Financial security is a critical but often-overlooked dimension of social identity. Talent leaders must work to recruit, retain and re-energize emerging leaders from all economic backgrounds.
August 19, 2021
In discussions about equity, diversity and inclusion, gender and racial/ethnic identity often dominate the conversation. Relevant to these conversations, financial security (also referred to as social class or socioeconomic status) is a critical but often-overlooked dimension of social identity.
Financially secure employees are more likely to hold leadership roles, though there is little evidence they are more effective as leaders. At the individual level, disproportionate representation in leadership can perpetuate social immobility, a pervasive worldwide challenge. For organizations, lack of representation can limit potential for growth. Team members from different generational and financial backgrounds bring unique strengths, experiences and perspectives that set the stage for innovation, productivity and success.
Financial security is particularly salient for young professionals experiencing an economic crisis. During the COVID-19 pandemic, The Center for Creative Leadership solicited input from more than 15,000 18-to-30-year-olds about their leadership experiences. Apart from insights into their interest, empowerment and motivation for stepping into leadership roles, we also inquired about their perceptions of economic security.
Our sample represented a range of financial situations, with participants reporting insufficient (26 percent: “I cannot make ends meet” or “I am barely making it”), adequate (27 percent: “I am breaking even”), or excess access to funds (42 percent: “I have extra money after paying the bills” or “I do not have to worry about money”). Compared to those with less financial security, young adults who did not have to worry about money were most likely to:
- hold leadership positions
- plan to pursue leadership in the future
- feel empowered in leadership roles
- be able to make decisions on their own
These differences were substantial. For example, 81 percent of financially secure leaders were confident their voice was heard at work, compared to only 56 percent of less financially secure leaders. Lower involvement, interest and influence in leadership among less financially secure employees could impact career advancement and promotion opportunities.
How does financial security – or lack thereof – impact advancement?
Responses to our surveys and interviews suggest three factors related to financial circumstances worth considering:
- Scarcity mindset: Concerns with making ends meet can restrict mental bandwidth and diminish innovation. When compared to having a place to sleep or putting food on the table, putting in extra hours, proposing creative solutions or even being fully present and attentive can seem unimportant. In our study, employees who were less financially secure also saw being a leader as “too stressful” or “not worth the effort.”
- Access to opportunities: Education and access to leadership development are often cited as barriers to financial mobility. Findings from our sample support this claim. Less financially secure individuals were less likely to have participated in leadership development programs or internships, been encouraged by their family or an adult to pursue leadership opportunities or perceived equitable opportunities for leadership in their country.
- Social affordances: LinkedIn estimates 80 percent of jobs are found through one’s network, compared to 1-2 percent through applications. In our sample, young professionals who were less financially secure reported knowing fewer young leaders in their industry and country. Social affordances can also extend to access to knowledge, with financially secure employees more likely to have insight into the norms, expectations and even lingo that help them fit in at work.
How can organizations provide equitable access to opportunities across social classes?
Whether you’re searching for your organizations’ future leaders or deciding how to best support current employees, HR and talent leaders have a critical role to play in disrupting the vicious cycle of financial security. Below are strategies for recruiting, retaining and re-energizing emerging leaders from all economic backgrounds.
When recruiting employees:
- Post your salary range: Disclosing salaries is becoming more prevalent, driven by equity concerns and generational expectations. Posting your salary range allows potential employees to determine whether the compensation will meet their financial needs.
- Re-evaluate degree requirements: Postsecondary degrees can serve as a gatekeeper for those without access to higher education. Consider whether your position truly requires formal education, or whether equivalent work experience, certificates or an associate’s degree could serve as viable alternatives.
To support current employees:
- Conduct a pay equity audit: Examine pay equity across leader levels, divisions and employee social identities. Compare your salaries to industry and country-wide benchmarks. If there are inequities present, address them with a concrete strategy and timeline. Make the results, plan and timeline available to all employees to convey transparency and ensure accountability.
- Examine your employee benefits: Financial security can be impacted by more than just base salary. Explore all aspects of employees’ benefit packages and seek opportunities to minimize financial burden. Do you have a hybrid workforce model that allows employees the option to save money on commuting by working from home? Do employees have flexibility to move to a location with a lower cost of living? Can your leave policies and paid time off adapt to different needs, such as caring for dependents?
- Build social connections: At work, who you know can be a determining factor for opportunities. Sponsor employee resource groups for young professionals or first-time leaders. Invest in mentorship and sponsorship programs for emerging leaders. Provide equitable access to professional development and high-visibility work assignments.
Our global study has helped uncover what it takes for young and emerging leaders to feel engaged and empowered in the workplace. By supporting this next generation of leaders, you can help them reach their full potential and attract and retain the best talent, which in turn supports continued organizational success.