Diversity Gets a Reality Check
Walk onto a mythical "average" trading floor of 100 people at a Wall Street investment bank and you'll see a lot of white faces. Seventy-nine of them, in fact.
That's assuming the staff's diversity matches the industry workforce described in the Securities Industry Association's 2005 Report on Diversity Strategy, Development and Demographics. Scattered through the ranks would be nine Asians, six African-Americans and five Hispanics. Fifty-six of the traders would be men - 46 of them white. Of the 44 women, eleven would be of color.
Since the SIA's report was last published in 2003, the proprietors of this trading floor have hired two Asians, one African-American and seven women. This is what many people refer to as "incremental growth".
It may be also a sign that the industry is hiring serious people, some diversity observers say. While on first read a three-percentage-point rise in a diverse workforce - from 18% total in 2003 to 21% in 2005 - may not seem like much, says one, "if it was 10%, you'd hear cries of 'affirmative action' and 'they're just hiring minorities.' These numbers could mean real progress."
Certainly, that's the way the SIA wants to portray it, as do its member firms, which include just about everybody on the Street. The biggest reason firms cite for putting time and money into diversity is the increasing competition for talent, according to the SIA report.
The diversity champions, it seems, could also be afraid of progress that's too dramatic. One could argue the make-up of our mythical trading floor doesn't come close to the actual, overwhelmingly white and male, trading floors on Wall Street.
But if investment banks hired for diversity's sake, they could run the risk of hiring the wrong people. Not only would current employees be disgruntled, but banks then would also have to deal with the baggage that goes with bad hires - wasted money and time, and potential litigation.
Old, White and Male... and Changing?
Wall Street firms, however - whose clients are often older, white and male - have faced less market pressure to diversify than, say, retail banks, whose customers often include a variety of demographic segments. "Companies focusing on the higher-end investor don't always have as strong a business case to push it, because of the demographics," says Peggy Hazard, managing director of Simmons Associates, a consulting firm that concentrates on issues related to diversity, culture and organizational development.
Market forces are playing an increasing role. The more diverse a company's customer base, the more pressure it's under to have a diverse workforce, say recruiters and HR executives.
Changing demographics are becoming "more real" to the industry, says Michele Holton, Manager of Inclusion at Edward Jones. "There's more recognition of emerging wealth in diverse markets," she says. "These are wonderful pools of talent and potential customers."
Recruiters and executives see 2006 as being a year of fine-tuning diversity programs. Holton foresees "a huge focus on execution" next year. In addition, expect firms to pay more attention to retention and preparing minority staff members for growth, issues that were often given second priority as firms focused on recruiting new hires in 2005.
Indeed, one of the hottest areas for hiring this year has been trading: derivatives, commodities, energy, the banks' own books on the prop desks. As securities firms evolve and diversify their revenue streams, so the workforce should evolve to be more diverse.
Click on the link to view the SIA Report on Diversity Strategy, Development and Demographics.