diversity

Strategies to Increase Diversity in the Hiring Process

You may have heard the story of a man named Jose, who was having no luck on his job applications. He began applying with the name “Joe” instead, and suddenly started receiving calls. The same is true in numerous studies where two resumes were submitted for the same job that were identical in all aspects except for one: the name. Resumes with male names consistently get more calls for interviews than identical resumes with female names.

If you’re reading this, that story probably doesn’t surprise you, so let’s talk about solutions. By now, hopefully you’re clear on the business case for diversity, equity, and inclusion (DEI) in the workforce. And hopefully you’ve successfully made the business case to leadership at your firm. Getting their full support is critical in authentically achieving DEI goals.

Now that you’ve got full buy-in and commitment from the firm’s leaders for a comprehensive DEI strategy, I’ll outline the steps needed to achieve the firm’s DEI goals.

Start with the D: diversity. Diversity is mix of people in an organization. Diversity can be many things: gender identity, race, country of origin, disability, sexuality, generation, gender expression, religion, political ideology, and much more. In this post, I’ll focus on increasing gender diversity – starting with a mini lesson on unconscious bias.

Unconscious bias is the act of instinctively making assumptions about people or things without taking the time to think things through. Every last one of us is guilty of unconscious bias, and it’s because of the ways our brains have been wired for centuries to make decisions quickly to keep us safe – ie, to fight or flight. Unfortunately, unconscious bias leads to a lack of diversity in hiring and promotions. Here are just some of the ways bias leads to less diversity in leadership positions:

•       Gender bias (eg: women are given fewer opportunities than men if they have kids then but then are disliked when they are not seen as nurturing)

•       Association bias (eg: favoring those who went to the same college, are members of the same organization or association, etc)

•       Similarity bias (eg: hiring/promoting someone that is similar to the person who previously had the position, similar to others in the department, and/or similar to the interviewer.

Before undertaking DEI initiatives, I highly encourage your firm to undergo an unconscious bias training, especially for leaders. Establishing a common language and common goals around unconscious bias and diversity will go a long way towards ensuring the success of the programs.

Here are 5 more tips to increase diversity at your firm:

1. Address the pipeline diversity issue. One of the main excuses firms use when explaining a lack of gender diversity is a pipeline issue. They may say that they’re simply not receiving many job applications from qualified women.

In the 2018 Preqin Investor Survey, Sandra Legrand from Alter Domus shared, “Diversity begins at the lower levels, starting with private equity education programs in universities to build up a pipeline of talent. Stirring up the curiosity of young women by sharing knowledge and experience, as well as participating in coaching and mentoring programs, will lead to increased diversity within our industry.”

Legrand’s advice is a great first step towards diversifying your firm’s workforce. 

2. Weed out biased words in job descriptions. Job descriptions often have hidden biases that attract male candidates over women. For example, driven, competitive, and analyze are male-biased words while collaborate, loyal, and support are words that are female-biased. There’s actually a solution to the unconscious biases that show up in job descriptions: Textio software notices biases when someone is typing a job description and suggests more neutral changes. This simple change will begin to attract a more balanced talent pool.

3. Remove identifying data from resumes. Software such as Ideal strips all identifying details (including name, location, and affiliations) from a resume so decisions who to bring in for interviews are less biased. This allows interviewers to seek out candidates based on their qualifications, not based on any biases that may show up unconsciously.

4. Have collaborative interviews with standardized questions. Collaborative hiring with diverse team members reduces bias because more voices are part of the process. For those interviews, use standardized, role-based interview questions which are important for many reasons: they force interviewers to focus on the factors that affect job performance; and if a scorecard with a scale is used as part of the process, this data can inform future hiring.

5. Give a work sample test. WeSolv is an online platform which connects diverse MBAs with companies by creating online practical “challenges” that job seekers can anonymously solve. Employers can then choose candidates based on practical experience and fit – not based on the hidden biases they may bring to the hiring process. WeSolv and other work sample platforms allow performance to be a direct factor in hiring.

These strategies are by no means a panacea, but should make a impact on gender diversity when used together along with strong support from leadership.

How to Make the Business Case for Diversity and Inclusion

“Women account for less than 10% of senior positions in the private equity industry: a lower proportion than that of other alternative asset classes with no apparent reason. In an industry so vast in terms of investment opportunities and nature, any increased diversity – not just in gender – in management should be of benefit to the whole industry,” shared Sandra Legrand of Alter Domus in the 2018 Preqin Investor Survey.

We know you aren’t surprised by this statistic in only one industry – the fact that you’re reading this article reinforces that.  We believe it doesn’t have to be this way.

The need for diversity and inclusion may seem obvious to us, but perhaps it's a harder "sell" to the powers that be. Here are some strong selling points to make the case for diversity and benefit your bottom line.

You'll better understand the needs of your target client.

When a workforce is diverse, that talent has a broader understanding of the needs of their diverse clients. Naturally, when an organization better understands the needs of its target market, they can better innovate their products and services – and that leads to an increase in revenue. 

According to their 2016 analysis of more than 20,000 global firms, McKinsey found that companies leading in executive board diversity had returns that were 53% higher than others. Organizations with high rates of female executives are also more profitable.

McKinsey & Co also found that companies that exhibit gender and ethnic diversity are, respectively, 15 percent and 35 percent more likely to perform better than those that don't. Their research shows that organizations with more racial and gender diversity also have better sales revenue, more customers and higher profits.

 

You'll save money in employee turnover.

Diversity is either a sexy or terrifying word, depending on whom you’re talking to – but there’s no doubt that it matters. Not only can comprehensive DEI strategies lead to higher revenue, but they can also save companies money in employee turnover.

35% of the workforce is made up of Millennials, those who most value diversity. Generation Z is bigger still - and right behind them. We must pay attention to their needs. 66 percent of the millennials (including 57% of those in senior positions) expect to change jobs in the next five years, according to Deloitte’s 2016 Millennial survey. And, according to GlassDoor.com, 67% of job seekers said that a diverse workforce is an important factor when evaluating companies and job offers.

All this, yet many large firms still don’t have comprehensive diversity and inclusion policies in place - and many do not have paid staff dedicated to this opportunity.

“Part of this conversation is about the bottom line and superior returns, but I think part of it is also about the extraordinarily talented female portfolio managers that exist. If the conversation and the need for diversity is not being talked about and prioritized within their firms, then those top talents will find firms where diversity is a top conversation” Kelly Rau, Audit Partner, KPMG, wrote in the 2018 Preqin Investor Survey.

 

You'll create champions of your brand. 

While diverse teams are important, a comprehensive diversity, equity, and inclusion strategy is necessary to truly reap financial benefits. Diversity is the people: the mix of everyone on the team. Inclusion is the strategy of ensuring the diverse mix of people feel welcome, are given a voice, and permission to truly be themselves at work. Without comprehensive inclusion strategies that include buy-in from leadership, diversity is ultimately shallow and employees will leave.

According to Gallup, ”Companies with highly engaged workforces outperform their peers by 147% in earnings per share.” An engaged, included workforce means that employees can express their passions at work, allowing them to effectively be champions of projects that will ultimately advance the company’s mission. Their passion leads them to be agents of positive change within the company.   

Even companies like Johnson & Johnson, Prudential, and Kellogg that pride themselves on their heritage and tradition are prioritizing diversity, equity, and inclusion (DEI) strategies and are now considered among the top 50 Companies for Diversity, according to DiversityInc.

Diversity and inclusion work has to be authentic and you can't just check boxes -- or it won’t work. You now know some of the facts on why diversity contributes to the bottom line, next we'll show you HOW to implement a program that is genuine, authentic and truly drives results.

This work is hard but the rewards are great. With authentic investment from leadership, and a comprehensive DEI strategy, private equity firms will see benefits that go far beyond increased revenue. In the next three articles, I’ll share tips on how to set a comprehensive DEI strategy.