New Ways to Move the Needle on Diversity Hiring

November 10, 2020 – As executive search professionals, Mercedes Chatfield-Taylor and Gina Barge of Caldwell have taken note of a lack of diversity at large technology companies. A new report they have co-authored examines why there are limited opportunities on senior leadership teams for people of color and women, and what can be done to change the trajectory.

The recruiters say that the leadership rosters of large technology companies are a homogeneous display of white male faces and telegraphs the obvious – corporate America still has a diversity issue. “What’s true for large companies is amplified for venture-backed start-ups,” said Ms. Chatfield-Taylor. “Anecdotally, I’ve heard from clients that their past recruiters discourage using diversity as a criterion for hiring because it takes too long and it’s too hard to find qualified candidates.” In September, Wells Fargo CEO Charles Scharf made headlines while attributing the bank’s lack of diversity to a dearth of “qualified minority talent.”

“In my experience I can tell you that finding great talent is, of course, challenging; but we shouldn’t turn a speedbump into a roadblock,” said Ms. Barge. “It’s our job to remind our clients that if the goal is to build an extraordinary company, then it’s necessary to employ exceptional recruiting efforts. It might be extra work, but there is a benefit in finding the so-called unicorns.”

The Status Woe

The common refrain is that there simply aren’t enough qualified candidates. “It’s the James Damore argument for the lack of representation – that people of color and women simply aren’t interested or skilled enough in technical and mathematical subjects to create a deep enough bench to choose from,” said Ms. Chatfield-Taylor. “So, companies tend to concentrate their diverse hires in cost centers and administration and support roles like marcom, operations and human resources. For too long there have been too few opportunities on senior leadership teams and boards of directors for people of color and women – surprising, given the numerous benefits that diversity brings.”

Mercedes Chatfield-Taylor is managing partner of Caldwell’s private equity and venture capital practice and a member of the firm’s technology, consumer, digital and media teams. She focuses on executive-level search for high-growth technology companies, with deep expertise in B2B SaaS, social, eCommerce, gaming and other transformative technologies. Ms. Chatfield-Taylor has completed over 75 CEO searches as well as other CXO level assignments for her clients and has a deep passion and expertise in helping to diversify VC & PE-backed company boards, and leadership teams.

According to Pew Research, the number of women holding STEM jobs in computer related fields has actually dropped seven percent since 1990, as women are choosing to go into the life sciences and health fields with their degrees. Meanwhile blacks make up just nine percent of STEM workers and Hispanics only seven percent.

“It’s amazing that one of our most influential industries, concentrated in one of our most progressive states, can be both a loud and leading voice for social change and a bastion of the old boy network at the same time,” Ms. Barge said. “Why can’t we disrupt ourselves?”

Cognitive Bias Could be at Fault

Ms. Chatfield-Taylor said that the problem might be evolution and the mechanisms humans have built up over the millennia to survive and prosper. “These inherited or ingrained biases are designed to reduce risk and they are self-reinforcing, resulting in an aversion to change or chance,” she said. As Stephanie Lampkin, founder and CEO of Blendoor, an app that uses blind review and analytics to tackle the problem of diversity in hiring said: “Cognitive biases are as natural as eating and breathing. Over the majority of our existence on this planet we have found safety in homogeneity. So the way that shows up now is that most of our social networks and content consumption is from people of our same gender and race. This leads to hiring people who look like us, talk like us and act like us.”

“The ambiguity effect makes us less likely to choose a path where the chance for a favorable outcome is unknowable,” Ms. Chatfield-Taylor said. “Anchoring means we rely too heavily on one piece of early information as a determinant for our preferences and choices. For example, a unique name at the top of a resume.”

“The bandwagon effect means people tend to believe what many others also believe,” said Ms. Barge. “This might result in us collectively thinking that all CROs must come from certain schools. While confirmation bias makes us recognize only data that reinforces our preconceived notions. Furthermore, a tendency to select for those who have sat in the seat as CEO, CFO, CRO at least once before is locking women and people of color out of these roles.”

Gina Barge is a consultant in Caldwell’s private equity and venture capital practice. She focuses on executive level search for senior leaders within high-growth technology portfolio companies, including software as a service, e-commerce, internet, and consumer. Her experience spans multiple C-suite functions, as well as marketing and sales leadership roles.

“So, while there has been a general upward trend since the late 90’s of diverse C-suite inclusion, the overwhelming majority of Fortune 500 CEOs remain men (94 percent) and white (99 percent),” she said. “The lack of diversity is not rooted in malice – in the end, our networks (neural and social) may be to blame.”

2020 Diversity, Equity & Inclusion Recruiting Report:
Building a Balanced and Diverse Workforce

Hunt Scanlon Media’s latest market intelligence recruiting report – this time focused on Diversity, Equity & Inclusion – will be available later this fall! The nation’s top executive recruiters are resetting expectations and looking for new ways forward to build balanced and diverse workforce teams for their clients.

According to executive recruiters, DE&I should not just be a priority, but an integrated part of every company’s leadership goals. Some companies have even tied DE&I metrics to executive compensation. But it’s more than that.

Part of building strong, diverse hiring teams means asking yourself: “Who is my company culture going to attract – and how will it engage people who are here?” This question can be very difficult to answer if you assume everyone feels welcome already just because you do. Fostering diversity, equity and inclusion within organizations is more than just the right ethical decision. “It is one of the best business decisions a company can make,” said Keri Gavin, a partner with Hanold Associates and leader of the search firm’s Global Diversity, Equity & Inclusion practice. Hanold Associates is a proud sponsor of this year’s report. This report will help organizations prioritize DE&I as a business imperative that drives greater competitiveness, innovation and business results. Get it now! 

Data Doesn’t Lie

The technology industry is driven by data and a desire to follow the data to get to scale and success. It should follow that organizations ought to search high and low to find diverse hires since the impact on performance is real. Yet, according to a recent study based on the EEO-1 reports of 117 Silicon Valley companies, this has not been the case.

The percentage of executives was heavily weighted towards white men (59 percent). White women held just 15 percent of executive positions. Among people of color, Asian men made up 16 percent while Asian women made up 4.5 percent. For Latinos, men are two percent and women just 0.8 percent. The most underrepresented are black men and women with one percent and 0.4 percent respectively.

The Business Case is Solved

The need for change is obvious from a sociological point of view, but what about the bottom line? “Fortunately, here too the numbers support the case for more diversity, especially in the areas most important to start-up and VC communities – increased innovation and revenue acceleration,” Ms. Chatfield-Taylor said. “A recent BCG study found that companies with above average diversity in their leadership had greater innovation (producing more new products) and nearly double the innovation revenue than companies with below average diversity. This should be music to our collective ears and justify any perceived extra effort required to find diverse hires.”

Additionally, in the study Why Diversity Matters, McKinsey & Company found a direct correlation between diverse leadership and better financial performance relative to peers. Companies in the top quartile for gender diversity are 21 percent more likely to experience above average profitability, and those in the top quartile for ethnic diversity were 33 percent more likely to outperform on EBIT margin. In contrast, companies in the fourth quartile for gender and ethnic diversity are 29 percent more likely to underperform their peers economically. The Peterson Institute for International Economics found that going from zero percent to 30 percent female leadership correlated to a 15 percent improvement in profitability or a one percent improvement in margin for a typical firm. “It pays to look for unicorns, especially if you want to build a unicorn,” said Ms. Barge.

Does it Take a Village or the Court System?

“It’s my job to find the best talent for my clients – people who will help propel their growth – so I’m a huge proponent of diversity and inclusion, given the advantages cited earlier,” said Ms. Chatfield-Taylor. “A recent article in TechCrunch, ‘Top VCs Discuss the Future of New York Start-Ups,’ really sharpened my focus on the need for a change in the public mindset. The author had interviewed nine top VCs about their opinion on the market – nine male, mostly white VCs. It seemed astonishing to me that he couldn’t find one woman to talk to, so I sent him a message suggesting a few women he ought to interview. To his credit, he revised the story to include these important voices. Do I think he was malicious in the first place? No. Lazy? Perhaps. Did he just do what everyone else would have done? Surely,” she said. “And therein lies the problem.”

Related: Recruiters Up Their Game in Diversity

“If we continue to do what we’ve always done, what everyone else has always done, there will be no meaningful change unless, of course, the courts step in,” said Ms. Barge. “In 2017, California passed SB 826 to mandate female participation on corporate boards for companies headquartered in the state.”

“So now, if a company board has six or more board members, three must be women,” she said. “If it has five then two must be women, and if it is four or less at least one must be a woman. But do we really need laws to do what’s morally and economically right? Will it take the state’s mandate to see more black and brown faces in boardrooms? We should be better and smarter than that.”

The Way Forward

Ms. Chatfield-Taylor said that diversity and inclusion have been growing in the public consciousness, but there is work organizations can do to help shorten the arc of the moral universe. Apps like Blendoor, which aggregate diverse talent and anonymize recruits can help – mainly by making hiring managers and leadership teams aware of their blind spots. As founder and CEO, Stephanie Lampkin said: “People believe they are more fair than they really are. Our biggest ‘aha’ moments come in the pre-screening phase when companies are evaluating candidates, not knowing their race or gender, and then later realize that they probably would not have considered this person or assumed they were female.”

Workplace Diversity Through Recruitment
Despite the well-documented benefits of diversity, many companies are still struggling to meaningfully change the makeup of their workforce. A new report from executive search firm Madison Wells finds that creating awareness and finding diverse talent begins with developing a targeted and well-structured internal and external recruitment strategy.

“It’s this awareness, driven by data and transparency tracked in the app, that will lead to change,” said Ms. Barge. “But even Stephanie is skeptical of the power of just apps to make change.”

There is no historical evidence to suggest technology companies will solve this problem on their own, said Ms. Lampkin. “I do not believe that tech executives and middle management are incentivized to solve this problem,” she said. “It will require pressure from employees demanding more change, BODs to require more transparency, it will require the press to hold the companies accountable and the government to require companies to report on their progress just like they do on their financial metrics.”

“They say in business that you can’t manage what you don’t measure, so let’s start measuring our progress in D&I,” said Ms. Chatfield-Taylor. “Investors, start-ups and scaleup tech companies can lead the way by making a pledge to prioritize their D&I policy in 2020 and beyond. By tracking and reporting their progress voluntarily. By charging their recruiters with bringing diverse ethnicities, cultures and genders to the table on each and every search. By looking for their future leaders in schools other than the Ivies, and from other industries. By building a bench that includes women and people of color in entry and mid-level positions and then creating mentorship and paths to the top,” she said.

Being inclusive in language and creating specific policies respectful of cultural and lifestyle differences can also be helpful, Ms. Barge said. As can “incentivizing the behavior we want and adjusting compensation to reflect not only revenue and profits but the racial and gender makeup of the team,” she said. “It is by actively and intentionally prioritizing, investing in and incentivizing diverse hiring and promotion that we will make change happen. If we take concrete steps towards doing just that, we might find we change the world in the process.”

Related: To Improve Diversity, Recruiting Sector Must Set a New Course

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor  – Hunt Scanlon Media