RETHINKING DIVERSITY TRAINING
Wells Fargo tries to foster fairness at work after black brokers sue
Frank Dobbin, a profes-NEW YOR K sor at Harvard, has declared that most corporate diversity programs have failed. In a Harvard Business Review article last year, he said they alienate managers and endorsed an alternative: a voluntary, consciousness-raising program that includes rank-and-file staff along with supervisors.
Could it work? Wells Fargo & Co., a bank that’s faced racial discrimination allegations, is willing to try.
As part of a US$35.5 million settlement with black financial advisers, Wells Fargo agreed to take non-financial measures to create a more fair workplace. They borrowed ideas from Dobbin, including focus groups with senior business leaders and black brokers from the bank’s private client group and wealth brokerage services operations.
“The question was, ‘How do you get good people in a room together who all care about the issue of changing the outcome and get ideas?’ ” said Linda Friedman, lead counsel for the plaintiffs.
Wells Fargo’s efforts are an important experiment for the financial-services industry, which has faced accusations of discrimination for decades. MetLife Inc. agreed this year to pay US$32.5 million in a settlement, and in 2013, Bank of America Corp.’s Merrill Lynch resolved a racial-discrimination employment case for a record US$160 million. The companies didn’t admit guilt.
“In general, the settlements don’t lead to changes in the composition of the workforce,” Dobbin, who’s now advising Wells Fargo, said. “That’s why both sides were kind of interested in implementing the things that we have shown to be effective in other firms: targeted recruitment and mentoring.”
African-American financial advisers at Wells Fargo said they were under-represented among the bank’s 15,000 registered brokers and systematically excluded from lucrative teams.
The firm’s discriminatory policies and practices for client account distribution and assignments led to lower pay, the complaint said. Wells Fargo disagreed with the claims.
“We look forward to Professor Dobbin sharing his research with leadership as we explore new approaches for advancing an even stronger diverse and inclusive culture,” a Wells Fargo Advisors spokesperson said in an emailed statement. “We are continuing to respect and embrace new ideas.”
A typical settlement includes a consent decree, in which a bank mandates diversity training for managers or agrees to send regular reports on the number of underrepresented minorities to a monitor. These programs usually last four years.
A program like that, Friedman said, “probably was going to be met with hostility. Every time you put together a program, the program failed, not because it was never implemented, but because they found a workaround.”
Meanwhile, the underlying issues persist, said Katherine Phillips, a Columbia Business School professor, who has researched diversity and ethics practices: “The first step of recovery is admitting that there’s a problem and trying to make sure they’re solving the problem and not just the symp- toms.”
Dobbin said managers see mandatory diversity training, whether required by a court or by corporate headquarters, as a control tactic. Workshops, job tests and grievance systems can also draw resistance because managers see them as an affront to their judgment. It’s more effective, the professor said, to enlist managers in coming up with a plan to prevent bias from creeping into the business structure.
Wells Fargo is seeking to reform staff behaviour and improve its public image on several fronts after settling a federal review last year into the practice of signing up customers for new accounts without their permission. The lender has bolstered internal controls and abandoned sales and bonus targets that were linked to the abuses.
The Office of the Comptroller of the Currency in March slashed a rating of how the bank serves communities, citing enforcement cases that faulted the company’s treatment of minority neighbourhoods, military personnel and women who had recently given birth. The company said it was committed to addressing the regulator’s concerns.
As the Wells Fargo broker settlement was in its final stages, Dobbin spent a day with the bank’s top executives, explaining his findings. The professor has already identified one area in need of improvement, saying the company needs to hire more black advisers.
The focus groups will start with conversations about improving recruitment and retention of black brokers. It’s important managers are in the room, so they can directly communicate the diversity and inclusion game plan with their teams, Dobbin said. He also stressed that companies need to use metrics to see whether their efforts are actually helping to bring in more minorities and deploy them on favourable assignments.