Why I'm Not Waiting To Prioritize DiversityMon, Apr 18, 2016 in Leadership
I have a vacant board seat at VividCortex, and I’m making diversity one of my priorities as I begin to search. I’ve discussed this with a range of people over the last several months. Nearly everyone has asked me to clarify what I’m trying to achieve, and why. Some have challenged me to defend why I believe diversity is a must-have at this stage of VividCortex’s growth. In the end, it’s my job to make the call. I’ve decided that diversity is a priority (not the sole priority, but a priority) now, not later. Here’s why—and here’s how I’m following through on that decision.
Purpose and Audience
I wrote this blog post with a variety of people in mind: my current and future board members and investors, my current and future employees, customers, peers in similar positions, and the unanticipatable readers who might be influenced by reading what I write. I’m also thinking about the people who might be motivated and able to help me after reading this.
I’d like to think that I’m not just another white man who feels enlightened and wants people to know that he cares about diversity. This isn’t written from a place of guilt or difficult-to-verbalize strong feelings. I’ve thought a lot about this, gone through several drafts over a period of months, and sought reviews and feedback from many people.
Writing this is a way for me to clarify, for myself and others, the position I’ve adopted and how I’ve arrived at it. My goal is not to express a sense of completion and finality, but to continue the process of learning, listening, and seeking and considering advice. To the extent that sharing this publicly is valuable to others, that’s good too.
The Benefits of Diversity
A huge number of studies across many years show that diverse groups of people outperform in a variety of ways. In a nutshell, diverse groups of people make better decisions, solve complex problems better, consider more solutions to challenges, have access to more resources, execute more quickly, are more ethical, have fewer problems and make fewer mistakes, are more cost efficient, grow more quickly, and generate higher revenues.
This is true across a variety of industries, and it’s especially true when there’s diversity in leadership positions.
An aside: in technology, diversity is often a synonym for gender diversity, specifically, women in tech. It shouldn’t be; we should consider age, race, geography of origin, socioeconomic class, sexual identity, native language, and much more. But in 2016, women-in-tech is often the primary type of diversity that people think about in tech. It also seems to have been the subject of more formal studies.
What do those studies find? Here are a few examples, focused mostly on women in tech:
- “Companies with at least one female board member had a return on equity of 14.1 percent over the past nine years, greater than the 11.2 percent for those without any women. The stock valuations are also higher for gender diverse boards versus all-male ones.” Source: Credit Suisse
- “The findings were startlingly consistent: for companies ranking in the top quartile of executive-board diversity, ROEs were 53 percent higher, on average, than they were for those in the bottom quartile. At the same time, EBIT margins at the most diverse companies were 14 percent higher, on average, than those of the least diverse companies. The results were similar across all but one of the countries we studied; an exception was ROE performance in France; but even there, EBIT was 50 percent higher for diverse companies.” Source: McKinsey
- “Organizations that are the most inclusive of women in top management achieve 35% higher ROE and 34% better total return to shareholders versus their peers—and research shows gender diversity to be particularly valuable where innovation is key.” Source: Illuminate Ventures
These are not isolated examples. Here are a few other links; you can find thousands with a quick Google search:
The implications could not be more clear. Diversity is a huge lever for success. And we’ve known this for a long time.
Anecdotally, I’ve seen the results in real life. I recently signed a contract with Lever, a recruiting software company. As I did a competitive bake-off with alternatives, I paid a lot of attention to who interacted with me. My sales rep from Lever was a woman. My onboarding was with a woman. My customer success manager is a woman. All of them have been professional and competent. The product and service is phenomenal. The design, the documentation, how well trained everyone is, the promptness of help and bug fixes, the thoughtfulness of so many little things—they are nailing it. In comparison, another company assigned me a white male sales rep who, despite past jobs as a recruiter, lacked training or experience, couldn’t help me, and was often wrong and never in doubt. These companies have big differences in diversity in their staff: Lever has a woman CEO/founder and quite a few women in leadership positions; the other company has visibly less diversity at the leadership level and apparently advances the careers of underperforming white men, judging by my experience. Draw your own conclusions, but I’ve seen enough examples that I don’t think it’s coincidence.
The Importance of Board Diversity
Adding someone to your board is a major decision. If you haven’t been a CEO, here’s a quick summary. The board of directors is one of the most important teams in the company, because they provide accountability and leadership for the CEO and other company executives. The board members need to be chosen carefully for what they can contribute to the company’s success. As seen in the studies I cited above, they can contribute a lot; board members have huge influence.
And a board member isn’t like most employees who can be terminated at will. When you appoint a board member, you should regard it as semi-permanent. It can be difficult or impossible to change a board member.
Clearly it’s important to find the best possible board members for your company, but why is it important to build board diversity? Many of the studies I mentioned or linked above deal with diversity on the board. How exactly do diverse boards, as opposed to overall diversity in the team, produce better results?
There’s a lot of debate about this. I believe one of the most important things diverse boards do is set the precedent for diversity in the whole company. It’s obvious to me that boards are enormously influential in hiring, especially in the top leadership positions. Diverse boards build diverse leadership teams. And that creates diversity in middle management and individual contributor positions. Diversity, in other words, flows from the top.
Or, as an expert on the topic wrote me, “Structure is more powerful than the individual—and also easier for leaders to control. For this reason, studies of sexism in the workplace typically recommend addressing ‘organizational structures, processes, and practices rather than focusing solely on reducing sexism in individual employees.’” Corporate boards wield tremendous power over those factors, helping to reduce sexism, one of the major factors that influences women to leave careers in technology in particular.
Recruiting great people is a huge competitive advantage for companies, which is one of the most important effects of diversity at the executive and board level. Companies with diverse leadership have access to a larger pool of candidates, it’s easier (and thus cheaper) to attract them, and retention is better. Recruiting and turnover are huge costs, so all of these factors go directly to the bottom line.
Why do companies with diverse boards and executive teams enjoy these benefits? The easiest way to understand is to look at what happens when the company’s About Us or Team page is several rows of mostly white males. People of diverse backgrounds are much less likely to join those companies. I intentionally follow conversations about this online, and since I began doing so, I’ve been impressed over and over again by the strength of people’s convictions. I’ve witnessed lots of cases where people I admire have declined to join teams that lack diversity. They don’t see themselves or their values reflected in the team portraits, and they feel strongly enough about it that they take a stand publicly to make a point of it. (It’s working: I noticed.)
The outcome is that companies with non-diverse boards have much less access to qualified candidates. They’re recruiting from a much smaller pool, which itself is more likely to be non-diverse, with all of the consequences that entails for performance.
A diverse board can also make a difference in forming relationships with other companies, too. My own story about selecting a recruiting software vendor is only one of several examples I could cite. And many of the people I know bring their values into vendor decisions too:
i’m so interested in containers, but is there literally any container co out there that doesn’t support harassing and/or assaulting women? - @mipsytipsy
I would be remiss if I didn’t take this opportunity to point out that lack of diversity is a negative spiral that limits access to opportunities for many people, and that’s unjust. As with company performance, the outcomes are unambiguous: lack of diversity gives rise to many types of discrimination. One that’s relevant in the context of an article about a board search is women’s greatly limited ability to raise venture capital funding as compared to men. Women who aren’t recruited into leadership positions don’t easily become part of the clique that leads to upward mobility into funding, founding, board positions, and so on. These are not accidental, blameless, or victimless outcomes. Diversity is not just a smart business decision, it is a matter of ethics and morals.
I believe that all of the things I’ve mentioned in this section—diverse staff, better performance, increased willingness to buy/partner, more inclusiveness leading to better rising-tide-all-boats opportunities—are at least partially outcomes of board diversity.
Why Diversity Matters Earlier Than I Thought
VividCortex is growing strongly and is in great shape financially, but it would be a mistake to think we can afford to relax even slightly. We are a startup, and we can still falter or fail. We must focus all of our efforts on getting things done. That’s why I wasn’t surprised when some of my advisors asked me if this is really the right time to prioritize diversity in the board. We have a lot of important things to do!
Some things must be done early, though. One example is establishing the company’s mission, vision, and values. Without such tools to provide clear direction, a company struggles to execute effectively. As founder, I focused on these things from day one, building on the basis of my personal mission, vision, and values. The first three values I identified for VividCortex are “The Golden Rule,” “Mutual Improvement,” and “Work Lean.” These values are beliefs about right and wrong that serve as guidelines for making decisions, and they’re called core because they are non-negotiable, mandatory values the organization must exemplify to succeed.
These core values are followed by aspirational values: “diversity, humor, humility, honesty, frugality, focus, fitness, sharing, and listening.” This list is values that are important but non-mandatory, or perhaps as the name implies, aspirational: not true today, but something to work towards. I struggled with whether diversity should be a core value, but ultimately decided that although we wouldn’t do as well with a non-diverse group, it wouldn’t flat-out kill us. I listed diversity in first place as a compromise.
I’ve changed my mind, though. I’ve come to believe that diversity truly is core to achieving excellence. Not only that, I think the definition of excellence itself needs to include diversity. I don’t think I can say, with a clear conscience, that we’ll have achieved excellence if our About Us page grows to look like some of those I’ve visited recently.
We’re not as diverse as I want us to be now. We’re a small team, so we’re not far down the road and we haven’t made an unrecoverable misstep. But at some point it gets much harder. To see where this road leads, consider this post-departure quote from one of Twitter’s few black employees:
“With my departure, Twitter no longer has any managers, directors, or VP’s of color in engineering or product management. From this position, Twitter may find it difficult to make the changes to culture and product.” Source
Mostly-white, mostly-male, or mostly-both is a dead end. There are so many men in tech, and the individual and structural biases are so pervasive, that this is the likely outcome for every company that doesn’t make diversity a priority, especially at the leadership level.
It reminds me of my days at Boy Scout Camp, learning how to sail. The wind was never blowing the way I wanted to go, but “the wind blew me there” is not an acceptable reason for ending up in the reeds instead of at the dock. As a sailor, you acknowledge and work with the wind, but you focus on the destination, and you do what it takes to reach it regardless. As a CEO it’s the same way; you can’t just be passive and hire whoever falls into your lap, you have to be intentional and work to create the outcomes you need.
Companies whose teams are too homogeneous have a serious chicken-and-egg problem to solve. They’re painted into a corner. I don’t think you can start thinking about this too soon. If I’d understood this earlier, I’d have focused on it earlier myself.
And that brings me back to the board search. As I fill this next board seat, it’s clear to me that it’s a watershed moment. There are three of us on the board now, all males, two of us white. The fourth member will vote with us to elect a fifth someday. If the fourth member is a white male, our chances of finding and recruiting a diverse fifth member are poor. If you were, say, a woman, would you want to be the only woman on a five-member board? If our board becomes five people who are homogenous along a major axis, we probably missed our best chance to create a diverse company. The fourth board member really matters.
How I’m Searching
As I said, the winds don’t blow towards diversity, so if I’m passive in this search I won’t get the outcome I need. That means my search for a diverse board member must be deliberately inclusive.
I’m the first to admit that I’m not completely sure how to do this. Part of the reason I wrote this post was to ask for your help, because it seems to me that as a community we’re not as good at this as we could be. If I want to build an API or a mobile app, there’s a lot of expertise readily available, but recruiting a diverse board member? Few people I know have actually done that.
My first step, of course, was to research. I Googled “how to conduct an inclusive job search.” The results were beyond disappointing; mostly a scattered collection of rather unrelated websites from academic departments, with a few results from the U.S. Department of Labor and various recruiters thrown in. Related searches such as “how to recruit inclusively” fared no better. This reinforced my impression that not enough people in the technology industry are thinking about and practicing inclusive hiring, let alone discussing it with (or promoting it to) others. If I’d seen results from a major tech company titled How We Recruited A Diverse Team I’d feel a lot better about our industry.
Since there doesn’t seem to be much to learn from tech companies, I looked to other industries. For example, one person mentioned the Rooney Rule to me. It’s an NFL (pro football) policy stating that teams have to at least interview minority candidates for senior roles. Obviously this doesn’t ensure the desired outcome, but it’s a step in the right direction; if you don’t interview any minority candidates you clearly are doing something wrong. The Rooney Rule is used broadly now, not just in the NFL. (Had you ever heard of it? I hadn’t.)
Another suggestion was to hire a diversity-focused recruiter. Alternatively, emphasize the importance of minority candidates to a recruiter, whether diversity-focused or not. I haven’t decided whether I’m going to use a recruiter for this search. I don’t know whether I should; your advice is welcome.
In general, the stages of any recruitment effort, whether traditional or for a specialized role such as a board, are a) defining the role b) publicizing the vacancy c) outreach d) interviewing and e) selection. It’s clear to me that diversity and inclusiveness need to be considered at each step. Some of these steps are very important, such as outreach. Relying on networks is proven to result in similar hires, not diversity. It would be easier to just ask for in-network references, but that’s sailing where the wind blows. So clearly someone—me or someone I hire—is going to have to actively search and reach out to candidates.
But a board search seems to be handled very differently from an executive hire, from what I can see. Maybe there are good reasons for it, but no one seems to post job listings or the like. In the absence of experience with this, I’m a bit uncertain: in what ways am I ignorant? What don’t I know that I don’t know? What could be the consequences? I decided to write this blog post and see what happens, as a first step. (Even this step seems pretty gutsy.)
As for the definition of the role and ideal candidate, I don’t want to go into too much detail here, but ideally as many of the following as possible:
- Non-white, non-male, or both.
- Experience in companies similar to VividCortex, which is a venture-capital-funded startup that sells infrastructure software to enterprises.
- Leadership experience, preferably as a founder, CEO (or similar), raising venture capital funding, or serving on a board.
- A highly technical role, such as chief architect, CTO or similar, ideally in a cloud-hosted SaaS platform that stores and analyzes sensitive customer data.
- Experience as a sales or marketing leader, ideally VP- or C-level. Again, if it was for a company that sells to similar buyers as ours, that’s great.
- Able to travel to Charlottesville, Virginia (CHO) conveniently.
In this post I’ve explained why diversity matters to VividCortex, especially at the board level, and why I believe now is the best time to diversify the board. I’ve written from my personal convictions as well as my judgment as a leader.
I’m looking for a board member who is different from our current board members. I’ve accepted that this will be a more difficult search than simply asking a buddy to join my board. I’m fine with that; I’m convinced the results will more than justify the effort. I’m also fine with this taking the time it takes. Rushing and adding the wrong person to the board would be much worse than having a vacancy for a while. As a startup, statistically speaking we could go belly-up for many reasons, but having a three-member board is not the most likely one in my opinion.
There are many challenges to building a diverse team, especially at the board level. In the face of these challenges and the consequences of making the wrong call, the arguments for recruiting someone just like myself, whom I already know well, can seem pretty compelling and rational. But the truth is that after you build a club, changing who’s in it comes slowly if at all.
I’d like to say thanks to all the exhausted feminists in my life. Anything I’ve done well in this post is pretty much the result of their hard work, and the rest is my fault.
Update, March 2017
I’ve chosen my 4th board member, a white man. I did this because I ultimately came to realize that someone who hasn’t been a tech startup CEO and successfully navigated the challenges both today and those in the years to come can’t help me with the struggles of that role. I learned this truth through the struggle itself.
And the population of under-represented minorities who can help me with this vital role is, sad but true, very limited and in unbelievably high demand (i.e. already on too many boards at other companies). There may not be a pipeline problem for under-represented minorities in tech in general, but there most conclusively is for qualified board members. The attainments that would qualify people through experience for such vital positions are largely withheld from minorities.
I learned that what I set out to do was so improbable as to be nearly impossible. Learning is the point. We’ll redouble efforts to make VividCortex a welcoming and inclusive place for everyone. It’ll be hard but worthwhile.
Photo credit: circuit board (yeah, bad pun I know).
I'm Baron Schwartz, the founder and CEO of VividCortex. I am the author of High Performance MySQL and lots of open-source software for performance analysis, monitoring, and system administration. I contribute to various database communities such as Oracle, PostgreSQL, Redis and MongoDB. More about me.