Commentary: Diversity and inclusion — more than evolved hiring practices

Incidents of racial discrimination and violence over the last few years have shined an ever-brighter spotlight on societal inequities and injustice and have brought forth an urgency in our world for true change.

While there are certain business-related benefits to more inclusive workforces, focusing on hiring practices, training programs and focus groups are a helpful starting point.

When diversity, equity and inclusion become part of a company's core competencies and are viewed as an asset — rather than something we think we need to do because the world is watching — only then will we see the transformation take hold. Transformation can also be assessed by how widely a company's efforts are taking hold, i.e., is the human resources or talent acquisition team the primary group focused on DEI efforts? Or are employees at every level of the organization involved in the effort to build and cultivate a diverse and equitable culture?

The investment industry, in particular, has spoken extensively about why increasing diversity is important and is the right thing to do, but whether the industry is devoting enough attention and resources to ignite systemic change remains an open question. Lasting change to support DEI efforts and integration is a complex challenge that requires progress to be evaluated over the long run. However, firms that lack focus on diversity are missing out on huge segments of the population with the potential to contribute new insights. The good news is that investment management firms can take meaningful steps now to begin transforming their businesses into those that consistently incorporate diversity, equity and inclusion.

Cultural change must come from the top of the organization.

While many companies have pledged to focus on DEI efforts, including recruitment initiatives and diversity targets, there is still much work to be done. According to a 2021 report by Deloitte, women in financial services account for less than 19% of C-suite roles globally.

According to another 2021 study by McKinsey & Co., in financial services, only 86 women are promoted to manager for every 100 men.

How can future talent visualize a successful career path if they do not see leaders who represent them?

Diversifying talent at the top of organizations is one of the most challenging efforts for companies — given the limited number of positions and the skill and expertise required — but it's the most important if you want to see actionable outcomes and lasting change, rather than just aspirational goals.

The average employee cannot promote diverse talent and implement inclusive policies without executive support, so action must start at the top with CEOs, boards, management teams and other leaders.

People in positions of power can not only create and guide strategy but also set an example that can influence other employees to drive change.

For example, when it comes to internal advancement, women have historically been less likely to raise their hands for opportunities they feel underqualified for, compared to men.

To avoid a non-diverse internal applicant pool, corporate leaders can help identify candidates from diverse candidate pools with the potential to succeed, for example by recruiting from historically Black colleges and universities and appointing a diverse hiring team. Additionally, leaders can focus on retaining diverse talent by empowering them to apply for more senior positions and support them through the application process.

Additionally, senior leadership should ensure that all employees have access to internal advocates — relationships with influential employees who can advocate for an individual's future successes and career advancement with others in the company. While advocate or sponsor-type relationships have happened naturally for some in the past, diverse groups have not always had access to this key resource. As these relationships are most successful when they develop organically, broad-based change in this regard can be challenging to implement. This challenge also highlights why cultural change at the top of the organization is key — organizational leaders who prioritize DEI can open doors for employees with diverse backgrounds and demonstrate that they will actively participate in their long-term success.

The failure to attract and retain entry-level employees from historically underrepresented groups in the industry is one of the challenges investment management firms face in their efforts to create a diverse and inclusive workplace.

While most investment management firms lack the resources to recruit at thousands of universities nationwide, companies can compensate by being efficient and selective when finding ways to reach diverse populations. Speaking at local schools and historically Black colleges and universities can be effective in improving visibility and spreading awareness of opportunities in the industry.

Additionally, companies can partner with organizations that foster mentorship programs and provide educational opportunities among diverse populations.

One such organization, "Rock the Street, Wall Street," has created an investment literacy program designed to spark the interest of high school girls in finance.

Firms can use recruiting events to emphasize the social purposes of investing, such as helping individuals plan for retirement, sending their kids to college and investing in a community's health and well-being. To break down these biases and other cultural barriers to entry, companies must instill a sense of societal purpose to attract individuals interested in making a difference in the world.

Once firms reach applicants, they need inclusive procedures and systems in place to ensure that diverse groups are not shut out from the hiring process. It's also important to involve a diverse group of established employees in the hiring process to minimize bias and demonstrate to applicants that an equitable and inclusive workplace is a top priority.

No firm is perfect when it comes to creating a truly diverse and inclusive culture, but it's within every company's power to formalize its commitment to change, update it on a regular basis and maintain transparency regarding its successes and where there is still work to be done. To create this accountability, companies can publicly share what they're trying to achieve and how they plan to do it, and then check in regularly to track and safeguard their progress.

A DEI resource group can help improve education and participation around DEI and hold a company accountable. While this initiative can have some level of executive sponsorship, the most successful resource groups develop organically from within the organization and are driven by individuals who are passionate about making a difference. Ultimately, implementing diverse hiring practices and creating an inclusive culture requires the contributions of employees from every level of an organization.

Firms now understand that diverse teams improve cognitive diversity — the inclusion of people who can offer unique perspectives on problem-solving because they think differently — and help reach clients and attract talent from every background. Diverse teams, as well as the benefits that accompany them, are attainable. But it's time to turn planning into sustainable action.

Only by maintaining accountability, being transparent about successes, challenges, and future initiatives, and educating and empowering their workforce can investment firms keep employees engaged and create a culture that supports diverse groups along their career trajectories. While true change in DEI will require a long-term approach in which the industry works together to drive progress, firms can be proactive now in laying the groundwork for the future.

Diamond Hill's management team is composed of 67% women and 17% ethnically diverse individuals. Approximately 32% of associates are women, and roughly 14% are ethnically diverse. Diamond Hill is committed to transparency on demographics and diversity, and more information can be found here.

This content represents the views of the author. It was submitted and edited under Pensions & Investments guidelines but is not a product of P&I's editorial team.