The moral case for improving the diversity of the private equity workforce is clearly understood. You’d be hard pressed to find a firm that doesn’t share the view that everyone irrespective of their gender, ethnicity or background deserves equal opportunity for career success.
But attracting talented people from under-represented groups into the sector is just as critical for the success of a private equity business. A group of individuals with different backgrounds and experiences will bring fresh perspectives and new ideas to the table, which boosts creative thinking and reduces the likelihood of the firm chasing the same investment opportunities as the competition.
A career in PE can be both professionally and financially rewarding. Despite this, the sector continues to struggle to bring talented new recruits from underserved backgrounds into the profession.
So what needs to change?
Challenging the status quo
Many private equity firms rely on investment banking and other key areas of finance to channel early career professionals into the sector once they’ve gained a few years’ experience. But this is not the only route firms seeking to improve workforce diversity can explore.
While progress has been made in recent years to improve diversity in the finance sector, there is a long way to go before these elite career pathways are fully accessible to young people from minority and under-represented groups.
So the first step for any private equity firm that wants to up their game to improve diversity is to strike out and start to do things differently.
Those firms that throw their recruitment nets out much wider – and spark young people’s interest in the sector much earlier – will be a step ahead in breaking down the barriers to improving diversity, equality and inclusion.
At SEO London, we’ve been working with organizations across private equity, banking, consulting and corporate law for over two decades to help them increase diversity in these sectors. One of the challenges we see all too often is that young people from under-represented groups may be aware of the broader opportunities for careers in finance, but the relatively niche pathways into private equity may not even be on their radar.
We know from our students and alumni that even those young people who do have a greater awareness of PE as a career option may simply feel it’s not for them, for whatever reason.
Employers in this space have an important role to play in helping to change perceptions. One way to do this is to start engaging with universities and even schools.
A PE firm could partner with a local university and run a regular event to showcase the advantages of developing a career in the sector. Putting information into the hands of undergraduates about further study or how to gain relevant experience will increase the pipeline of potential candidates coming through.
The impact will be greater still if firms start earlier and target schools and academy trusts with their awareness campaigns. A visit to a group of local schools to increase children’s knowledge and understanding of private equity will nurture a much more diverse channel of quality candidates for the future. In our experience, very few firms consider this early outreach, which is a real missed opportunity as this approach has certainly paid dividends for companies we work with.
Break from convention
We know for those private equity firms that only take on one or two new recruits at a time, it can be difficult to put such long-term schemes into place. However, regardless of how many vacancies come up, if a CFO responsible for recruitment only targets a limited pool of talent, such as existing networks or graduates from top universities, they will not meet their DE&I goals.
Firms could be making much more of the opportunities that already exist to identify and develop the future PE high-fliers.
Quality candidates can come through on schemes such as summer internships aimed at females or people from black minority groups for example. But there are still too many firms that think of internships as short-term opportunities offered as part of a corporate responsibility agenda, rather than the long-term strategy for improving diversity they could be. What this means is talented people come in, make an impact during their placement and once it ends, they move on to develop their careers elsewhere.
The firms that take diversity to heart go to great lengths to build relationships with their interns and keep them up to date with new work experience opportunities. They might run regular events such as meet ups for women in private equity or quarterly breakfasts aimed at African heritage PE professionals to bring young career starters and more experienced colleagues together. The opportunity to make industry connections would otherwise simply not exist for many young people from underserved groups. Over time, this relationship building will have a positive and significant impact on the diversity of the PE recruitment pipeline.
Protecting the bottom line
Building a truly diverse workforce where everyone has equal opportunity to succeed can be hard.
In the current economic climate, it has never been more important for firms across the private equity sector to commit to diversity initiatives.
Those organizations that genuinely recognize and embrace societal, cultural and religious differences and embed DE&I deep into the fabric of the firm will ultimately find it easier to attract and retain top talent, and as a result, protect their bottom line.