Different socioeconomic backgrounds are a key source of diversity of thought, but also intersect with many other diversity traits. The worlds of business and finance cannot achieve true diversity without taking it into account.
Read this article to understand:
- Why it makes sense to recruit top talent from across society, rather than competing with blue-chip companies to hire from a narrow pool of like-minded candidates
- The challenges of combatting a deep-seated desire to conform, which leads to a tyranny of ‘fit’, a misrecognition of merit, and a tendency for social class to be self-sustaining
- How we can start cracking the ‘class ceiling’ to make financial professions more socioeconomically diverse and inclusive
Leave three Englishmen in a room and they will invent a rule that prevents a fourth joining them
Julian Fellowes’s 2004 novel Snobs1 hilariously depicts the inner workings of the British upper class. Along the way, it provides excellent insight into its codes, nonverbal cues, and all the small ways through which its members recognise and accept each other – typically at the exclusion of everyone else. Being accepted not only requires sponsorship and introductions by the right people, but also internalising these cues and making them second nature, with any faux pas often resulting in mockery and disdain.
Satire aside, big business and finance are not so different from the world Fellowes describes, with a vast majority of upper and middle-class employees and, to date, less acceptance of people from lower socioeconomic backgrounds. Research commissioned by the City of London Corporation in November 2020 found that 89 per cent of senior-level employees in financial services were from a higher socio-economic background by parental occupation.2
Just ten per cent of white British people from working-class backgrounds attain high-status jobs, while in the US, recent research found workers from lower social-class origins are 32 per cent less likely to become managers than people from higher origins, an even greater gap than for gender (27 per cent) or race (25 per cent).3,4
“Even when individuals from working-class backgrounds are successful in entering the country’s elite occupations, they go on to earn, on average, 16 per cent less than colleagues from more privileged backgrounds,” wrote Sam Friedman and Daniel Laurison, authors of The Class Ceiling. “More significantly, this class pay gap is not explained away by conventional indicators of ‘merit’. A substantial gap remains even when we take into account a person’s educational credentials, the hours they work and their level of training and experience.”5
Yet socioeconomic diversity is only just starting to be considered as part of companies’ diversity and inclusion (D&I) initiatives, both because it is a less visible trait than gender or ethnicity, meaning it is easy to overlook, and because – shockingly – discrimination based on class tends to remain socially accepted to this day.6
“I felt keenly disadvantaged as a working-class individual trying to enter the legal profession and never felt this from the angle of gender. Despite this, there were far more initiatives at the time promoting access into the profession for women and very little for students from my socioeconomic background,” said Sophie Pender, founder of the 93% Club, in a recent interview with the Diversity Project. “Importantly, it's not a protected characteristic, meaning that individuals are not protected from unfair prejudice as a result of their socioeconomic background.”7
In addition, those that do make it often hide their origins and adopt the social codes of the majority to blend in. “In many senses, social mobility is invisible and working-class people who come into professions like law or finance tend to assimilate and get completely lost,” said Pender. “If you listen to my accent now you would never know that I grew up on a council estate in north London.”
There is, however, a strong case for finance and other elite professions to become more socially inclusive.
Being civilised makes moral and commercial sense
“In a civilised society, there should be no link between educational opportunities and family income, so that all young people are given the chance to fulfil their potential regardless of their family background, school or where they live,” noted Lee Elliot Major, professor of social mobility at Exeter University and former CEO of the Sutton Trust. “Greater social mobility is beneficial to society in a number of ways. Improved social mobility leads to better matches between people and jobs and the talents of all members of society recognised and nurtured and barriers to accessing jobs are reduced.”8
Mirza Baig, global head of ESG investments at Aviva Investors, adds this is true within the financial services industry. Since there is no link between a person’s talent and their socioeconomic background, employers are likely to hire a much stronger set of candidates if they look at those with the highest potential across a wide social spectrum.9
If you get the top performers from every talent pool, you will be richer in terms of the skills and work ethics of the people you're bringing in
“There is no relationship at all between intelligence, capability and the life you were born into; there will be bright people and less able people in all social strata,” he says. “But if seven per cent of the country goes to private schools, and they make up 80 per cent of your hiring, by definition you're going to get a spectrum of people from the good all the way through to the less competent; conversely, if you get the top performers from every talent pool, you will be richer in terms of the skills and work ethics of the people you're bringing in.”
In addition, because socioeconomic diversity intersects with so many other diversity traits, D&I cannot be resolved without taking it into account, ensuring one characteristic is not promoted at the expense of others. In the US and UK, there is a strong correlation between ethnicity and socioeconomic status (SES), making it difficult to tackle one without the other, while focusing on the issues separately can lead to hiring high-SES women or ethnic minority individuals who are not necessarily representative of their wider group.10
Friedman says organisations tend to silo different types of diversity characteristics, or even play them off against one another, despite the fact many of these characteristics intersect in complex ways.
“People at the intersections of marginalised categories often face double or triple forms of disadvantage and, in our analysis, you can see that quite clearly in terms of pay. For example, women from working-class backgrounds face a clear double disadvantage that is greater than the class and gender pay gap put together,” he says.
“Similarly, different ethnic categories and groups in the UK have very different class compositions. On average, the British Indian and Chinese populations are far more privileged than the white population, whereas Bangladeshi and Pakistani communities are much more disadvantaged in terms of their socioeconomic background,” he adds. “We really need to understand all these nuances. But a key takeaway is that class privilege doesn't necessarily work in the same way for non-white people; they don’t get the same following wind from it in the workplace.”
Constructive conflict and missed opportunities
In her book Wilful Blindness, award-winning chief executive and author Margaret Heffernan argued ‘constructive conflict’ is precisely the role boards of directors must play, for which diversity of thought is a necessary condition. She wrote:
“That the boards of private companies and public organisations are filled with like-minded individuals, often selected because they can be relied upon to agree with one another, explains many institutional failures we have seen in the last twenty years. […]
“Fostering diverse groups that can, and do, look for and debate problems is the job of governance bodies. In this issue, nothing less than the legitimacy of business is at stake.”11
Baig adds that, more broadly across organisations, individuals from lower socioeconomic backgrounds are not only cognitively more diverse due to their different experiences, and thereby able to generate constructive conflict, but also tend to be more resilient, innovative and proactive.
Succeeding means you will have to proactively read and understand the curriculum on your own
“Of course, it is a generalisation and doesn't apply to everyone, but effectively, if you are at a school that provides limited guidance and support, succeeding means you will have to proactively read and understand the curriculum on your own,” says Baig. “You need to find alternative ways of getting access to learning materials to get through college and university. And while many people choose to work alongside their studies, more disadvantaged students have to. They must learn to organise their time, effort and workload just to keep pace with students from more privileged backgrounds.
“The student who makes it at an equivalent level has had to show so much more innovation, creativity and drive just to get to that same level. That doesn't mean we discount the achievements of students from more affluent backgrounds, but we need to recognise the additional value of the drive, journeys and experiences of those disadvantaged students,” he adds.
Randall Peterson, professor of organisational behaviour at London Business School, also argues that, while we remain short on data, diversity delivers very specific outcomes and processes that benefit organisations. On gender, he references a recent project conducted for the Financial Reporting Council (FRC), which found the more women are on a board, the more collaborative the working dynamic becomes, leading to greater cooperation with stakeholders, reduced revolts from shareholders and therefore better performance. He says similar benefits can be found for socioeconomic diversity.
That's the missed opportunity we suffer because we don't really embrace socioeconomic diversity
“There's a reason why a lot of the Fintech for mobile phones came out of Africa and not here,” he explains. “Those people had real insight into how average people are banking, and there wasn't such a disconnect as we have. If more people who are working class and don't really have or use a bank account but do use a phone worked in finance, we would have figured it out. But we didn't because we aren't diverse enough in our own banks. In Africa, they figured it out and we're now importing it back. That's the missed opportunity we suffer because we don't really embrace socioeconomic diversity.”
While most banks overlook low SES customers because their transactions tend to be small, the sheer volume creates a huge opportunity. He mentions a recent collaboration with a bank in Egypt that decided to position itself as an intermediary for these types of transactions. “It came in and spotted that opportunity none of the big banks were spotting – and, of course, in the pandemic, nobody wants to touch cash. Talk about a win for them,” he says.
However, changing hiring practices to broaden the talent pool and transforming company cultures to foster constructive conflict is fraught with difficulties.
A complex challenge
In a recent study on board diversity conducted on behalf of the FRC, Peterson found boards with strong female representation tended to only have high socioeconomic status (SES) directors.
“The implication is that we're dropping low SES men off boards and putting on high SES women,” he says. “I don't want to disparage the women who've been added or the contributions they've made, but one group at the expense of another just doesn't feel like real movement forward.
You can put some non-white faces in, but they turn over quickly if you don't engage them properly
“In fact, we saw boards that did well with women struggled with race and socioeconomic status. Boards that did well with race, for example, actually had a much more difficult journey in the sense you really have to look at your own culture to make that work. You can put some non-white faces in, but they turn over quickly if you don't engage them properly,” he adds.
While diversity of thought and backgrounds bring different perspectives, it can make decision-making harder because there are more ideas on the table. For company boards short on time, bringing in high SES women is therefore easier than tackling racial or socioeconomic diversity. He gives the example of Rachel Lomax, former deputy head of the Bank of England and current non-executive director of Heathrow Airport, among other roles.
Lomax was once the guest speaker at an event organised by Peterson, and she was asked for the secret of her success as a woman in a man’s world. Peterson says her response was that, aside from her gender, she was just like the successful men she worked with, having gone to the same schools and thinking much like they did.
“As I remember, she would even recognise that, although that was helpful to her, it wasn't solving the bigger problem,” says Peterson. “Even the people who benefited from this can see the ‘dead-endness’ of it. That doesn’t diminish her contribution; it just says we haven’t achieved the kind of diversity we are hoping for.”
This is also found beyond board-level hires for a number of reasons.
Conforming gives our life meaning
Citing academic studies, Heffernan explains we are likely to feel hopeless and demotivated when excluded or rejected, while taking an independent stand against a group causes our amygdala, which governs our emotions, to become highly active, indicating something tantamount to distress.
She noted: “We conform because to do so seems to give our life meaning. This is so fundamental a part of our evolutionary make-up that it is strong enough to make us give the wrong answers to questions, and strong enough to make us disregard moral lessons absorbed since childhood.”12
D&I initiatives can intensify the feeling of being different
This has three consequences. Firstly, corporate D&I initiatives can make people feel exposed, when what they want is to blend in. “When you’re from an ethnic minority, you’re already incredibly visible,” says Vaidehee Sachdev, people pillar lead and senior impact analyst at Aviva Investors. “D&I initiatives can intensify that feeling of being different. Sometimes, it can feel like we have professionalised the D&I discussions to the extent they may even risk alienating the people they’re aimed at supporting.”
Secondly, managers often feel irked by those who express different viewpoints, which in large part explains their tendency to hire, sponsor and promote those most like themselves, and put unconscious pressure on dissenters to conform.
“If you have diversity of thought, it creates what us academics call ‘representational gaps’, meaning how I represent the problem and how you represent the problem are different. That is the most difficult thing for groups to deal with, on boards but also more generally across an organisation,” explains Peterson.
“The thing that makes socioeconomic status more difficult is that, if somebody looks different from you and they come up with a different idea, you're not entirely surprised, because they're obviously different from you,” he adds. “But when they look just like you and they're coming up with a different thing, it's really jarring. People tend to reach the conclusion that this person doesn't like them, as opposed to ‘he has a very different experience’ because we all expect people who look like us to think like us.”
Thirdly, people from different backgrounds who make it in elite professions tend to shed their identity to fit in (See The tyranny of “fit”).
“People who make it from a less-privileged background tend to morph into the established culture. As they become more senior, they almost shed their skin, so you don't have senior role models from different backgrounds because they can often become indistinguishable from the privately educated cohort,” says Baig.
“I'm going to talk from personal experience,” he adds. “I don't speak in the same way or use the same vocabulary as my friends who have never had any exposure to the City. But 20 years of spending most of my day in that environment means I'm a very different person to what I was in my early twenties, and now I'm quite clearly distinct from my family and friends.”
Class tends to be self-sustaining
Friedman explains this can create a sense of guilt or betrayal about abandoning their origins, which can partly explain why people from working-class backgrounds are not clamouring for promotions and leadership positions. “And so, decisions to stay where they are, to not migrate to London for example, are more complicated than simply a lack of ambition or confidence,” he says.
Peterson adds this is reinforced by the fact social groups tend to be self-sustaining. “For example, my working-class grandmother always maintained education ruins people. What she meant by that is it means you move away, you have a professional job, you don’t come home very much, you start not to engage with the family in the same way and it ruins you as part of the family,” he says.
High socioeconomic status tends to be reproduced inter-generationally
High socioeconomic status also tends to be reproduced inter-generationally through the social, economic and cultural capital parents pass on to their children, from money to the insulating notion support is there if needed, or the spark of cultural similarity which can transform an everyday working relationship into a bond a senior leader deems worthy of sponsorship.13
“Bourdieu argues social capital can also be inherited because certain dispositions are inculcated in your early life,” adds Friedman. “The way we speak, our accent, the way we hold our body, and the way we present ourselves are, quite literally, passed on – and all are done so in ways that are connected to the class groups we were brought up in.”
Increasing inequality has only added to the separation between classes, as phenomena like postcode wars for good schools and rising house prices have increasingly made people physically ghettoised, drastically reducing the opportunities for interaction and familiarity.
“My mother is 80 but always points out to me that, when she was a girl, the relative socioeconomic position between the chief mechanic at the local garage and the local doctor were such that they could live in the same neighbourhood,” illustrates Peterson. “These days, that's pretty much unthinkable.”
There is a misrecognition of merit
Our desire for conformity, enhanced by a greater lack of familiarity across social classes, means that in professions dominated by high SES individuals like finance, the self-presentational baggage or cultural capital of a privileged class background becomes a dominant behavioural code we unconsciously tend to misrecognise as merit, intelligence and sophistication.14
“But are they really markers for these things?” asks Friedman. “If we take a step back and think philosophically, why is classical music more valuable than Love Island? Or why is a received pronunciation accent more valuable than a regional one? There really is no valid reason for that, and yet it is a hugely powerful force in society.”
It’s important to understand not every 2:1 or first-class degree is equal
For entry-level jobs, this is exacerbated by the fact companies judge academic achievements irrespective of students’ backgrounds. “It’s important to understand not every 2:1 or first-class degree is equal, that somebody from a council estate who manages to get a first from a red-brick university is as, or more, impressive than someone from a privileged background who got into Oxford,” says James Whiteman, head of client communications and content at Aviva Investors and co-lead of the social mobility workstream at the Diversity Project.
Baig says one of the difficulties in changing these perceptions is that it can make incumbents feel their own achievements were not based on merit. When fundraising for a social mobility charity as chief executive of the Sutton Trust, Elliot Major says around half of successful financiers from working-class origins would donate, feeling fortunate to have made it, while the other half refused on the basis that if they had made it, others could too.
Data and definitions
Support for greater social mobility is also hindered by a lack of clarity around what defines socioeconomic status, how to measure socioeconomic diversity in the workplace, how to make a formal business case for it and what actions are necessary.
“There are hundreds of definitions out there,” says Elliot Major. “Academics have differing views. We all know class matters instinctively, but how do you measure it?”
This is further complicated by people’s reluctance to disclose their background at work; indeed, British people often overstate their working-class status. “We know from public surveys that 60 per cent of British people claim to be working class when clearly that can't be the case – there aren’t that number of working-class people in the population,” he adds.
We need more and better data. We need to give it time and attention
Peterson adds that, in the UK, specific initiatives were stopped, and the government has hardly collected any data in the last 30 years. “And, of course, because it can be hard to define, a lot of companies also didn't collect data because it wasn't required, so we have surprisingly thin data,” he says. “We need more and better data. We need to give it time and attention. Otherwise, everybody has their own point of view and there's very little to call to action.”
Whiteman concurs that encouraging data collection is a priority area for the Diversity Project’s social mobility workstream. “If we can start getting the data across the industry, companies, and departments, we will see our organisations in a much richer light, and we will start to be able to prove or disprove assumptions we have about what's going on, who's getting ahead and why.
“I would be really surprised if, in a couple of years’ time, there isn’t a class pay-gap reporting requirement like we now have for gender and ethnicity,” he adds.
However, Whiteman says we are still a long way from making the business case for socioeconomic diversity in terms of company performance or profits. One reason is that measuring the impact of one characteristic in isolation is close to meaningless; another is market and macroeconomic factors that can skew company performance far beyond what D&I could achieve.
You might be lulled into thinking diversity doesn’t matter. There are so many variables at play
“If you looked at stock market returns over the last ten years, they would probably be skewed by tech, so you might be lulled into thinking diversity doesn’t matter,” he explains. “But if you conducted in-depth and sector-based case studies to see what is different between the top and bottom performers’ culture and included a quantitative analysis on different types of diversity, but combined that with psychometric and psychological tests on how open-minded people are, and looked at job-function diversity, you might be able to measure the impact of inclusiveness. But even then it is not clear cut. There are so many variables at play.”
Until then, collecting data is the first in a multi-step journey towards greater socioeconomic diversity.
Can we break the class ceiling?
“We haven't set out on the journey and that's the problem,” says Peterson. “First of all, collecting data and committing to making a change would be a huge step forward. As we struggle to make the change, we will learn along the way. It's a multi-stage process, which is much further along for some than others. We know lots about why women don't make it to the top, the good organisations are addressing it and we're seeing real change. But that comes after 25 years of work on the issue.”
Ask the four key questions suggested by the Social Mobility Commission in their Toolkit for employers
In a recent Investment Week article, Whiteman and David Aujla, co-lead of the Diversity Project’s social mobility workstream, say a good starting point is to ask the four key questions suggested by the Social Mobility Commission in their Toolkit15 for employers: main household earner parental occupation at age 14; type of school attended at age 11–16; free school meal eligibility; and highest parental qualification.16
Think about talent differently
As for new recruits, Whiteman and Aujla recommend 80 per cent of firms’ intern and graduate intake should be from state schools, which still allows for over-representation of privately educated graduates of just under three times.
To achieve this, Elliot Major says the basic elements involve including socioeconomic diversity in the D&I strategy, gathering data, and setting up formal networking groups and mentoring programmes. But to take it to the next level, firms must tackle the ‘three Ts’: talent, targets and top. Targets are self-explanatory, and by top, Elliot Major means obtaining crucial C-suite buy-in to change the company culture. But, for him, talent comes first.
Organisations and hiring managers need to think about talent in different ways
“Organisations and hiring managers need to think about talent in different ways; that means thinking about apprenticeships as much as graduates,” he says. “We should challenge ourselves more on how we describe and, more accurately, assess the skills we need for different jobs. Instead of using middle-class proxies of competence articulacy, we should try harder.”
Recruiters should also push back against what Paul Ingram, Kravis professor of business at Columbia Business School, calls ‘degree inflation’. Instead of requiring a degree by default, companies should find ways to measure capabilities directly in the recruiting process through formal tests and assessments.17
“For people who are really struggling, university may not be an option,” says Baig. “The organisations that have made most progress on this are the big four accountancy firms, which are probably the businesses that depend most on talent, particularly at the junior level where there's a higher level of competition and they can't pay the same as investment banks. They have been the most innovative in identifying and attracting school leavers, both post-GCSE and post A-level, and providing options to study a degree while working. There are a lot of lessons that can be learned by others across financial services.”
Recruitment efforts should also include outreach programmes to educate a wider audience about careers in finance, ban unpaid internships that discriminate against those who cannot afford to work without a wage, and broaden internships and apprenticeships to include more front-office roles, which are more likely to lead to senior positions later in people’s careers.18
All these efforts must take intersectionality into account as well, to avoid any unintended consequences of silos and deliver the greatest support to the most disadvantaged.19
Open the road to promotions
Misrecognition of merit also affects the promotion process. Ingram recommends promoting people from across departments, as these tend to be stratified according to social class. He noted:
“People with higher origins cluster in high-status departments; those with lower origins work in less-visible groups. Because companies often seek candidates for managerial roles from only a handful of departments, the odds are stacked against some of the best candidates simply because they work in the wrong place.”20
Formal mentoring and sponsorship can transform lives, giving people a chance and helping them make connections
Formal mentoring and sponsorship are crucial, giving employees an advocate who will fight their corner and put them in front of the right people. 93% Club founder Pender says it can transform lives, giving people a chance and helping them make connections.21
“It’s not just the promotion opportunities; it’s the type of work that gets allocated,” adds Whiteman. “If you give someone a high-profile project and they manage to deliver it, it can catalyse their career. They will get recognition; it will feed into their formal reviews and support their chances of getting promoted. But there can be unconscious bias in who managers select for a project. Is it based on a personal connection and bond, or are they really choosing the best person?”
Whiteman also says career progression is linked to creating a company culture that delivers the right support and allows people to feel included. “Otherwise, you can hire the most diverse workforce in the world, and just eradicate all those good intentions,” he explains.
We need to find a way to put a stop to prejudice and going down the legal route might have to be part of the equation
For Peterson, this entails looking at two problems. The first is fighting prejudice. “How do we deal with this trigger problem when I hear an accent, when I see the brown shoes? This prejudice is very real, and because it's not a protected characteristic, it's socially acceptable to make jokes and engage in a prejudiced way,” he says. “We need to find a way to put a stop to that and going down the legal route might have to be part of the equation.”
Friedman also urges policymakers to take direct and urgent action to tackle the class ceiling and believes class pay-gap reporting should become mandatory.
The second problem is figuring out how to help people succeed without giving up who they are. “Ten years ago, there was an assumption people would be shoehorned into a middle-class culture,” says Elliot Major. “The debate is more interesting now; we are challenging cultures so they become more inclusive of people from different backgrounds. It is more about inclusion and diversity rather than simply fitting in.”
Sachdev thinks this should include internal and external support networks, but also tailoring work around people’s needs. “If you want to attract people from different backgrounds, ethnicities, cultures, and neurodiversity needs, you need to find ways to tailor your working expectations around them,” she says. “That might mean creating working structures that are not classically nine-to-five, and potentially not filling the day with meetings, to allow for people who thrive during concentrated periods of the day, or for those who are more productive are certain times of the day than others. It is about creating flexibility in a working culture that has tended not to, because we've had a very traditional understanding of economic activity tailored to a particular socioeconomic group.”
The end goal is to create a culture where people from different backgrounds are comfortable being themselves
The end goal, she says, is to create a culture where people from different backgrounds are comfortable being themselves and calling out colleagues or even senior management when they see things not being done in an inclusive way.
“Perhaps to finish on a more positive note, the agenda is becoming more mainstream. I can tell you that simply from the number of requests I get from the media – which is almost daily,” concludes Elliot Major. “I hope all this attention translates into real action, and instead of merely talking about it, we actually do something about it.”