The Top 10 Things To Improve Your Inclusion Practice
Ahead of the TD Bank Presents: Diversity & Inclusion – Perspectives from the Private Capital Industry panel at #IC18, Dave D’Oyen, Inclusion & Innovation Builder, Shopify, shares 10 ways to improve your inclusion practice in this special contribution to CVCA Central.
During my first week at Shopify, CEO Tobias Lütke gave an introductory onboarding talk in which he said, “It is easier to change the environment than to change people’s behaviour.” He was describing a situation in the early days of Shopify, where dishes and take-out containers were left at people’s desks after food was brought in for the staff. No matter how many signs were posted or reminders were given, the problem persisted. The team decided to change the environment by adding more areas for cleaning all around the office. For this reason, today’s offices are designed with nearby kitchenettes outfitted with bins for utensils, glassware, organics and garbage for easy collection by members of our facilities team.
Shifting to diversity and inclusion in the private capital ecosystem, there is an opportunity to change the environment versus the behaviours.
The default response to changing behaviour might be unconscious bias training. Professors Frank Dobbin (Harvard University) and Alexandra Kalev (Tel Aviv University), caution against mandatory diversity training. Their article “Why Diversity Programs Fail”, says, “…five years after instituting required training for managers, companies saw no improvement in the proportion of white women, black men, and Hispanics in management, and the share of black women actually decreased by 9%, on average, while the ranks of Asian-American men and women shrank by 4% to 5%.” The trainees felt anger and resistance during the training, negative feelings which became associated with the aforementioned racialized groups. The premise was simple: individuals don’t like to be forced to do something. The training should be voluntary.
Controlling the impact of unconscious biases on our behaviour is difficult, insofar as we continue to receive the same messages and signals. Unconscious bias training shouldn’t be your be-all and end-all.
Below are 10 suggestions to change the environment and challenge our current thinking:
1) Create a diversified deal flow pipeline. It’s well known that entrepreneurs have a much higher chance of receiving funding when they are inside a venture capitalist’s known network. It could be through a long-term relationship or a ‘warm’ introduction but for entrepreneurs outside the network, it’s extremely difficult to get on the inside. According to Pitchbook, in 2016, venture capitals invested $1.46 billion in women entrepreneurs compared to men entrepreneurs who received $58.2 billion. When we account for race, a report by CB Insights in 2015 said only 1% of funded start-up founders were Black. The question that should be on the mind of all venture capitalists is, “How diverse is my network?” It is crucial to be honest about your sources of deal flow and to intentionally incorporate more sources that are diverse.
2) Hire more women partners and give them the authority to give funding. A working paper by Harvard University professor Paul Gompers and PhD candidate Sophie Wang showed that venture capitals (VC) with greater gender diversity had improved deal and fund performance (Fun fact: greater gender diversity was apparent in firms with partners who had more daughters.), and yet between 2011 and 2013, women CEOs only receive 3% of VC funding, according to Babson and Wellesley colleges, and ProjectDiane found that Black women received only 0.2% of VC deals between 2012 to 2014. According to McKinsey, “Companies in the top quartile for gender diversity are 15 percent more likely to have financial returns above their respective national industry medians.”
3) Dedicate funding for racialized and women entrepreneurs. Allocating funding means an early expression of commitment to support entrepreneurs who would have otherwise been overlooked. According to the Institute for Women’s Policy Research, “Firms owned by black or African American women have experienced the most rapid growth. Between 1997 and 2014, African American women-owned firms are estimated to have grown by 296 percent and their revenues to have increased by 265 percent, surpassing the growth among all women-owned firms.” Dedicated funding for racialized and women entrepreneurs is simply putting money where your mouth is.
4) Create a diverse interview panel. Since implementing this practice, Intel saw the percentage of women and racialized people increase from 31.9% in 2014 to 45.1% in 2016. At Cisco, diverse interview panels increased the probability of hiring Hispanic women and African-American women by 50% and 70% respectively. Closing the gender and racial/ethnic gaps improves our understanding of how certain businesses resonate with women and racialized groups. A former partner at Connetic Ventures, Meena Maddali, said, “People only invest in things they know and people they trust.”
5) Prepare a set questions that will be asked to all entrepreneurs. Researchers from Columbia University, Dana Kanze and Mark Conley, found that men entrepreneurs were asked promotion-focused questions, e.g., “How do you plan to acquire new customers?”, and women entrepreneurs were asked more prevention-oriented questions, e.g., “How do you plan to retain customers?” by investors. They studied 194 angel investors who allocated twice as much to entrepreneurs who were asked promotion-focused questions than prevention-based questions. Their research was informed in part by Professor E. Tory Higgins who formulated the influential regulatory focus theory which says we think in terms of promotion (gains), and prevention (losses). The recommendation is to ask more promotion-based questions.
6) Challenge emotional feedback with rational thoughts. Swedish researchers Malin Malmstrom, Jeaneth Johannson and Joakim Wincent found gendered discourse in the evaluations. They found the investors “…produce stereotypical images of women as having qualities opposite to those considered important to being an entrepreneur, with VCs questioning their credibility, trustworthiness, experience, and knowledge.” For example, the men entrepreneurs were described as “Cautious, sensible and level-headed” while the women entrepreneurs were described as “Too cautious and does not dare”. As a result, women entrepreneurs received 25% of the funding requested compared to men entrepreneurs who received 52%.
7) Sponsor not mentor. Mentoring is simply giving advice. As a sponsor, you actively advocate on behalf of someone, particularly in those moments when they aren’t in the room and you open doors for them. In summary, you are willing to go to bat; not as a matter of pity, but that you really believe in the entrepreneurs and their product/service.
If you are interested in working on yourself, try these:
8) Be colour brave, not colour blind. I’m sure we’ve all heard the statement, “I don’t see race.” On the contrary, we do. The question is not what you see, but how you react to what you see.
9) Engage people in conversation. Go out for lunch with someone from an underrepresented group and ask the questions you think might be tough or be met with apprehension in a public setting. Build on that by reading books and watching videos to learn more about their lived experiences.
10) Listen. One of my favourite lines from the song “Anyama” by Naxxos is “Listening is our access to understanding.” People are focused on getting their point across and proving they are right. Being a good listener takes time and effort so that other ideas and perspectives get voiced.
Pick one or two actions and measure them.