Prior to COVID, the financial services industry, long considered the quintessential boys’ club, was making recent progress toward greater gender equality. Projections by Deloitte in 2019 put women at 31% of senior leadership representation by 2030 — still shy of gender parity, but a percentage point higher than the 30% needed for underrepresented groups to become a critical mass capable of making change among an entire group. Then the pandemic, which disproportionately negatively affected women, hit. Deloitte’s recent projections in their 2021 article “Leadership, Representation, and Gender Equity in Financial Services” now forecast that representation of women in senior roles will drop to 28% by 2030.
Below, we examine the state of women in finance today, and share strategies to drive systematic change to fight the gender gap and, importantly, increase the prevalence of women as senior leaders.
COVID Was Hard on Women in Financial Services
The past several years have been unimaginably difficult for everyone, but the pandemic and its aftermath have created different sets of challenges for women and nonbinary folks in the workplace, which will have lasting effects on gender equality at work.
Put simply, the pandemic was harder on working women than working men. Because while modern-day partnerships often offer the illusion of equality, few advancements have been made when it comes to division of labor at home, even when both partners work full-time.
McKinsey’s 2021 article “Closing the Gender and Race Gaps in North American Financial Services” reported that senior-level women were 57% more likely than their male counterparts to have a full-time working spouse. As the home became the center of our lives during the stay-at-home orders and closures of the pandemic, working women ended up having even more home-related labor. In 2021, senior-level women were seven-and-a-half times more likely than their male peers to say they were responsible for “all or most of” their household responsibilities. This is a significant increase from 2018, when this figure was reported as only four times more likely — and obviously adds a tremendous additional burden for women.
Women in Finance Have More Responsibilities at Work
Women at financial services firms have outsized responsibilities at work, too. They’re more likely to participate in roles or take on tasks for which they are not paid or recognized, a phenomenon known as “invisible labor.” McKinsey’s Women in the Workplace 2021 report found that senior-level women are twice as likely as their male counterparts to allocate significant time to diversity, equity, and inclusion (DE&I)-related activities, like supporting employee resource groups. And women managers in financial services are reported by financial-services direct reports to be 50% more likely to provide emotional support than managers who are men, according to the McKinsey “Closing the Gender and Race Gaps” article.
In many cases, these personal and professional stressors coalesce at the mid-career point, when women are firmly in the leadership pipeline but at great risk of leaving their organization, believing the costs may outweigh the benefits. As a result, financial services organizations lose skilled female or female-identifying candidates from their pipelines — the top feeder-system into senior leadership and then C-suite positions. This helps explain why women and men in financial services begin their careers in financial services in parity, but senior roles and C-suite positions are still overwhelmingly held by men.
Strategies to Promote Gender Equality in Financial Services
Beyond creating more just and equitable workplaces, gender equality is a business opportunity. Research has proven again and again that diverse workforces outperform their more homogenous counterparts. Here are five meaningful and impactful ways to advance gender equality in the workplace.
1. Change the language you use to market workplace offerings.
Organizations that want to promote gender equality must reframe their programs and revise the language they use for relevant offerings. Touting “primary-caregiver leave” and “secondary-caregiver leave” and marketing hybrid workplace arrangements as a retention strategy predominantly directed at women have inherent bias. In short, women should not be the sole focus of gender equality efforts.
Especially in a competitive, high-stakes industry like financial services where individuals are expected to “pay their dues” to advance, workplace offerings that are considered “for women” signal that an individual is not serious about work, said Liz Kofman-Burns, PhD, cofounder of diversity, equity, inclusion, and belonging (DEIB) consulting firm Peoplism. “Once something is seen as an accommodation for women, it becomes low status and signals that the individual [taking it] is not serious about work,” she said.
Kofman-Burns said companies can work to correct this by changing how they talk about these programs, who they market them to, and what the benefits provide. “Offer a single paid parental leave, and really try to incentivize men to take it,” she said. As more men navigate the challenges of parental leave — securing approval, negotiating paid versus unpaid, ensuring coverage, and rejoining the team after parental leave, systems and attitudes will change, creating a better parental leave process and more acceptance toward those taking it.
The same is true for other challenges also primarily if not solely associated with women, like work-life balance. “If work-life balance is an issue for women, it’s an issue for everyone and it should be addressed as such,” said Kofman-Burns. “[Gender equality] will only get better if men are expected to take up care responsibilities of all kinds, which will lead companies and managers to see this as acceptable, and part of being a human, adult, working person.”
2. Offer hybrid work while analyzing for bias.
Hybrid workplace models present a lot of benefits. They can create better work-life balance, increase a sense of belonging, and make the workplace more accessible for all.
“Organizations that are authentic in their flexible work offerings communicate to all employees, ‘There’s a place for you here,’” said Anu Mandapati, Global Head of Diversity, Equity, and Inclusion at Magic Leap, an augmented reality company. A 2021 study by Catalyst, a global nonprofit with the aim of advancing women in the workplace, supports this sentiment, finding that employees are 93% more likely to report feeling included in environments where hybrid work is offered.
“People are looking for value alignment with their organization more than ever today, and when an organization does flexible work well, what they’re saying to employees is, ‘We value you [and] we respect you as a person with responsibilities and needs outside of the workplace,’’ Mandapati said.
Hybrid workplace models that are well designed and have substantive resources behind them can show employees that their organization understands the way work has changed. But done poorly, hybrid work can become another avenue for bias — especially proximity bias, or the tendency to favor those in our physical vicinity. Since women in financial services are more likely to report being responsible for a majority of household responsibilities, it’s feasible that women are more likely to take advantage of hybrid options than men.
Any organization with hybrid work options must do routine analysis to watch — and correct — for bias. “Look at who the stretch assignments and promotions are going to,” advised Mandapati. “If it’s often in-office folks, companies must find ways to interrupt bias to ensure they’re elevating, leading, and representing everyone in the organization, and not just those they sit next to.”
3. Encourage cross-demographic sponsorship for women protogés.
“Get a mentor” is a common refrain to early-career employees in financial services, but it’s sponsors — individuals of influence in the organization who advocate for you — that have greater ability to influence the trajectory of your career.
“While mentors advise and support, sponsors play a much more active role, using their networks, power, and influence to advocate for, make visible, and fight to get their protégé to the next level,” wrote Herminia Ibarra, Nancy M. Carter, and Christine Silva in their 2010 Harvard Business Review article “Why Men Still Get More Promotions Than Women.
“Sponsors are people who are having the right conversations in the right rooms with the right people, and they are invaluable,” Mandapati said. “They are truly how careers get elevated.”
In 2019, Payscale released a comprehensive report on sponsorships, Sponsors: Valuable Allies Not Everyone Has. The report’s findings showed that everyone benefits from having a sponsor, but the benefits vary greatly depending on your gender identity and race or ethnicity, and that of your sponsor. For example, Payscale found that a “sponsorship premium” — a pay bump for having a sponsor — exists, but that men with a sponsor earn 12.3% more than those without, while women earn 10.2% more. Women of color have the most to gain from sponsorships, with Black women with a sponsor earning 5.1% more than Black women without, and Hispanic women with sponsors earning 6.1% more than Hispanic women without.
It’s common for sponsors to seek out those who look like them, and also for individuals to seek out sponsors who resemble their demographics. But this creates a number of issues. For one, it means that the most influential sponsors — white men — tend to sponsor other white men. It also means that Hispanic women are most likely to seek out sponsors who are Hispanic women. Yet the Payscale data shows that women of color who have sponsors of the same race or ethnicity tend to have lower pay than women of color who have a white sponsor.
To correct for this, financial services organizations should encourage and incentivize men to sponsor women and, specifically, women of color. “Investing in programs that train individuals on how to be a sponsor to someone who’s from a different demographic is important,” Kofman-Burns said. “Organizations should also be tracking who is sponsoring who and look for demographic disparities.”
4. Make leadership development programs available to all employees.
Usually when a company in financial services wants to diversify their leadership pipeline, their first initiative is a leadership development program for underrepresented groups, said Mandapati. “That’s a band-aid solution to a hemorrhaging problem,” she said.
Proposing leadership development for underrepresented groups implies these groups of people have not historically been promoted because of a lack of skill, ability, or qualification, rather than because of systemic bias and discrimination. “There’s nothing that needs to be ‘fixed’ about these people,” Mandapati said. “More accurate is that they are part of a system that has held them back.”
Mandapati recommended making leadership development available to all employees. “Everyone can benefit from this training,” she said. “And more importantly, these programs are often directly tied to core leadership competencies and organizational values, so [companies] are making it really clear what they’re looking for from leaders via objective criteria.”
And even when leadership development isn’t part of a DEIB initiative, it poses problems. The process for selecting individuals for development or leadership opportunities is most often based on informal feedback from managers, noted Kofman-Burns. “Almost nobody has a formal process for this, and anytime you have informal feedback, there’s a huge opportunity for bias to come into the decisions,” she said.
To remedy this, Kofman-Burns recommended that organizations clearly articulate the parameters of what makes an individual eligible for the company’s leadership programs. For example, this could be defining criteria based on answers to questions like What competencies are you looking for? and What skills must this employee have? Once defined, these criteria should be shared with managers and employees alike, notably early-career workers who can use this information to guide their careers and workplace decisions.
“Companies tend to identify individuals early on for leadership opportunities and roles,” Kofman-Burns said. “Then, when a director-level role opens up, companies look to see who is there — and it’s the same individuals they’ve been grooming for years. Companies need to set clear criteria on how those people are identified.” Discrete criteria create more objective processes for identifying individuals for leadership or development opportunities rather than merely relying on informal feedback, which is easily biased.
5. Offer a return-to-work program.
Return-to-work programs are a powerful source of highly educated, motivated, and experienced talent, and were actually pioneered by the financial services industry. In the early-2000s Wall Street took note of what is now a well-known problem: Women were leaving the workplace at the mid-career point, drying up the pipeline for senior leadership positions. Lehman Brothers and Goldman Sachs were among the first to offer a solution in the form of formal return-to-work programs, where they discovered the biases against those who’d taken career breaks was unfounded.
Today, return-to-work programs remain common in the financial services industry and typically come as either a paid returnship, where a cohort of employees is brought on for a fixed period of time and potentially or likely offered a job at the end, or direct-to-hire programs, where returning individuals secure a job offer when they’re accepted into the program.
We know by now that women should not be the sole focus of gender equality efforts. This remains true when marketing your return-to-work programs. Companies should work to normalize extended career breaks and the subsequent re-entry back into the workforce, but avoid messaging around “returning mothers.”
Return-to-work programs are a way to provide financial services companies with the talent they need to improve gender diversity at mid-to-senior levels. The programs also communicate to employees that an extended career break doesn’t render their skills and experience obsolete, and temporarily leaving the workforce for personal reasons is okay — regardless of their gender.
Meaningful progress can’t be made if society continues to categorize gender equality as a women’s issue. To advance gender equality, organizations don’t need programs to empower or support women, or leadership development programs for women from underrepresented groups. Rather, what’s needed is systemic change that makes leaders, managers, and employees aware of their biases and provides tools at every level of the organization to interrupt them. The five strategies outlined here are a powerful place to start.