Preaching diversity and actually taking the steps to become a diverse private equity firm is not the same thing. Panelists at PEI’s Responsible investment forum in New York 2019, discussed what they do to instil a more diverse culture within their firms.
By now it’s understood that the industry has an issue with diversity. A report earlier this year from the Knight Foundation found that of 2,814 US firms surveyed, 146 were women-owned and 106 minority-owned, representing 5.2 percent and 3.8 percent of all included firms, respectively. In the UK, the British Private Equity and Venture Capital Association and Level 20, a membership advocacy group with the goal of increasing the proportion of women in senior roles across the European private equity industry, surveyed 179 UK private equity firms and found just 6 percent of senior investment team roles are held by women.
One panelist at the event – a chief compliance officer – explained during a Chatham House rule discussion how they implement basic strategies to improve the diversity in their recruitment efforts. But even these simple strategies aren’t implemented across the industry as much as they expected.
“When I go to ask recruiters to implement very basic things, I’ve been told consistently on both sides of the Atlantic, ‘Wow, you’re the first person to ask me this,’” the CCO said.
One of these “basic things” is accepting blind résumés during the hiring process for the firm. Unlike a traditional résumé, blind résumés are submitted with the candidates’ names, gender and ethnicity redacted. This is supposed to eliminate any unconscious bias a hiring manager might have and create a more objective process.
To further eliminate unconscious bias, the CCO’s firm provided training to all members of their team to ensure that “people are aware they need to put objective reasoning first,” during the interview process. “We don’t want to hear anymore ‘they’re not a good fit’ or ‘that person’s a good cultural fit.’ We don’t want to hear that anymore; we want to hear specific objective criteria.” Hiring managers are asked to provide reports on how they conducted their interviews.
Limited partners are starting to ask more about diversity policies within a firm. “I’ve seen a real uptick in requests for more diversity and inclusion but no specific metrics,” another panelist said. “The number of requests coming in are three times as much as they were 18 months ago.”
The human capital operating officer underscored the importance of leadership embracing the importance of diversity as much as other members of the firm, with the understanding that there won’t be a change overnight.
“We provided half-day training for each of our offices, at all levels and I had the support of my CEO,” they said. When some members of the firm tried to make excuses to get out of the training “the CEO said, ‘I don’t care what deal you’re sourcing or how important this meeting you’ve been trying to get is, you’re going to the training.’”
The panelist also explained the importance of “pushing back on recruiters” if they say a diverse hire is too difficult to find. A diverse industry won’t be born overnight, but conversations like this are a step in the right direction.