For many years, employers have talked about the importance of hiring people who are a great cultural fit. In fact, some HR consultancies go as far to say that this is the single most important factor in employee retention. But in a world where business is breaking down borders and barriers, cultural add is actually of far more importance than cultural fit and speaks to the importance of diversity.
Diversity is both socially responsible as well as a savvy business strategy. Experts have shown us time and time again that companies with diverse management teams perform better financially and are more innovative than their less diverse peers.
Boston Consulting Group studied diversity and performance in over 1700 businesses across eight geographies, a number of sectors and a variety company sizes. There was a clear relationship between diversity and innovation, and a strong correlation between the number of dimensions of diversity represented in the businesses and their financial performance. The most diverse enterprises were also the most innovative, according to an analysis of new revenue streams. McKinsey & Company also undertook a study with equally powerful results but added the valuable point that this is a correlation, although not a causal link.
The benefits of diversity extend to increasing employee satisfaction, reducing conflict and enhancing the image of the business according to McKinsey. Additionally, businesses with diverse management teams will perform better as they have a stronger customer orientation arising from the powerful position of better understanding women and minority groups and their importance in decision making in purchasing. According to Femeconomy, in the US women make over 85% of purchase decisions, equating to $874 billion last year alone.
The same studies have also highlighted the importance of enabling practices such as fair employment practices including equal pay, participative leadership, a non-hostile environment, an inclusive culture, management support for diversity and open communication.
But how can a start-up ensure that it is attracting diverse talent? The tech industry is not known for diversity and this itself may be a barrier to drawing diverse graduates to a career in technology. Indeed some even say that Silicon Valley is “a predominantly white, male industry that is notoriously bad at welcoming and celebrating people from diverse background”. The FAANG companies (Facebook, Amazon, Apple, Netflix and Google) and A-PLUS (Airbnb, Pinterest, Lyft, Uber and Slack) companies today are reportedly still predominantly white and Asian. The diversity profile of Google has changed little. In 2014 it was 61.3 percent white and 69.4 percent male. Today it is 54.4 percent white and 68.4 percent male.
Diversity was the hotly debated subject at the recent SaaStock Australasia conference where Carolyn Breeze, Chloe Sesta Jacobs, James Slattery and Jay Spence discussed the benefits of diversity in the often masculine SaaS sector and how all businesses can attract and harness of the power of a diverse workforce.
For rapidly growing start-ups, developing the talent pipeline with a broad range of employees will stand the business in good stead. But this will need a rethink in the way that businesses hire and what they define as flexibility and inclusion. They will also need to cast the net wider and look in different talent pools.
Tech has the ability to use data to its advantage in hiring and remove some of unconscious biases that can occur when founders are hiring. A great example is language learning platform Duolingo which used data to achieve a 50:50 gender ratio in its software engineering team, a balance that will help maintain diverse teams going forward.
Job descriptions are very important to attracting a broad range of talent from different backgrounds. Founders who speak to the types of people they are trying to attract and ask for their input in writing the job description will resonate better with their audience. On the SaaS panel one guest spoke of the enormous benefit of cross-company interviews from outside the team to validate interviewees and the culture “add” of the candidate.
Of course, hiring is just the start of the diversity journey. Retaining and rewarding all employees equally is a given. Understanding what flexibility means to different people can help founders retain talent.
One of the panellists at the conference spoke of her own experience returning to work after both childbirth and cancer treatment for a large multinational and reported that the offer of flexibility was similar in both situations, a shortened pro-rata working week. She encouraged start-ups to talk to the segments they are seeking to attract to find out what inclusion and flexibility means to them. It might be that the employee wants to return to work full-time but needs flexibility by the business to enable this. Whilst flexibility may mean part-time opportunities for some people, this shouldn’t be an assumption.
Diversity and inclusion does not happen by accident. Founders need a clear and defined strategy in place. In a US study by First Round Capital of 869 start-ups, only a small percentage had a strategy to promote diversity and inclusion and a quarter had no diversity strategy in place at all. But above all, this strategy must start with the founder asking themselves whether they truly value diversity and how they demonstrate this to people from all backgrounds.
Benjamin Chong is a partner at venture capital firm Right Click Capital, investors in high-growth technology businesses.