The finance sector faces a growing diversity problem. Although greater gender, racial and ethnic diversity is proven to boost company bottom lines, discussions of diversity’s benefits don’t always translate to action for hiring managers in US banks and financial institutions.
The need to hire more diverse candidates forces financial businesses to think differently about where to find talent, says Julia Streets, CEO of Streets Consulting and founder of the DiverCity podcast.
In particular, says Streets, financial hiring managers face concerns over supply, including the diversity of the candidate pool itself. Even when candidate pools offer a wide range of candidates, however, making the best decisions can be tough.
Artificial intelligence can help. By screening candidates and spotting patterns, this adaptive technology can help financial institutions fight bias without losing out on top talent.
The Diversity Problem in Finance Hiring
Although 90 percent of financial firms express a commitment to diversity, results lag behind promises. According to a study by Stacey Chin, Alexis Krivkovich and Marie-Claude Nadeau at McKinsey, “women remain significantly underrepresented in the upper-levels of financial services companies.”
They continue: “Women and men in financial services begin their careers at parity, making up roughly equal portions of entry-level staff, but higher up the ladder, women account for only 19 percent of positions in the C-suite.”
Women are underrepresented in executive positions throughout the US; on average, only 22 percent of business leaders are women across all industries. Finance’s 19 percent figure, however, puts it behind the average for all industries.
Both men and women of color have even less representation in financial C-suites. There, men of color account for only eight percent of leadership; women of color, only one percent.
“The lower representation of women does not appear to be driven by attrition,” say Chin, Krivkovich and Nadeau. “And yet, as they advance through their careers, women steadily lose ground to their male peers at every stage.”
A similar pattern holds true for financial professionals of color. The percentage of senior-level managers in color in the financial services industry increased slightly between 2007 and 2015, according to a February 2019 study by the US General Accounting Office (GAO), but representation still lags behind the general population.
“I started in banking and finance in 1981 and things have not got better,” says Anne Boden, CEO and founder of Starling Bank. “We’re making strides in the boardroom, with non-executives being more likely to be women, but we still don’t have enough females in senior positions.”
The will to improve diversity is necessary, but it is not sufficient. Combining the will to increase diversity with the proper tools is what yields results.
How AI Improves Diverse Hiring
Artificial intelligence (AI) differs from predecessor programming in its ability to analyze and adapt to the information it receives. While conventional programs are static sets of instructions that process inputs the same way every time, AI-based programs have the ability to adapt to the inputs themselves.
This adaptability gives AI the ability to offer unprecedented support in candidate recruiting and screening, especially when diversity and inclusion are at stake.
First, artificial intelligence makes it easier for companies to explore, analyze and use the vast amounts of data collected on both candidates and employees.
For instance, AI-based tools can help companies evaluate past hires for a number of factors. By identifying patterns in employee skill sets, these tools can reveal which skills and traits are most closely correlated with success in any given position, allowing recruiters to focus on finding candidates with those skills.
The tools can also help reveal where companies may have favored candidates in the past based on factors like gender, ethnicity or skin color, researchers Paul R. Daugherty, H. James Wilson and Rumman Chowdhury write in a 2019 article in the MIT Sloan Management Review.
Financial services companies that struggle to find qualified candidates from diverse backgrounds often realize that their own talent pipeline isn’t as diverse as it needs to be. AI-based tools can improve the candidate pool itself, making it easier to choose candidates based on skill.
For example, an AI-based text editor could help recruiters and hiring managers analyze past job postings and create postings that attract qualified candidates from historically underrepresented groups. By using such a tool, Australian software company Atlassian increased the number of women among its new hires from 10 to 57 percent in just two years, says Aubrey Blanche, the company’s global head of diversity and belonging.
Unconscious bias is the human tendency to make split-second decisions without consciously considering the sensory information that fed that decision. Because these biases operate outside conscious awareness, they can be difficult for even the most conscientious hiring managers to fight, says John Jersin, vice president of product management for LinkedIn Talent Solutions.
AI, however, provides a way to fight unconscious bias by placing the AI itself as an unbiased party between candidates and recruiters. “As [hiring managers] are shifting to use artificial intelligence to help hiring decisions, we lay out those decisions in the data and the code,” says Jersin.
For instance, AI application systems can screen identifying information from recruiters by assigning a numeric identifier to each application. Without information like candidates’ names, hiring managers are free to focus on each candidate’s skills and accomplishments without unconscious bias unfairly weighting the scale.
Contextualizing AI-Based Recruiting for Diversity and Inclusion
While artificial intelligence offers a number of benefits in recruiting, it remains only one tool recruiters and hiring managers can use to improve diversity and inclusion within a financial services organization. To maximize its benefits, AI-based recruiting should be placed in context with other aspects of the organization’s recruiting, team and culture.
Retain the Human Touch
Artificial intelligence can help human recruiters spot patterns and fight unconscious biases, but it’s unlikely to replace the person-to-person connections essential to employment branding and culture-building.
For instance, Swedish recruiter TNG recently began testing an AI-enabled robot named Tengai, who conducts screening interviews for employers. While Tengai offers similar benefits to an AI-enabled platform or chatbot, the use of a robot for the interview itself may raise concerns, says Dr. Malin Lindelow, a psychologist who specializes in recruitment.
“We have a lot of areas where there is a lack of employees, so actually attracting candidates is a big issue. I’m concerned that [Tengai] will be an impersonal and not very selling experience for the candidate,” Lindelow says.
Financial services companies with similar concerns can balance them by using AI as a tool to improve their own screening decisions, their employer branding and the relationships they build with candidates. For instance, a company may use the AI to gather and transmit information to human recruiters, who then contact candidates, hold interviews and introduce candidates to potential co-workers.
Diverse teams combine a greater range of perspectives on any given problem, making the team more innovative, flexible and resilient. To leverage these benefits, however, financial services teams must understand that the goal of greater diversity in recruitment is to maximize these outcomes and train their teams accordingly, says LaKesha Womack, founder of Womack Consulting Group.
“Many organizations attempt to teach diversity but don’t practice it,” Womack tells Forbes. “Having diverse team members at all levels of your organization will ensure that your team members see the humanistic qualities in people of different backgrounds.”
While AI-based tools can improve the diversity of your candidate pool, that diversity won’t benefit the organization overall unless it’s given a culture of inclusion in which to thrive, says Jay Shah, CEO of Personal Capital. “It’s critical for leaders to create a culture of inclusion and opportunity where every team member’s voice is heard so they, and the companies they work for, can achieve their potential,” says Shah.
When diversity goals are set clearly and the right AI-based tools are chosen to pursue those goals, financial services companies have laid the groundwork to turn their aspirations of building more diverse teams into a reality.
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