How to infuse diversity into venture capital
If a tech company made a big investment in a new product initiative without achieving any tangible results, shareholders would rightly demand that something should be done to fix the situation. Yet every year big tech firms spend millions on diversity and inclusion initiatives, often with very little to show for their efforts. We need to be as diligent about fixing the diversity problem as we are in triaging stagnating products and growth numbers.
I recently had the pleasure of appearing on a panel at the CDX NYC Open Innovation Summit on the topic of diversity and innovation alongside Rita McGrath, distinguished professor of strategy and innovation at Columbia Business School, and Julia Taylor Kennedy, EVP of the Center for Talent Innovation. We discussed the barriers women and minorities face in tech today and what the industry needs to do to tap into the power of diversity.
Outsourcing has a corrosive effect
Lack of personal accountability is a major reason for the failure of tech industry diversity, equity, and inclusion initiatives. Large tech companies often outsource their talent recruitment to third parties who are in the business of hitting quotas instead of truly assessing candidates for their intrinsic value. As a result, women, and minorities are primed to think they are hired on diversity and not on merit.
Early in my career, a recruiter told me that I was a “diverse candidate.” As an employee, this can cause you to question your value and feel like a second-tier candidate or impostor. You start to feel like you’re the only person there with a liberal arts degree, the only woman, the only person of color. Being the “only X” creates an insidious force where you start to doubt yourself.
Most of my career has been marked by a feeling of not belonging. There is a long term, corrosive effect in which corporate recruiters end up labeling people as diverse candidates instead of affirming that they have earned their positions.
Owning unconscious biases
Unconscious biases against women and minorities don’t end at recruitment. Female business leaders constantly face difficulties that their male counterparts don’t have to experience.
For example, female entrepreneurs receive only about 2 percent of all venture capital funding, despite owning 38 percent of businesses in the United States, according to a 2017 study reported in Harvard Business Review.
During our panel discussion, Julia referenced a survey conducted by her organization that found 71 percent of managers pick proteges of the same race and gender as themselves. The survey also found that 77 percent of managers picked proteges with the same management style or skills.
As Julia noted, this isn’t just a problem from an equity perspective. It also prevents companies from developing the innovation they need to reach diverse markets.
Both my fellow panelists argued that a more personal approach was key to helping managers overcome unconscious biases. Rita noted that unconscious-bias training often creates a kind of resentment in managers. To counteract this problem, she suggested managers be given targets for finding and maintaining diverse talents.
The true test of time of a diversity initiative is in retention. It’s easier to hire diverse talent but harder to retain them. There is no point pouring diverse candidates into a broken system if the environment is not designed to support them.
Often, managers don’t know how to act on what they learn in diversity training, Julia said. Teaching managers how to exhibit inclusive leadership is far better than just telling them they are biased and leaving it to them to figure out the next step, she added. She even recommends building inclusive leadership into the performance evaluation or bonus package of managers.
Building diverse ecosystems
As I mentioned on the panel, Samsung NEXT is uniquely positioned to tackle diversity and inclusion. As an investor in software and services, we plan to focus on how we can tap into a diverse market of founders, entrepreneurs, and operators – and thereby serve diverse markets.
Diversity can only truly be achieved by partnering with practitioners, investors, operators, and founders to institutionalize change. For starters, we intend to form a consortium of experts who have worked on interventions, studies, and research on diversity and inclusion.
As a member of the Global Corporate Venturing & Innovation Summit, comprised of hundreds of global corporate funds, we are looking into how we can partner with researchers to measure and track longitudinal studies on the impact of diversity and inclusion initiatives.
The question we are hoping to answer is: If a fund sets a quota, how close do they come to sticking to the quota as they go down the funnel to portfolio companies?
Additionally, Samsung NEXT is exploring a partnership with the Harvard Kennedy School’s Women and Public Policy Program, which would involve pooling data points from all these different corporate funds.
Having more data will help us create recommendations to guide corporate venture capital firms on how to build diversity and inclusion into their partnership networks.
From the workplace to open innovation partnerships, promoting diversity and inclusion is key to accelerating corporate digital innovation. Inclusiveness is a moral imperative because all candidates should feel they are judged on their merits and not just made to feel they are there to fill a quota. It is also an industry imperative because bringing in a more diverse field of people can help the tech industry overcome its blind spots.
To hear more about Samsung Next diversity initiatives and events, sign up for our weekly newsletter.