Private Equity Has Something To Add To The Diversity Discussion. Yes, Really
This article is by Charles Gray, who co-leads Egon Zehnder’s U.S. diversity practice and focuses on private equity, financial technology, and technology officer recruiting.
Google “Uber” and “diversity” and one of the first articles to pop up heralds the startup’s hiring of Bozoma Saint John — a former Apple executive and African-American woman described as a “badass” by Wired — as its chief brand officer.
The hire was doubtless an effort to add some luster to Uber’s reputation as a less-than-stellar place for women to work. But more than that, it was a shrewd business move. According to a recent McKinsey study, companies in the top quartile for gender diversity are 15% more likely to outperform those in the bottom quartile, in terms of financial returns. When it comes to ethnic diversity, the advantage is 35%.
As leadership advisers, we hear a consistent lament: We want to hire diverse individuals, but they’re just not out there. They don’t have the requisite experience at this level. There’s no pipeline for diverse talent.
Think about it. When you’re making substantial investments in numerous companies at critical growth stages, you know it will be only a matter of time — and usually not much time — before you’ll need a new leader. If you wait until you’ve got an opening to start assembling your pool of prospects, you’ve already missed the boat. Top-tier private equity firms know this, and they’re constantly searching for the best and the brightest. They’re always willing to take a meeting with top-level talent, even — or especially — with people who are happily employed.
Our P.E. clients know that hiring a superstar is a long game. You may walk away empty-handed at first, but all it takes is a merger, an acquisition, or someone getting bored for a super-talented candidate to become a free agent. If you’ve already forged a relationship with that person, you’re the first call they’re going to make.
That same approach can pay dividends when it comes to diversity.
I recently attended a networking event in New York City for senior executives of color in the tech and media fields, all at the vice president level or above. It was a goldmine for a talent scout who specializes in helping companies diversify their teams. None of the candidates was an immediate fit for a current search, but we at Egon Zehnder now have 50 names we can get on the radar of our clients.
By applying this evergreen hiring logic to diversity, a few financial services companies are reducing the hiring timeline from months to years, and the return on investment is eye-opening. One global asset manager with thousands of employees wanted to boost its ranks of female executives, so they made it a priority to identify the top 100 women in the field.
They then tasked each executive committee member with getting to know a number of these women over the course of several years. This wasn’t about one or two meetings. It was a serious long-term investment in building relationships. This client took the time to learn what these high-level executives wanted out of their careers, and to make sure they could come in with an enticing offer when the time was right. A few years in, the effort is starting to pay off. They’re making great hires and adding to the diversity of the management team.
From companies as diverse as Facebook and McDonald’s to financial services giants like JPMorgan Chase, the push to build diversity into corporate hiring culture has never been stronger. And it’s no wonder. Aside from concrete benefits to the bottom line, building a long-game plan for diversity has another benefit: You’ll tap into talent pools you never knew existed — even some that have been sitting right under your nose.
Another client of ours knew they lacked Latino talent. They had longstanding relationships with several consulting firms from which they’d often recruit, but somehow the candidates they were hoping for never materialized.
So we reached out specifically to the Latino partners and associate partners in those consulting firms. Altogether we found 70 highly qualified individuals to introduce to our client. Amazingly, only one of them had been on their radar before. Now, when one of those partners is ready to make a move, our client won’t have to compete for their attention on the open market.
Adopting this evergreen approach to hiring is definitely not business as usual—but that’s exactly the point. Moving the needle on diversity takes intention, and it takes time. But companies willing to put in the effort are finding themselves on the inside track for elite talent in an increasingly competitive world.
Posted with permission of Forbes Media LLC