A guide to improving gender diversity
As gender diversity is such a key issue for private equity, it’s no wonder LPs are increasingly asking for more data from their GPs as part of their ODD and regular reporting. Sasha Graham, senior consultant at Equality Group provides insights on how GPs can actually improve gender diversity.
Part of ESG
Gender diversity forms part of the “S” when it comes to ESG. “We always talk about D&I (of which gender is part of) as social sustainability,” explains Graham. “Firms need to implement good practices, build an inclusive culture and create good behaviour, which then drives that socially robust business.”
This feeds into the idea diverse teams outperform, create better returns while nodding to ESG requirements. “ESG regulations within financial services are incredibly helpful because there is pressure to adhere to the requirements, and firms have to commit to it and understand how it works,” adds Graham.
However, D&I is still considered a broad and abstract topic. “People have so many opinions when it comes to specifics such as gender,” she says. To rectify this, Equality Group created a D&I Index in partnership with Dow Jones. “We created it to provide a mirror to PE firms about how they are perceived externally,” explains Graham. “Most organisations are promoting diversity and trying to attract diverse talent, but the public information doesn’t express that, which is where communication falls short. Being able to apply some standardisation and specific criteria helps organisations to measure and understand what D&I as a whole is. With that knowledge, firms can break down, for instance, their stance on and find solutions to rectifying gender diversity.”
Why measure D&I?
One reason measuring gender diversity can be challenging is trying to classify people. “We need to be clear the sole purpose is to understand what the representation is within a firm,” says Graham. “By no means is this aiming to classify or label people. Gathering and measuring this data is important because it shows the business where its gaps are, and brings to light areas they aren’t necessarily thinking about but should be.”
Graham has seen various companies say they are committed to improving their gender diversity, but a statement on its own holds little weight. “Without tracking and measuring data points, firms don’t necessarily know what or how they’re achieving their current representation,” she says. “Without that knowledge, there is no way to improve. It’s better to commit to something they can strategically achieve, because once they’ve met their goals or targets, it gives them confidence to look at other demographic characteristics which need to be improved.”
What can be done?
Improving gender balance at a firm starts with hiring an equal ratio of men and women. “The question is who is the best person for the job?” says Graham. “However, often what people mean is they want someone like them, which is how we naturally create homogeneous communities. When people create job specifications, they unconsciously seek certain profiles, usually someone who mirrors them.”
Graham says it’s important to consider where you find candidates. “If they come from the same universities or have similar backgrounds, you’re already losing the diversity battle. It’s key to work with relevant recruitment firms and adjust the language within job specifications to widen candidate pools and ensure you capture new talent who can offer your firm a new perspective. If we strip it right back, it’s about cognitive diversity. Firms want to create teams of people who think and practice things differently and set them apart from their competitors.”
Graham notes the companies with strong D&I practices use role modelling. An obvious example, which severely impacts female retention in PE, is parental leave. “Pressure shouldn’t be on women to think about how they’re going to manage a career, but instead male advocates,” she explains. “Some clients, for example, would confidently say they have men in the business who are great at taking parental leave and taking on that responsibility. However, those same men wouldn’t necessarily advocate for it in the firm because they feel unable to show any vulnerability for fear of being perceived as weaker leaders. Equality Group encourages firms to showcase these men as role models within their organisation. That way everyone else will feel confident and follow in their footsteps.”
If a leadership team isn’t interested in understanding why gender diversity is important, nothing will change. “Leadership needs to want to make those changes to create diversity across all levels of the organisation,” says Graham. “When leadership takes responsibility, this is how you avoid lip service.”
Step one is educating people to understand why it’s important and how it can be achieved. Step two is applying and adapting practices across the organisation and decision making levels. “We’ve had conversations with firms which said diversity is great and they’ll run a workshop to solve it. Sure, it’ll raise awareness, but it won’t change the organisation’s culture. Workshops provide knowledge, but they still need to apply the changes.”
If firm culture is perceived as masculine, in that employees must behave and sound a certain way, women who are brought into that environment will get stuck. “Whether they don’t speak up enough or they’re considered too pushy or too emotional, they won’t progress, there will always be something ‘wrong’ with them,” she says. “When leadership welcomes vulnerability by taking responsibility and making a solid commitment to improving gender diversity, that’s when you see real changes around culture engagement and women progress through the ranks.”
Oftentimes, Graham says clients believe they don’t need to explicitly say or do things to confirm they support gender diversity, it’s just ‘known’. “Those firms need to remember while some individuals feel one way, it doesn’t mean everyone else in the business does. Any barriers such as flexible working, parental leave, negotiations - they should not be implied, they should be consistently communicated explicitly so it becomes ingrained in the culture.”
Of course, none of this equates to an overnight fix. It will take time because this is ultimately about recreating an inclusive firm culture and implementing good practices. “We want firms to see gender diversity in the same way as any other issue,” adds Graham. “First, decide what is great gender representation to them. Then analyse and assess it to understand what culture would support it and how can they attract that talent. This produces data to measure so you can visually see improvements.”