Executive Recruiters Upping Their Efforts to Help Organizations Achieve Diversity Goals
December 9, 2022 – Anyone who works in executive search right now has seen, and will continue to see, a push for more lists of diverse candidates for open roles. “We are also seeing organizations start to mandate diversity numbers as a benchmark for DEI success, and seeing an influx of diverse candidates at the executive level as a result,” said Ryna Young, head of the diversity, equity, and inclusion practice at Odgers Berndtson.
It’s encouraging that companies are making an effort. “And yet, if you’ve been paying attention over the past couple of years, you know diverse candidates still have a lot stacked against them,” said Ms. Young. “Board representation is still very low when it comes to both gender and equity deserving groups. COVID added extra barriers and stress for women executives, exemplified by the numbers of women dropping out (and staying out) of the workforce. And companies are struggling to retain the diverse talent they are hiring.”
Since the summer of 2020 companies have increasingly recognized the importance of diversity and inclusion within the workforce, according to Letitia Hatton, consultant and head of diversity, equity, and inclusion at Tempting Talent. “Due to the huge spike in recognition, some companies opted to lay out some ambitious targets for their diversity hiring needs,” she said. “While others focused on an influx of hiring diverse talent to improve their statistics. The problem we have seen with the companies that implemented overly ambitious promises is that they originally had no diversity and did not change their strategy, nor did they consider their level of inclusion. Even if they have ‘lived up’ to their promises the challenge some companies are now facing in result of their hiring plans have resulted in difficulty to retain staff due to not defining their strategy for inclusivity in the workplace ahead of hiring. Improving DEI does not come overnight and their needs to be measurable actions in place to ensure their strategy is constantly evolving to cater to the challenges minorities face in their day-day work environment.”
Ms. Hatton notes that there have been improvements in firms that have decided to act on diversity and inclusion daily and have implemented a strategy to stay inclusive as a fundamental foundation of their company. “Recruitment and executive search businesses that have implemented inclusive plans and are acting on the them are the firms that have improved the most since the summer of 2020,” she said.
Challenges Facing Recruiters
The challenges are dependent on the type of diversity, according to Ms. Hatton. “We look at a range of diversity including and not limited to ethnicity, age, gender, sexual orientation, religion, disability, socioeconomic status, and background,” she said. “Unfortunately, we don’t always know what people identify as when seeking talent. It has proven difficult to hire find diverse talent at senior levels of an organization; from my perspective many reasons could factor into this. First being if they are already a part of an organization who is doing diversity and inclusion well and they feel respected and valued therefore it is much harder for them to be interested in making a move as salary and career progression is not always the biggest driving factor.”
“There is also a much smaller percentage of executive search and recruitment professionals in the industry, most firms are white male owned and are surrounded by other white males at the C-suite level of an organization, there is often a smaller percentage of women, agender, transgender, non-binary, and all other gender identities at the top of an organization along with less people of color and those who identify as having a disability,” said Ms. Hatton. “Working in a white male dominated industry naturally discourages diverse talent.”
“There are clear signs of progress on the topic of diversity in the private equity space, where most of our clients are operating. However, there is still work to be done,” said Charlotte Cederwall, partner and co-leader of the consumer practice at Acertitude. “We are seeing a significant increase in the number of women in the C-suite at private equity funds and new research supports this observation. McKinsey recently documented that since 2020, women are outpacing men at a promotion rate of six percent for eligible women compared to one percent for eligible men,” Ms. Cederwall said. “Some of this momentum can be attributed to LPs demanding that these issues be addressed more aggressively which has led firms to take significant strides, improving on issues of diversity and making a tangible impact in governance. However, we are also seeing positive progress to become more accessible from the industry as a whole.”
“Of note, as more heads of human capital and heads of ESG are appointed to private equity operating teams and tasked with embedding DEI as a component of every deal, we are seeing more initiatives driven into portfolio companies and critical hiring decisions,” Ms. Cederwall said. “This type of progress should be applauded, but there is more work to be done. Private equity still lags corporates when it comes to C-suite ethnic diversity.”
“One of the biggest challenges we – and all executive recruiters – face is the shortage of diverse talent to source from at the leadership levels, particularly within certain sectors like manufacturing and tech,” said Ms. Cederwall. “We don’t have that today because different groups have historically not been afforded the same opportunities. Addressing diversity at the senior-most levels takes thought, effort, and creativity – but is worthwhile. Teams with diverse thinking, backgrounds, and experiences outperform those that don’t.”
Multinational Diversity
“Most of the larger multinational clients we work with have diversity hiring on top of their talent acquisition agenda,” said Jens Friedrich, CEO of SpenglerFox. “This is however more prominent amongst companies in the U.S. and Western Europe where diversity hiring has been the norm for many years now. Each search longlist and shortlist is scrutinized from day one to ensure we as a service provider offer a slate of candidates that meet their specific targets. As we move east into Central and Eastern Europe however, the emphasis is there, but not always that strong. Those that do consider this a priority, have most certainly ramped up their diversity mix.”
Diversity and Inclusion Trends for 2023
These days, clients care more about D&I hiring because it is the right thing to do as opposed to for financial reasons, says a new report from Sheffield Haworth. Companies are also showing a growing determination to measure the effectiveness of their diversity efforts and find practical solutions to problems.
Diversity is an issue that depends almost entirely on the function, industry sector, and geography, with the latter being the least of an issue out of the three, according to Mr. Friedrich. “Some functional areas such as human resources have traditionally been dominated by females,” he said. “Finance, sales, scientific research, and the likes have traditionally had a good diversity mix and we are able to source candidates across the diversity spectrum. When it comes to engineering and technology related roles, these were and continue to be dominated by males, making it a challenge to provide a fully diverse slate of candidates in those domains. This by implication affects certain industries. Production and manufacturing, technology, mining and agriculture, and even to an extent banking and finance, are all still heavily male gender biased because there are simply not enough female candidates to choose from. This problem is specifically acute in geographies such as Eastern and Southern Europe due to historic societal norms.”
“Based on feedback received from some of our clients in PE/VC sector, the approach varies quite considerably,” Mr. Friedrich said. “Bearing in mind that the size and maturity of portfolio companies vary quite dramatically, the approach to diversity hiring, and DEI in general, is more practical, hands-on, and fit for purpose, rather than governed by formal policies. Consider too the fact fund managers must deal with portfolio company management teams in different parts of the world and across multiple cultures, with varying degrees of DEI.”
“Regardless, diversity hiring is taken seriously, and investment firms monitor progress continuously,” he said. “Bigger, more mature portfolio companies, as well as some of the bigger fund managers, may have a DEI officer, but this is not always practical within early-stage growth companies. We have also heard of cases where senior leaders are sponsored to attend executive training programs at prestigious business schools, and it is commendable to see that DEI is taking its rightful place, starting in the board room.”
“Since the events of summer 2020, where many companies pledged to improve and make good on their commitments to diverse hiring, we have noticed a lot more intent from organizations around hiring and developing black talent,” said Helen Tudor, managing director at Sheffield Haworth. “Organizations are being more intentional about where to recruit in terms of gaps within their organization, and also around implementing development programs specifically targeted at black talent for retention. Although organizations are more committed, it is still too early to measure however what the impact has been so far.”
Diverse talent is out there. But Ms. Tudor says she has found that a degree of flexibility from clients and an open-minded approach on the exact skills, background, level and career trajectory of potential candidates is needed to ensure a diverse range of candidates can be put forward and considered for senior opportunities. “Some potential candidates are operating at a level below the client’s hiring level, so it is important that a candidate’s full potential and transferable skills are considered in the round,” she said. “There should be commitment to provide additional support during onboarding and in the first 12 months to enable integration.” For example, leadership coaching, inclusion in networking, and access to key decision makers, would all be useful add-ons. “The challenge is often in convincing someone to put themselves forward for a role in the first place,” says Ms. Tudor. “If they don’t think they tick every box required in the job description, then they will not want to put themselves through a time consuming process. Therefore, it is essential to demonstrate real support around candidates and to help them land successfully.”
Related: The Importance of Setting Proper Diversity Targets
There are many initiatives organizations can put in place to better retain women and people of color. Sheffield Haworth often advises clients of some of the programs they can adopt which have been successful at keeping retention levels high in these underrepresented groups. “These initiatives and programs could include targeted mentoring with other people in the business or externally, targeted development plans and frequent check-ins to ensure the person feels supported and is receiving the development or training they require,” said Ms. Tudor. “Increasingly companies seek to bake-in this approach through linking inclusion rates to overall performance of leaders and impacting annual financial reward and promotional opportunities. It is also imperative for organizations to demonstrate a genuine commitment to helping and supporting these under represented groups, rather than it being purely lip service.”
Diversity Starts from the Top
Ms. Tudor sees it as highly important to have top leadership driving the diversity and inclusion agenda within organizations. “Genuine senior-level commitment and involvement is essential in helping the business understand why it’s important to build an inclusive culture and organization to ensure hearts and minds are fully engaged at all levels,” she said. “If the senior leadership is only seen to give lip service then the culture won’t move on and staff will become disillusioned. As younger generations come into the business, senior leaders are becoming more accountable for ensuring their workforce supports everyone across the organization. It is incumbent on them to understand the moral and business case for inclusion and lead from the front.”
“Many of our alternative investment clients have been actively looking to hire diversity candidates,” said Dawn Magnotta, head of infrastructure: accounting, operations and compliance practice at Hudson Gate Partners. “In fact, many funds are specifically looking to hire a Head of D&I. This is usually a newly created role. The head of D&I role tends to be very strategic and sometimes includes campus recruiting as well. In addition, some of our alternative clients are also hiring diversity talent sourcers. These roles are usually filled by experienced lateral recruiters who specifically target diversity candidates and are focused on achieving hiring targets. As a sign of how far many funds have come over the past few years, some of our clients now have over 50 percent of their employee base broadly defined as being diverse (including both women and unrepresented communities).”
Ms. Magnotta notes that there are challenges in finding talent for every role, gender, and ethnicity. “But recently, we have been faced with a particular challenge in finding POC diversity talent to fill crucial roles within the broader human capital function,” she said. “Within the world of HR and recruiting, we have found that there has been heavy candidate movement as of late, as firms poach diversity talent from each other. Given the focus on D&I is still a relatively recent one, the candidate pool is still developing. The large majority of available candidates only have one or two years of experience in D&I, and are spoilt for choice in terms of job opportunities. Thus, we have encouraged our clients to be open to hiring mid-level and junior candidates for HR and recruiting positions where diversity is desired. We have had good luck finding outstanding diversity talent in the functions of marketing, investor relations, finance, and legal.”
“We really push our clients to interview as diverse a slate as possible. It is our job to present them with diverse talent — which we do,” said according to Dana Feller, founder of Hudson Gate Partners. “But it is also our job to politely insist that they interview candidates whose backgrounds may not be perfectly cookie-cutter. As you might imagine, it is often a candidate whose background is slightly different who brings the most to the table in terms of experiences, creativity and perspectives. We have found our clients much more sophisticated about evaluating diverse talent versus even a few years ago.”
Ms. Feller also notes that both private equity and venture capital funds are fully embracing diversity hiring. “It is simply an automatic part of any search and assessment process,” she said. “The funds have been aggressively adding diversity talent within their infrastructure and operations teams, as well on the investment side and in their portfolio companies. It is exciting and fun for us to help our clients hire the best-in-class employees, many of whom are diverse. So far in 2022, It is also exciting for us to help these amazing candidates find outstanding new job opportunities at some of the world’s leading investment funds.”
“Premier executive search firms, have been doing what we do best — proactive networking,” Ms. Magnotta said. “We are constantly reaching out to and connecting with all types of diverse candidates and making sure that they are aware of not only the searches we are working on, but the general state of the hiring market. In addition, we are always counseling young, recently graduated, diversity candidates who are looking to make their very first job change.”
Related: Hiring Top Talent in Unprecedented Times
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media
