Women in finance: beyond the 'glass ceiling'

Achieving gender balance requires change at every level


Four decades have passed since management consultant Marilyn Loden coined the phrase “glass ceiling” to describe the invisible barrier blocking the way for women to progress to senior positions. In the financial services sector, the ceiling seemed to be made of toughened glass. But does the metaphor still adequately encapsulate what’s happening today, or has the quest for gender balance shifted its focus?

London Business School alumnae Sarah Bates, founder of the Diversity Project, Chair of the Diversity Project Charity and former Chair of St James’s Place Wealth Management Group, and Clare Woodman, Head of Morgan Stanley’s EMEA (European, Middle East and Africa) division, have a wealth of insights to share.

Despite the #MeToo campaign and the attention given to the gender pay gap, attempts to increase both the number and advancement of women in the financial sector are moving slowly. “The pace is not where any of us would like it to be,” says Woodman. “The metrics are not showing the direct result of this significant momentum we have at the moment.”

Bates agrees, saying that in her field of investment management, “Something hasn’t changed.” Citywire’s Alpha Female Report 2018 shows that only one in nine UK fund managers is a woman. She notices that there seems to be more female fund managers aged over 55 than younger women entering the profession and recently heard that only 13% of the graduate applicants to a large asset management company were female. She says: “For a while, a career in financial services was what people wanted to do after business school. Perhaps tech firms are now attracting that talent?”

Something seems to be putting women off opening the door to careers in financial services long before hitting the glass ceiling is even a possibility. Woodman says Morgan Stanley has made good progress with its early outreach programme, in which senior women visit schools to tell girls about the range of career opportunities in the sector – and to debunk some of the myths surrounding it. Subsequent graduate recruitment figures prove that this outreach is working, but both she and Bates agree that firms need to look very carefully at the best ways of finding new talent.

Casting the net more widely

Bates questions whether institutionalising the recruitment process and making it ostensibly more objective has replaced one sort of elitism with another by attracting only “a certain type of very competitive and capable alpha male or female” to investment management. To reach the broadest range of candidates, companies need to scrutinise every stage of how they recruit.

This starts with job adverts in which, Woodman says, the style of language makes a huge difference. Bates agrees. “You have to be very careful about specifying candidates’ qualities,” she says. “There’s academic evidence that if you use language like ‘highly competitive,’ ‘warrior’ and ‘outstanding’, you put off most members of the human race.”

When it comes to shortlists, she is very clear: ‘If you haven’t got women on shortlists, you must jolly well ask why not.’ Woodman recommends that recruiters think more broadly – going back to look at candidates for a second or third time, or enlisting the help of an additional search firm to see if different names come up. “Be dogged and determined,” she advises. “If you consistently emphasise diversity, people work harder at coming up with more balanced shortlists.”

Screening tests can also throw up problems. Bates points to US research showing that women taking online multiple choice maths tests for university entrance scored significantly lower than men (who were more willing to guess and performed better when up against the clock), but that their results significantly under-predicted performance in final exams. Timed tests reward a particular personality type, but may fail to measure other qualities important in the workplace, such as the ability to gather and evaluate information and to express ideas clearly.

Andy Haldane, Chief Economist at the Bank of England, has suggested another way of interpreting test results. He gives an example of a situation where two candidates sit a test for a job. Candidate A scores 8 out of 10 and Candidate B scores 4 out of 10. Most people would employ Candidate A. But if Candidate B correctly answers the two questions that Candidate A got wrong – or that the majority of the company’s existing employees got wrong – there’s a strong case for employing Candidate B.

Employing the higher-scoring candidate may look like a less risky strategy, but hiring people from the same background who all think alike actually increases risk. There’s less debate, fewer questions are asked and ideas go unchallenged. Haldane points out: “Groupthink was the reason most banks – as well as many regulators, central banks and academics – failed in 2008.” As lack of diversity was the cause of these failures, greater diversity can be the antidote to their recurring in future.

"The benefits of mixed teams show that there are no winners in a workplace battle of the sexes"

Similar beneficial dynamics play out within companies. Academic research indicates that employing a greater proportion of women acts as a restraining influence on the riskier investment behaviour of men. Mixed gender teams of fund managers outperform funds managed by single-sex teams by balancing out risk and producing less volatile returns.

Such creative and financial benefits of mixed teams show that there are no winners in a workplace battle of the sexes. Instead, men and women who want to reorganise the way we work are joining forces, both within companies and through organisations such as the 30% Club and the Diversity Project, chaired by Bates.

Government has played its part, too. In 2016 Jayne-Anne Gadhia, CEO of Virgin Money, was invited to lead a review into the representation of women in senior management in the sector. Her report, Empowering Productivity: Harnessing the Talents of Women in Financial Services, revealed that only 14% of executive jobs were held by women. The report’s recommendations became the backbone of the Women in Finance Charter, which asks financial services firms to commit to four key actions:

• Appoint a member of their senior executive team to be responsible and accountable for gender diversity and inclusion

• Set and publish internal targets for gender diversity in their senior management

• Publish progress annually against these targets in reports on their website

• Have an intention to ensure that the pay of the senior executive team is linked to delivery against these gender diversity targets.

The March 2018 review of progress made by the original 68 signatories to the Charter reported that more than a quarter have already met their targets and more than a half are on track to do so.

Developing and retaining female talent

Gadhia’s report also identified a “permafrost” in the financial services sector’s mid-tier – women were either failing to progress or just leaving. The common assumption is that women fall out of senior roles because they leave to have children, but the research found this was simply not the case. Women who didn’t have children were just as likely to tread water at work or leave. The problem was more complicated. The whole culture needed to change: “Not many women leave to do yoga full time,” says Woodman wryly.

“They leave when they don’t think the management team supports them and they leave to perform other highly demanding roles within or outside the industry. One of the most important areas a firm has to work on – which never gets enough attention – is the way managers develop talent. Women have a tendency to be less vocal about their aspirations. Even when they are, managers have not always been open to thinking of different leadership styles.”

What is the solution to developing and retaining female talent? Part of the answer lies in rethinking how business is done. Woodman and Bates agree that the presenteeism mindset needs to go, for a start. Keeping in tune with a generation used to communicating and contributing remotely means businesses must make as many roles as possible open to agile working.

“This isn’t about giving women with kids a laptop,” says Bates. “It’s about getting the job done efficiently.” Happier employees, both male and female, who are not exhausted by long commutes are more engaged and more productive.

While being physically located in an office may no longer be essential, feeling supported within the organisational structure remains vital: “At Morgan Stanley we’ve instituted a process where we’re having constant and frequent conversations about our rising stars – both women and men,” says Woodman. “The focus is on mentorship, effective sponsorship and talent management.”

This includes the successful ISG Connects programme, a six-month mentoring initiative in the Institutional Securities Divisions which carefully matches women with a senior colleague. Often these pairings develop into a form of sponsorship which can act as a catalyst for the junior employee’s career as the senior colleague advocates for them to gain experience and take on more responsibility.

If women are taking a career break to have children or fulfil other caring commitments, Bates urges managers to keep in touch with them. She commends those businesses – in particular the big investment banks – who have introduced programmes for women looking to return to the workforce. “They give access to a pool of enormously competent and capable people,” she says.

Where are we now?

Focusing on the glass ceiling may not be helping bring about change. While it’s critical that women hold senior leadership positions, not least because they act as role models for their younger colleagues, focusing too rigidly on the achievements of these highest flyers risks distracting attention away from the far wider question of how gender balance is being sought today.

Bates’ and Woodman’s CVs mark them out as trailblazers and glass-ceiling smashers, but their actions and aspirations encompass far more. Both are committed to creating inclusive and flexible working environments and to increasing the number of women working at every level in the sector: “My emphasis is on building the pipeline – attracting a high percentage of women to join the firm and then retaining them and inspiring them,” says Woodman.

Gender balance is not just a ‘nice to have’. With algorithms increasingly automating tasks, the way companies will differentiate themselves – and protect their bottom lines – is through creativity and innovation. Bringing together people with different backgrounds, experiences and perspectives can give rise to a burst of creativity described by Frans Johansson as “the Medici Effect.” “When you step into an intersection of fields, disciplines or cultures,” writes Johansson, “you can combine existing concepts into a large number of extraordinary new ideas.”

These are the sort of moments that Bates describes as her true career highlights, when providing a spark became a springboard for someone else’s thought and creativity. Occasions when, as she puts it, “someone comes back with a better answer than the question you asked.”


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