When it comes to diversity, the story in the financial business is mixed. In recent years, the industry has put great effort into hiring and retaining minorities at all levels. And while there's no question many firms have made real progress, entrenched corporate cultures and economic realities have sometimes halted that evolution. Few doubt the industry's direction will change, but at the same time few believe complete solutions will be achieved easily or quickly.
Meanwhile, minority candidates are presented with an exceptional opportunity: Because fewer women, blacks and Hispanics are applying to business schools, financial companies are engaged in a fierce war for talent.
"Blacks and Hispanics have predominately worked in law, medicine and other areas of business, but Wall Street or finance is under-populated by those minority groups," says Lance LaVergne, vice president of Human Capital Management at Goldman Sachs and manager of the firm's U.S. diversity recruiting efforts. As a result, he says, "We are very, very focused on expanding the pool by reaching out to students from non-traditional backgrounds. That's top of mind for all of us."
While the push toward diversity opens up opportunities for minority candidates, executives are quick to throw water on the notion that diversity equals entitlement or lower standards. "It's important to remember that diversity and meritocracy are one and the same," says LaVergne. "We're not compromising on quality to satisfy diversity." Ultimately, says Elizabeth Wamai, a director at Merrill Lynch and the firm's diversity manager for Global Markets and Investment Banking, candidates who aren't qualified won't be successful ? so there's real pressure on companies to make sure each hire is a good hire.
"We're in an environment that's as positive and optimistic as it's ever been for diversity," says LaVergne. "If you're interested and prepared, the opportunities are endless."
According to Wamai, top candidates can expect three or four job offers. "We all know who they are," she says. In their pursuit of the strongest candidates, executives express less concern about whether they're minorities than whether they're talented. Says Pamela I. Faber, managing director of Human Resources at the Securities Industry Association (SIA) and staff advisor to the association's diversity committee: "A company wants the best person they can get for the job."
"There's no monopoly on talent," observes LaVergne. "Talent is found across all demographics, all demographic groups. If you want the best team, the team by definition must be diverse." And, he says, financial companies believe talent is critical to their success: "The only thing that distinguishes us from our competitors is our talent," he says.
To find qualified minority candidates, the industry is searching both broad and deep. Companies are reaching out to students as early as junior high with internships and communications programs. "By the time you get to juniors and seniors in college, they've already got a relationship with a firm," says LaVergne.
Increasingly, companies are working with not-for-profit groups like Management Leadership for Tomorrow and Sponsors for Educational Opportunity (see Enlarging the Talent Pool, page 54) to reach these young prospects. At the same time, Wamai says companies are seeking candidates from academic areas outside of business school, looking at accounting majors, law majors, and others with backgrounds that could be valuable in the financial, banking or investment worlds. However, this doesn't mean they're turning their back on the value of business schools. Several firms, Merrill Lynch among them, offer fellowships and internships to promising candidates who want to attend business school but need help shouldering the financial burden.
"Firms have built a very good infrastructure in terms of reaching out to minority populations," says the SIA's Faber. In addition to networking, they're advertising more in minority media outlets, pushing recruiters to find more minority candidates, sending more staffers to job fairs sponsored by minority organizations, and leveraging the networks of their own minority employees, she says.
In 2003, the latest year for which numbers are available, minorities made up 18.3% of the securities industry workforce, according to the SIA's 2003 Report on Diversity Strategy, Development and Demographics, a survey conducted by the association every two years. That's up from 17.8% in 2001.
Some 27% of the securities industry's executive management positions were held by either women or minorities in 2003, compared to 20% in 2001. Some 15% of branch managers were either a woman or minority, the same as in 2001, while the proportion of women or minority managing directors rose from 17% to 20%.
But while the proportion of Asians rose from 5.8% in 2001 to 7.3% in 2003, blacks and Hispanics lost ground: The proportion of black workers dropped from 6.3% to 5.5%, while the proportion of Hispanics slipped from 5% to 4.7%. Women, who made up 43% of the industry's workforce in 1999, held 37% of its jobs in 2003.
To be sure, the years from 2001-2003 were one of the most unusual ? and traumatic ? the business has ever faced. The dotcom disaster and the tragedy of September 11, 2001 precipitated a slide in revenues and employment that forced many firms to surrender some of the advances they'd made in previous years. In the words of Flo Yee, a financial industry recruiter, "When it comes to downsizing, Wall Street is color-blind."
Such obstacles don't negate what most observers call a real and sincere effort by the financial industry to make its workforce more diverse and multicultural. Of the companies participating in the 2003 survey, all of the large firms and 83% of the mid-sized firms reported having a management-level person dedicated to diversity. Some 83% of the large firms and 67% of the mid-sized companies had established diversity councils. All of the large and 92% of the mid-sized firms said they had diversity training programs in place.
A 2005 Harvard Business Review article reported that in a survey of 2,443 women, nearly four in ten highly qualified women said that they left work voluntarily at some point in their careers. Today, LaVergne says, the focus of many diversity efforts is on gender, mainly because women are both a larger demographic and more evolved politically and organizationally than blacks and Hispanics. "There are more women in the organization than any other minority group. They have critical mass," he observes.
However, LaVergne points out blacks are developing that same kind of momentum, and Hispanics are making rapid gains also. "Hispanics are becoming a larger proportion of the workforce and are more active politically," says LaVergne. "African-American networks are more evolved right now, but Hispanics are catching up."
Mona Lau, Global Head of Diversity at UBS, sees two important trends in the industry: First, she sees more companies involving business leaders in their efforts. While it's important, she says, for a company to have a champion in the senior executive suite, "for diversity to take, business leaders have to be involved. It's a key to success." Second, she sees diversity and multiculturalism taking hold as global concepts.
At higher levels, executives say, diversity is spreading more slowly because of a relatively shallow pool of women and minority staff members to draw from. So, while companies are actively seeking recent minority graduates for the entry level, they're also trying to strengthen their retention efforts through employee networks, surveys to measure real (and perceived) progress, and mentoring programs designed to help employees navigate the organization and achieve the visibility often necessary for advancement. In addition, Lau says, companies are integrating their diversity efforts into the recruitment of senior business leaders.
What's driving these dynamics? First of all, in the U.S., it's the law. Equal Employment Opportunity is on the books, and ensuring their workforces have a representative pool of minority talent is a public, measurable way for companies to demonstrate their compliance.
From that beginning, a deeper movement has emerged as the characteristics of both the financial customer base and the employee talent pool have evolved. While some companies are driven by the long-term vision of their leadership, others face market demographics that apply real business pressure to ensure diversity. "Companies want customers to be able to identify with them and their workforce," says Tanya Hinton, president and chief executive officer of Diversified Search Services of Chicago. "In retail, you want to see people who look like you."
Companies whose focus is on the higher-end consumer, who is very often older, white and male, face less pressure to diversify. Says Peggy Hazard, managing director of Simmons Associates, a consulting firm focused on issues related to diversity, culture and organizational development: "Success comes from treating it like a business issue and holding people accountable. Companies focusing on the higher-end investor don't always have as strong a business case to push it because of the demographics."
Getting Beneath the Surface
Of course, for the job candidate, what matters isn't what's on the company's website so much as what's going on in the workplace. "Sometimes the right things are on the Web site, but the culture hasn't caught up," Hinton says.
How can candidates be sure that what they're experiencing during a job interview reflects the true company culture? "First, do your research," says Merrill's Wamai. When visiting a firm, be aware of the people you're meeting with and how they compare to the rest of the office. Interviewing with three black professionals who appear to be the only ones in the office is probably not a good sign, she says.
Wamai suggests asking questions and listening for consistent answers, and meeting as many people within the company as you can, even if they're not in your core area of interest. "The best test of a company is its people and alumni," she says. "Are the people you're seeing serious, real line people? Do you get to see the real company?" Read the company's annual report and Web site and study its board of directors and executive management to get a sense of the diversity within the upper ranks. "You really have to look beyond," she says.
Hinton suggests researching the company's retention rate among minorities and women. You want to find out "not just do they have diversity hires, but do they retain minorities as well?" she says. Taking advantage of professional and minority networks to talk with people in the company is another way to learn whether its culture truly embraces diversity, she says. "You really have to get in there to see how it's all working in practice."