Where gender and racial gaps persist in financial services — and why

October 21, 2021 11:44 AM

Women are still very underrepresented in leadership roles at financial services institutions, despite incremental progress in closing gender and racial gaps, according to new data from McKinsey.

But companies have a rare opportunity right now, thanks to the pandemic’s workplace upheavals, to make changes that could permanently improve the situation for women, according to Jill Zucker, a senior partner at McKinsey, who co-authored McKinsey’s latest Women in the Workplace report, published Thursday.

“We challenge companies to not go back to the status quo, and take this chance to redefine the way we ensure diversity of thought and leadership in our ranks,” Zucker said.

Financial services companies can take concrete steps to reduce bias in hiring, performance reviews and promotions to help women and people of color break down barriers to corporate advancement, she said.

“I think organizations could reset the way we handle diversity and inclusion, race and gender issues now and we’d start to get better results,” Zucker said.

McKinsey’s data draws on information provided by 423 employers in the U.S. and Canada and a survey conducted among 65,000 people at 88 companies between May and August 2021.

Women of color are less represented in top roles

Women don’t climb the corporate ladder at the same rate as men, but women of color are especially underrepresented at every level above entry-level positions, according to McKinsey’s survey.

In the financial services industry, more than half of employees in entry-level positions at the beginning of 2021 were women, but only 27% of C-suite executives were women.

Opportunities to advance beyond entry-level positions are even fewer for women of color. According to the data, women of color account for 21% of entry-level employees but only 4% of C-suite executives.

“In 2020 there was a real push for equality in corporate America and we saw lots of encouraging signs of companies promoting women, but Black and Hispanic women are still very far behind,” Zucker said.

To achieve greater equality, companies must create new systems to measure and reward people at all levels with specific metrics that drive diversity, she said.

“Financial services companies must begin working with women earlier — at the point of that first promotion — to help them knock down obstacles to get to that next promotion," she said.

“Just as we set goals and establish accountability for companies to achieve certain sales or profits, we need to apply that same mentality to closing gender and race gaps in the workforce. Set goals, track progress and tie incentives to achieving milestones,” Zucker said.

Most women are less likely to be promoted than men

Overall, men continue to rise higher and faster than women in financial services organizations — especially compared to Black and Hispanic women — though there are exceptions to the rule.

For every 100 men promoted to a manager role in financial services organizations in 2020, 86 women were promoted to managers. However, Asian women outperformed men, with 107 Asian women promoted to managers for every 100 men.

After Asian women, white women are most likely to be promoted, with 82 white women promoted to management for every 100 men promoted. Promotions for other women of color are even less common, with only 63 Hispanic women and 37 Black women moving up for every 100 men, according to McKinsey’s data.

“One of the problems facing many women of color working in financial services is there is no visual path for advancement. They don’t see where others have advanced before them,” Zucker said.

There’s no specific reason Black and Hispanic women can’t succeed at every level of financial services, but they aren’t getting the opportunity, she said.

“Many women of color have the competence to advance, but they must be given a chance, and a lot more support from companies,” Zucker said.

Fewer women allowed to work from home

One of the intriguing outcomes of the pandemic was the shake-up it forced on many financial institutions’ work-from-home policies.

“We learned during the pandemic that working from home doesn’t mean being less productive, with many people reporting they are working harder from home than they ever worked in their lives,” Zucker said.

Women juggling family and caregiving duties along with their jobs typically are most in need of flexible work arrangements. Forty-five percent of women in financial services say they want to continue to work remotely, compared with only 36% of men, according to McKinsey’s data.

But women still feel that they’re not getting the support they need from their managers to work from home without losing ground, the survey found.

Thirty-five percent of women in financial services said they receive almost no support from their managers to work from home, while only 9% of men said they did not receive support. An equal number of men and women said they get “a little bit” of management support for working from home, while only 16% of women get “a lot” of support compared to 32% of men with lots of management support for remote work.

When management doesn’t fully support women struggling to balance work with managing their personal lives and families, they are more likely to drop off the corporate ladder, according to Zucker.

“Women should have equal opportunities to contribute at every level and be recognized for their work even when they are working remote or in hybrid arrangements,” she said.

Women offer more emotional support to colleagues

Ironically, certain qualities that make great leaders — providing emotional support and empathy — are more likely to be found among women, who are underrepresented at the top, according to McKinsey’s data.

Eighty percent of women in financial services said they gave emotional support to a colleague during the past year, compared with 72% of men. Even among entry-level employees, women were more likely than men to reach out to help colleagues.

When it comes to team bonding events, about half of all women working in financial services said they have taken the lead, versus only 38% of men who said so. Among entry-level workers, 21% of women said they have organized group events for colleagues versus only 8% of men.

“For years and even during the pandemic, we saw that women shared outsized burdens between their jobs and home lives, but it’s rarely recognized and rewarded. And we know anecdotally that women of color feel the need to care for people in the workplace broadly and for other people of color,” Zucker said.

Financial services companies must find ways to acknowledge and account for the hard and soft skills of everyone in the organization who’s helping to drive inclusivity, she said.

“Change requires retooling the way we train employees and measure their performance, because when employees feel cared for and supported, they advance,” Zucker said.