that the regulator does, or does not, wish to see. The regulator wants firms intentionally to move away from homogenous thinking, and towards a broader range of perspectives, backgrounds and lived experiences. That is diversity.

It has also highlighted the absolute importance of people feeling psychologically safe to challenge the status quo and included in a working environment that supports good conduct. If people feel that they cannot speak up when they hear or see something wrong, and don’t believe they will be listened to, that creates a very real risk of key issues not being escalated. Regulators, understandably, worry about that. That is inclusion.

For my sins, I have now been talking about D&I in the City of London since the late 1990s, and it has given me some perspective on the evolution we have undertaken. With a colleague who deserves far more credit than me, we organised what we think was the first ever dedicated lesbian, gay and bisexual (LGB) (for I am not certain the debate properly included the trans (T) or the + at that time) recruiting event by a Wall Street firm in the City of London. It garnered, at the time, a certain amount of media attention for its novelty.

Subsequently, I was asked to go and speak with other City firms about their D&I efforts. In some cases, the teams asking me to speak felt that they were doing so despite the perspectives of their leadership, rather than because of them.

Fast-forward to my time as a regulator and I had the privilege of speaking to a great many investment bank CEOs from across the globe who were passionate and driven in their desire to both champion and foster D&I. Then came the realisation that, while the tone from the top is essential – and without it, change won’t happen – tone from the top is not enough.

Making change happen

The structures and processes we have put in place within organisations are much like the ones that exist in wider society and, to produce different outcomes, they need to be changed. As I too often say, the quotation misattributed to Einstein is true: it is a sign of madness to do the same thing over and over again and expect a different outcome. But how can we make that change?

To me the starting point is data. I have long said that I don’t think you can have a D&I strategy without having a data strategy, and that data strategy has to do two things: enable organisations to accurately describe the current situation it faces regarding diversity in the workplace; and, perhaps even more importantly, support those organisations to understand why the data is as it is and what steps therefore need to be taken to address both diversity and the level of inclusion.

This starts with disclosure. In order to understand the experiences of different groups as they move through organisations, it is first essential to identify those groups. This fundamentally requires trust, the trust from those who are sharing their personal data that it will be safeguarded, used, and not abused. This can take time, but in most organisations I have observed, a diligent and long-term focus on disclosure rates is critical.

What then follows is the preparedness and then ability to roll out, at the appropriate level of consolidation to protect personal data, dashboarding that enables those making personnel decisions to understand the journey different groups take through the organisation, the impact of any resourcing strategies, pivotal decisions on that journey and the ultimate numbers.

As the UK’s Women in Finance Charter has proven, I think it also requires being comfortable with targets and an honest reckoning with why they are necessary. When targets were established at the FCA for both gender and ethnic diversity, some members of the diverse communities were among those most concerned. The understandable comment was: “I don’t want people to think that I got where I am on anything other than merit.”

I totally understand. I don’t want anyone thinking I have the privilege of being CEO of the London Stock Exchange because I am a diminutive out gay woman. But that presupposes one thing: that the thing we call merit is unbiased and wholly fair. That it is not instead a “stacked meritocracy” that assigns merit to the traits and characteristics of those already at the top. The problem with this reliance on the concept of meritocracy is that it does something even more pernicious: it gives us the structure for rewarding those who look, sound and act like those already at the top, while making us feel better about ourselves because we are operating a “meritocracy”.

One of many conundrums at the heart of the D&I debate, this illustrates how hard it is to create authentic, lasting change. To me, the focus is now exactly where it needs to be in financial services: not on whether D&I is a good thing, but grappling with the hard yards of what we actually need to change to make a difference. The Women in Finance Charter is a good start, but it is the micro-changes to processes underneath the overarching structure that will be of greatest importance. And in that regard, I think we all need to share ideas, best practice, things that work and equally things that don’t as much as possible. There is no silver bullet, but success lies in the attention to micro-details.

I cannot and would never claim to have all the answers, but we must consider evaluation strategies, including understanding historical patterns to look for embedded, often unconscious bias; deliberative programmes to foster talent; a focus on hiring people-managers who genuinely value management (sounds ludicrous, but it’s still necessary to say); and recognising that setting tight time-to-hire targets may not result in the most diverse pool of candidates.

The tools in the toolbox are there. They are numerous. We just need to use them.

Julia Hoggett is CEO at the London Stock Exchange and former director of market oversight at the Financial Conduct Authority.