The Case for Diversity at Work and in the Financial Services IndustryThe Case for Diversity at Work and in the Financial Services Industry
Firms that toe the line will miss out on breakthrough innovation.
Years ago, I was fortunate enough to speak alongside Frans Johannson, author of the seminal book on the value of diversity, The Medici Effect. He opened with three questions asking about the correlation between:
Burkas and bikinis
Ice and beds
Termites and architecture
A Muslim woman moved with her family to Australia, which has fabulous beaches and created the burka bikini, which became a revelation not just for religious women but also for those sensitive to the sun.
An entrepreneur owned land in a remote area of Sweden and built the ice hotel, with everything, including beds, made from ice. It became the second most visited tourist attraction in the country. (Spoiler alert: it melts every summer.)
An architect commissioned to erect an office building in Africa with limited access to electricity for cooling borrowed ideas from termites who build their hill homes with many wind tunnels to maintain the temperature to grow larvae.
His premise is that the greater the diversity of ideas, cultures and businesses, the greater the innovation. (Johansson was born in Sweden to a Native American/black woman and Swedish father.)
In a copycat financial services world, especially true in the 401(k) industry plagued by clunky technology, regulations, complex distribution and lack of diversity, is it any wonder how little breakthrough innovation happens and, even when it does, so slowly? The most growth capital is deployed consolidating record keepers, TPAs and advisory firms. A step forward or an investment in the past?
Having attended countless 401(k) conferences and meetings with thousands of professionals from all sectors over the years, my back-of-the-envelope estimate is that 90% are males, with 90% having either attended college in the Northeast or worked for a provider there.
Today, diversity is under attack, even being blamed for the recent aircraft accident in DC. While it will be hard to push for more diversity just for its own sake in any environment, especially now, it might have a chance if it can be proven to yield better results.
When people, especially senior management, have similar backgrounds, they may agree more often and “can relate” better, but at what cost? It might be okay if all clients were the same, but they are not. Letting the old guard rule might be more efficient, but at what sacrifice?
Case in point: More than 90% of plan sponsor TPSU attendees are women, while 90% of the speakers are male. Female lecturers get higher ratings and resonate more strongly. RPAs that bring diverse staff to RFP finalists' meetings have a greater chance of winning.
In today’s environment, many workers are afraid to disagree or even voice a differing opinion, which limits innovation, let alone breakthrough ideas. Organizations that think they have everything figured out and are better than everyone else and are unwilling to engage or share with competitors will suffer. Just ask former Harvard Professor Clayton Christensen, author of the breakthrough book The Innovator’s Dilemma.
So, look around your organization and see if there is significant gender, age, culture and industry diversity. Diverse providers and advisory firms are better prepared for the many changes coming to the financial services industry, especially defined contributions plans experiencing massive new plan formation, the convergence of wealth, retirement and benefits at the workplace, and the inevitable retirement income demand. New entrants, mindful of the past, that understand the current DC ecosystem with workers with a diverse workforce, come from different industries and some old guard, are bound to succeed.
Though it might be hard to quantify, chances are that those with greater diversity are more nimble and creative and will be more likely to thrive in a rapidly changing world rather than wasting energy forcing everyone to toe the line and being selective about the facts that support their ideas and business models.
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