I’m not going to rehash the economic benefits a company accrues by employing progressive diversity policies. The benefits are clear. Companies that promote diversity do better financially than those that do not. If this fact is obvious, why is there such a shortage of diversity in the finance function, and what can a CFO do about it?
First, the top of the funnel is still small. According to a 2019 study by the AICPA, most students studying accounting are white, and only 7% of students pursuing undergraduate or graduate degrees are Black. And an even smaller percentage take the CPA exam. Once in the profession, either at a firm or in private industry, BIPOC (Black, Indigenous, People of Color) finance professionals advance at a lower adjusted rate than their white peers, to the point that finding a diverse leader in the CFO’s chair or among their direct report teams is a rarity.
Some of the challenges confronting CFOs in creating more diverse teams are generational. Widening the top of the funnel, for instance, requires an intense, long-term focus on encouraging students at the primary and secondary school level to consider accounting as a career. However, there are some things that financial leaders can do that will have more immediate benefits as long-term plans progress. On the recruitment side, several interventions can improve diversity hiring results, including the following.
- Set the expectation that diversity hiring is a priority and then practice it in your own hiring decisions. Nothing encourages behavior change more than seeing your boss practice it herself or himself. CFOs who make conscious and visible efforts to improve their diversity hiring practices will see similar results from the teams who report to them.
- Make a distinction between equity and equality. Speaking from 23 years of experience, I believe there is no such thing as a perfect candidate. Your job description is a living document, and your thoughts about the position should incorporate the entirety of the experience a candidate brings to the table. Getting a new and valuable perspective to the table often takes precedence over having 15 years of experience versus 20, particularly because diverse financial leaders sometimes don’t get the same career development opportunities.
- Be able to articulate your value proposition. The pool of diverse finance leaders in corporate America remains shamefully small. As a result, high potential leaders with diverse backgrounds are often bombarded with inquiries. A CFO must create meaningful dialogue with in-demand diverse talent focused on their career development aspirations. This individualized commitment builds trusting relationships that will enhance the ability to access such sought-after talent.
- You need to be recruiting all the time, not just when you have an opening. Focus on building long-term relationships with potential candidates. An openness to partnering with your firm’s talent acquisition group on pipelining diverse talent through exploratory conversations and opening development opportunities on your team makes your hiring plan more robust and strategic.
All of these suggestions can have a positive short-term impact on your ability to attract your team’s diverse talent. However, the challenge will not be truly addressed until we confront the more systemic issues in education and access that have contributed to the scarcity of diverse talent in the financial profession.
Similar challenges confront the function in the area of gender diversity and, while there is a long way to go in achieving real gender equity, substantial progress has been made. The number of female CFOs at Fortune 500 and S&P 500 companies is at an all-time high. These gains can be attributed to long-term investments in attracting more women to the profession early in their careers, creating more inclusive environments through the establishment of mentoring programs and employee resource groups, and large money managers holding their portfolio firms accountable for gains in this area. It has been a generational effort and now needs to be applied to achieve similar BIPOC gains.
So, where is a financial leader to start? First, have a strong understanding of your organization’s diversity, equity, and inclusion strategy and how you can leverage resources available companywide to address your department’s diversity goals. This is particularly true in the areas of recruitment and management development.
If you have a financial rotational program, does your talent acquisition function specifically recruit out of historically black universities and colleges or organizations that support BIPOC student participation in the function, like the National Association of Black Accountants?
On the development side, have you invested in unconscious bias training with your direct report team to ensure they are using inclusive management practices? Are the many diverse perspectives of the colleagues wh work within your organization being fully accessed?
As diversity becomes a more significant performance metric for individual leaders and organizations, particularly public companies, the CFO is in a unique position to lead in this area. Considering the influence the CFO’s office has in developing financial objectives, there is an opportunity for financial leaders to incorporate diversity considerations into how they achieve those objectives.
Just as importantly, as a member of the executive team, the CFO has an opportunity to shape how the finance function improves its diversity, particularly from the standpoint of recruitment, development, and succession. Given the events of 2020 and the increased scrutiny of racial justice issues, the time is ripe for change. Let us as financial leaders not allow it to go to waste.
John Touey is a principal at executive search firm Salveson Stetson Group with more than 20 years of experience providing executive search, human resources, and management consulting services to health care, financial services, utilities, manufacturing, and pharmaceutical organizations. Follow him @JohnTouey.