Are diversity initiatives taking a back seat in the face of the past year's financial turmoil--especially at financial institutions?
Banks, insurance companies, investment managers and other financial institutions made important, noticeable advances on the diversity front in the past decade. You could see that in many circles. More and more women and people of color began to populate trading desks and entry-level corporate-finance programs. More became fluent in exotic derivatives, valuation models, and optimal asset allocation. And more began to take lead roles in deals in corporate or municipal finance.
They became interested in venture capital and private equity. Those who started out years ago progressed to vice president, branch manager, and senior research analyst. Some had started their own brokerages or funds.
In business schools across the country, blacks and Latinos plotted careers as bankers, as traders, as financial consultants, as financial engineers, and M&A advisers. Many could envision the day they would become heads of trading desks, managing directors, sector heads, or top-ranking researchers or salespersons.
Watching mentors and prominent examples, they grew confident in a finance career path. They wanted to be the next generation of CFO's, deal-doers, star analysts, creators of new financial products, or prominent fund mangers. They watched as African-Americans led Merrill Lynch and American Express. African-Americans had become top bankers at Morgan Stanley and Bank of America. Women had become CFO's at Lehman Brothers and Citigroup and "All-American" equity-research analysts.
But have all the progress and sense of urgency slowed down?
Financial institutions last year found themselves with backs against walls, fighting for their lives--scrambling to avert loan and trading losses, reduce and rationalize staff, cut expenses, boost capital, and respond to regulators and the general public. Many understandably worried about panic among depositors and runs on their banks.
Did diversity and the special passion to ensure all aspects of financial services were inclusive and reflected all faces of the general population get pushed to the bottom of corporate agenda?
Most institutions will contend that throughout it all diversity remained high in importance. But keeping it there was a daunting challenge. Last summer, Lehman Brothers, a Wall Street firm that had made admirable progress on the diversity front the last decade, was hustling to maintain its existence. Reducing its balance sheet, shifting top management, confronting a frightened public, avoiding comparisons to Bear Stearns and injecting more capital were an all-consuming preoccupation. Diversity initiatives were likely shoved aside.
Lehman wasn't alone. In a severe crisis, firms' diversity council meetings with senior management are postponed. Diversity follow-up programs, initiatives and scorecards draw less attention. Firmwide enthusiasm and celebration of inclusiveness dwindle. A culture that had been one where minorities finally felt happy and felt belonged turns fierce, mean and Darwinian. Funding for diversity-pipeline programs (SEO, Inroads, Toigo, and Consortium) gets cut or rationalized away. Recruiting budgets are sliced, and recruiting itself becomes erratic or inconsistent.
As the crisis last year ballooned, financial institutions swiftly reduced staff. Those in under-represented groups suffered from "LIFO" staff reduction: last hired, first eliminated--especially at entry-level positions. Just like that, a half-generation of progress was at risk of being dismantled. The next generation of top minority deal-doers, senior analysts, senior vice presidents and managing directors got tripped up right at the starting gate.
Worse, there was the risk that those who followed might get discouraged. They could get disenchanted if they saw few women and minorities ahead of them and could ask themselves, "Why?" or "Why bother?"
The best firms kept the passion in good times and bad. As the world of finance pondered bailouts, new capital, and trading losses, the best firms--faced with the same--reaffirmed their commitment. It wasn't easy, but they did.
They are the ones, who while fighting for existence, still managed to keep diversity high on the agenda, convened diversity-council meetings, and ensured there was a significant pipeline of diverse talent headed their way. And they did so eagerly--while distracted, anxious, and burdened. They had a long-term perspective on inclusiveness.
Top business schools had an important role, too, in helping to keep diversity on the agenda. They reminded corporate recruiters they don't need to go far to find diverse talent. Talent is in their backyards. They made sure the next generation of talent was well-prepared, ready to contribute. And they helped convinced under-represented groups a career in finance is still worth the effort.
Fortunately markets have stabilized and anxieties eased, but the challenge remains. It took decades to get the spirit of inclusion near the top of the agenda. It took just a few months for it to slip and take a back seat. It will take everybody to get it back to where it needs to be and make sure it stays there.