Why target setting matters
Running a business is largely based around targets.
Target customers, target profits, target growth areas, and there are also diversity targets, whether that is for the number of women or ethnic minorities on boards or senior management or in terms of recruitment at the entry level, as well as net-zero targets or carbon emissions reduction targets.
Targets provide focus and motivation for firms - with culture and diversity targets particularly helping them align with their core values, which we discussed in the previous blog.
But firms can sometimes stumble with target setting in relation to culture because it has a strong people component and can feel like a subjective, qualitative topic.
See also: Why clients are asking about ACT
The reality is they will need to upskill and consider how to best get on top of these – after all, regulators are increasingly doing so.
Discussions by the Financial Conduct Authority in 2023 saw an increasing focus on target-setting.
The regulator made clear in its diversity and inclusion consultation paper (CP23/20: Diversity and inclusion in the financial sector – working together to drive change) it wants firms to be setting their own targets and may look less favourably on those that do not.
Additionally, firms are likely to be affected by implementation of the EU's Corporate Sustainability Reporting Directive, which came into effect in January 2023 and covers social objectives in relation to board and employees, as well as products and services.
Firms are getting to grips with the basics, but there are some steps that they can take to elevate the utility and impact of targets.
Our research, detailed in our City Hive ACT Trends report, available to purchase or free of charge for ACT Signatories, shows almost 70% (68.1%) of signatory firms surveyed have set targets, objectives or goals for diversity. Some of the actions recorded are listed below.
The first revolves around representation targets - for board diversity, underrepresented groups at specified levels.
Secondly, the report highlighted training, development and evaluation.
That is mandatory training for employees and separate manager training plus annual evaluation, and training for recruitment, as well as the use of inclusion surveys and seeking feedback.
Thirdly, the report took notice of partnerships and collaborations, such as scholarships and bursary programmes, as well as supporting initiatives such as #TalkAboutBlack, Investment 200/20, GAIN and Women in Banking and Finance.
The ACT Framework, however, looks for signals that firms are not just setting targets in isolation, but are also creating the right structure around them to succeed.
Progress to be made towards achieving targets requires resources, support and guidance from leadership.
This includes setting organisation appropriate targets, clarifying the steps needed to achieve them, and deciding what to do when things are not working (this is very important for a firm to acknowledge).
Representative targets, for example, need to be accompanied by changes to recruitment, development, management and retention policies and practice.
Our research shows some firms are thinking creatively beyond representative targets and using those targets to drive progress.
A simple but effective method is to create milestones based on progress, such as reviewing and changing policy, and rolling out training and updates to practice.
This helps to signal positive change is happening, even in areas where the payoff might take longer.
The progress is small but encouraging and we have been pleased to see how firms consider diversity, equity, and inclusion (DE&I) in wider business practices, creating a pathway to embedding DE&I strategy as a core of the business.
The next step for investment firms is to set clear, transparent targets - especially as the regulatory wheels turn - with accountability to make the targets meaningful.
This blog first appeared on Investment Week.
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