Reflections on the FCA’s pilot study into understanding diversity and inclusion in financial services

The timing of the release of the results of the FCA’s pilot study into understanding diversity and inclusion in financial services just before Christmas may have caught firms by surprise. But the results and recommendations were surely no shock, having been alluded to at a fireside chat during an event hosted by the Investment Association late last year. Against the background of discussion papers and speeches reiterating the FCA’s commitment to driving change in the financial sector, the results provide the first real value judgments on live diversity and inclusion strategies. 

Now firms have had a chance to digest the findings, here are some reflections as well as related questions you should be asking about your company’s DEI programme:

• Culture continues to be the key touchstone for the FCA in their pursuit of enabling firms to deliver better outcomes for consumers and markets. The study concluded that “very few firms seemed to have understood diversity and inclusion as a fundamental culture issue”. While capturing the complex web of elements that make up an organisation’s culture is hard, structured methods of analysis are available – and it’s the outcomes from this measurement that help produce targeted change initiatives and benchmarks to monitor against. 

Reflection point: How are you measuring culture at your organisation? And is DEI a focus area? For example, are you measuring your culture of inclusion? What about well-being? And are you looking at how those results differ across employee populations?

• Data is crucial to obtaining baselines and measuring progress, but collection initiatives often suffer from internal organisational trust issues. Poor data leads to difficulties in designing or implementing targeted change initiatives and, more importantly, in carrying out analysis to understand the experiences of people within the organisation.

Reflection point: How are you generating trust and fostering the psychological safety needed for staff to provide data?

• Understanding what is going on at your organisation cannot be achieved by surveys alone. Depth is what is really needed. This comes from human stories which give you the context behind survey responses. The FCA point to a range of qualitative tools such as focus groups and exit interviews, which help firms “understand why there are divergent outcomes, not just where they occur”. 

Reflection point: Does your data collection around DEI capture the lived experiences of your staff?

• Change comes not just from diversity initiatives, but rather from “meaningful culture change driven from the top” to embed the ethos behind those initiatives.  What the FCA is really talking about here is structural and systemic changes within the institution, from hiring and on-boarding processes to team structures and the way in which allegations of improper conduct are handled. Evidence on commonplace DEI interventions like training is mixed at best, and so a systems mindset may offer a path to better outcomes. 

Reflection point: What exactly are your initiatives targeting and how do you measure their success? 

While firms know better than to expect a regulator-approved DEI checklist or route map, there is more that the FCA could have done, and indeed may yet do, to move the conversation onwards. Firms of different sizes face challenges of scale, but many of the issues being tackled are the same and a series of industry-based sprints on measurement, framing initiatives and implementation may well generate momentum and ultimately move the conversation forward.

Another tool firms can use that has gotten little FCA attention is running experiments or pilot programmes to see what works. Such experiments should be evidence-based, using data from staff to inform which areas to prioritise and integrating findings from DEI literature to shape the design of those interventions. Seeing what works for the organisation as a whole and for individual groups within the organisation is an iterative process – some ideas, as evidence-based as they may be, will not work. It would be interesting to hear more from the FCA about what they might do to support firms who want to embrace the power of smaller experiments to help guide their overall strategy.

The big questions noted above are not going away. Just a few weeks ago, the UK Treasury Select Committee held hearings to investigate concerns about a lack of gender and ethnic diversity at venture capital businesses. There is no doubt fiercer scrutiny to come and much work to be done.

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