DIVERSITY LESSONS FOR AMERICAN BANKS
African-Americans have complained about discrimation – and dealing with it may require a new approach
Frank Dobbin, a professor at Harvard, has declared that most corporate diversity programmes have failed.
In a Harvard Business Review article, he said they alienate managers and endorsed an alternative: a voluntary, consciousness-raising programme that includes rank-and-file staff along with supervisors.
Could it work? Wells Fargo, a bank that has 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 fairer workplace. Ideas were borrowed from Prof Dobbin, including focus groups with senior business leaders and black brokers from the bank’s private client group and wealth brokerage 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, the 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 agreed this year to pay $32.5m in a settlement, and in 2013, Bank of America’s Merrill Lynch resolved a racial discrimination employment case for a record $160m. The companies did not admit guilt.
“In general, the settlements don’t lead to changes in the composition of the workforce,” said Prof Dobbin, who is now advising Wells Fargo. “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.
“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. “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 reports on the number of under-represented minorities to a monitor. These programmes usually last four years.
A programme like that, Ms Friedman said, “probably was going to be met with hostility. Every time you put together a programme, the programme failed, not because it was never implemented, but because they found a work-around.”
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 symptoms.”
Prof 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 is more effective, he 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 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 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.
As the Wells Fargo broker settlement was in its final stages, Prof Dobbin spent a day with the bank’s top executives, explaining his findings. He 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 is important managers are in the room, so they can directly communicate the diversity and inclusion game plan with their teams, Prof Dobbin said.
“You might expect financial services, where there are a lot of data crunchers, to be more evidence-based,” Prof Dobbin said. “It looks like they’re moving in that direction.”
Merrill Lynch’s leadership councils are also aimed at boosting interaction between black brokers and their colleagues. Before the settlement, the bank had tried a string of diversity programmes. But now people involved in the council have told Ms Friedman the newer method feels more like an “avenue for being heard when you’re being aggrieved”, she said. If focus groups and councils do not succeed, the next step may be a familiar one.
“They will be sued again by the next generation of people whose lives are horribly impacted by the treatment,” Ms Friedman said. “It will cost them a lot more money.”
Managers see mandatory diversity training, whether required by a court or by corporate headquarters, as a control tactic