A Startup Attorney’s Tips to Advance Private Company Diversity

One of the biggest contributors to a lack of corporate diversity is the size of a company. And the problems are often traceable to the company’s leanest, earliest days. One of my key messages to clients is that it’s never too early to make concrete efforts to promote diversity, and it may be easier to build that culture sooner, rather than later.

That connection between growth and diversity challenges is one of the takeaways from Fenwick’s recently published Gender Diversity in Silicon Valley Survey – 2016 Proxy Season. We particularly saw a disparity in diversity between the technology and life sciences companies of the Silicon Valley 150 and the larger public companies of the S&P 100—that is, the larger the company, the more likely it is to have a more gender diverse workplace, especially at the senior executive level. The top 15 largest companies in the SV 150—peers to S&P 100 companies in terms of scale—tend to match and in some cases even exceed those of other public companies in the United States. That’s not the case, however, for smaller public companies.

I work with businesses from incorporation through their eventual sale or IPO, and what I see generally is that diversity often isn’t actively and systematically addressed until a company is forced to by circumstance—often by outside pressure. My top recommendations to enhance diversity depend on the company size, but some things are true no matter the scale or reach: it’s the right thing to do and a more diverse workplace generally leads to a more successful company. Research from a variety of organizations indicates a correlation between higher participation of women in decision-making roles and higher market returns and superior profits (see, for instance this 2016 Credit Suisse Research Institute report).

Two Areas Emerging Companies Should Not Ignore to Build Diversity

Young startups and other emerging-growth companies face challenges unique to their size and stage of development. Shoestring budgets are one. Smaller teams whose members already wear multiple hats are another. There is also a tendency to hire within familiar networks of friends and colleagues. However, companies that build an inclusive culture early on have far less catching up to do as larger organizations.

Recruiting and company policies are two areas where concerted focus can make a powerful difference.

Shake up recruiting by:

1. Incorporating “passive candidate pipelining.” Recommended by diversity HR experts, this method entails identifying and engaging with qualified diverse candidates before you need to fill the position.
2. Partner with local universities and colleges and inquire about building a diverse pipeline of computer science or other technical candidates.
3. Partner with organizations that help diversify company workforces, such as the Code2040, Women Who Code or the Recurse Center.
4. Revamp your job descriptions to broaden the qualifications and cast a wider net in advertising your positions, including on Diversity.com and Hiretechladies.com.
5. Hire or appoint a dedicated diversity leader and tie their title to innovation (and maybe compensation).

Consultants at McKinsey & Company and others have for a long time said that company culture plays a critical role in supporting women and other diverse employees in reaching top management.

Some policies to consider implementing early include:

1. A formal plan to foster diversity.
2. Flexible schedules.
3. Parental leave.
4. Transparent pay structures for every position based on compensation formulas.

Five Steps Large Private Companies Can Take to Diversify Leadership

In Fenwick’s recently published Silicon Valley Gender Diversity Survey, we discussed several steps that larger companies can take to advance diversity in leadership ranks. When recruiting new board members, consider the following:

1. Define qualifications more broadly by including other C-suite experience besides just the CEO role, as well as division presidents and leaders from government, accounting, law, retired military and academia.
2. Broaden the definition of board experience.
3. Identify the skill sets needed for new board members and then look for women or minorities who have that skill set, rather than using diversity as a “plus” factor.
4. Value perspectives from those who come from different industry or generations.
5. Retain a search firm that specializes in recruiting women and minorities.

No matter the company size, change starts at the top. As a company leader, set the desired example. The benefits of running a diverse company are many, not least of which is the growing sentiment that an inclusive and diverse workforce correlates with stronger financial performance.

To learn more about how tech and life sciences companies in Silicon Valley fare in terms of gender diversity in leadership compared to those in the S&P 100, download the Fenwick Gender Diversity Survey – 2016 Proxy Season.