Does Your Company Suffer From Diversity Debt?

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Jan 15, 2021

If your company isn’t as diverse as you’d like it to be, there’s a good chance that the problem began on Day One.

Many startups follow a typical genesis story. You’re building your first company. You hire a team with friends you’ve made over the years. It makes sense because you know them and you trust them to build your company together. But chances are that the founding team looks a lot like you do. 

What seemed like a way to foster trust, community, and alignment might actually be the very thing holding you back. Before you know it, you’ve scaled your core team of five to a company of 300, and everyone looks, thinks, and acts in similar ways. Innovation is at an all-time low, you’ve exhausted your networks, and growth is trailing. 

By now it’s well-known that diversity in the workplace boosts productivity, innovation, and revenue. Yet many founding teams still lack diverse representation, and growing companies are still falling short on sustainable and measurable plans to address workplace inequalities. 

If your business didn’t prioritize diversity, equity, and inclusion from Day One, your team might have been accruing significant diversity debt ever since. 

What Is Diversity Debt?

Diversity debt is the idea that hiring a homogenous team from the start makes it more difficult to bring in diverse talent as you scale. Just like financial or technical debt, diversity debt compounds over time, can be detrimental to the growth and culture of a company, and is notoriously difficult to pay off.

Established companies can mitigate diversity debt by implementing equitable hiring and compensation practices. Startups and quickly-scaling teams have the advantage of avoiding diversity debt by intentionally building a diverse core team from the start. 

Especially at a startup, bringing on people with a range of skills and experiences helps avoid groupthink and blind spots. When your staff is encouraged to bring their unique ideas and perspectives to work, your company stays on the cutting edge of growth and innovation. 

Here’s how your company can manage diversity debt.

Don’t Wait to Infuse DEI Into HR and Recruiting Practices

Early-stage startups often get off the ground with no real HR structures in place. Leaders face intense pressure to grow fast and build an amazing product quickly. This can result in biased hiring tactics that can last well past the start-up phase. 

Not hiring a diverse core team limits your networks, and it may also alienate diverse talent from even applying. Diverse talent looks at the demographic makeup of leadership teams as a key factor when making career decisions. That’s why having a diverse core team — from Day One to today — can be so important for mitigating diversity debt.  

Early in my career, I was the head of an engineering department at an early-stage company. While there, I had the opportunity to hire a team that would set the pace and tone of our culture during a period of high growth.  

My core team started out with all men. 

After a few months, I brought the first woman on at hire No. 4. Her feedback as she was onboarding made me  realize that, even in that short time frame, the culture had already been set. Because I caught this early on, I was intentionally able to chart a course for a more inclusive team as we continued to scale. 

Here’s what I learned about diversifying teams from the start:

  • Diversify your hiring pipeline. Make sure that you’re focusing on skills and experiences that will help your company grow. Expand recruiting channels to ensure your hiring pipeline matches demographic representation in the industry. 
  • Standardize compensation bands for salary and equity. Provide salary ranges based on market data. Salary transparency removes the burden placed on applicants to negotiate their worth, a practice that continues to negatively affect women, people of color, and gender non-binary people. 
  • Set clear guidelines for growth. When you hire employees, equip them with the resources they need to meet performance expectations and progress in their career. 

Hire for the Role, Not the Person

When hiring new team members for start-ups, founders often fall into the trap of looking just for smart people to fill the ranks. The assumption is that if you hire good people, they will define their responsibilities and do good work. 

Sound good? 

This rarely works out in practice. 

Successful recruiting efforts need to first focus on building clarity around roles and responsibilities, and the skills needed to meet them. Then you can start your search with a clearly defined sense of the skill sets and experience levels you are looking for. Here are some steps you can follow to hire for the role, not the person:

  • Identify clear objectives and responsibilities for each role. This encourages hiring teams to stay focused on what the company needs to succeed, not what a person needs to accept an offer. When interviewing, share these objectives with candidates so they understand the job expectations upfront. 
  • Look beyond your network. Make it a recruiting policy to interview people from different representative groups for all executive roles. 
  • Expand the geography of your search. Especially given the uncertain future of office-returns, hiring for remote positions allows you to expand your potential talent pool. This helps you stay laser-focused on your goal to hire the best candidates suited for your org’s needs. 

What Gets Measured Gets Managed

Diversity debt is an issue that many companies face. The good news is that for established companies it’s fixable, and for new companies it’s fully avoidable. But it does require some intentional work and buy-in across your team. 

Oftentimes, diversity debt accrues because of lack of knowledge. Startups and enterprise companies alike store information about hires, compensation, and quarterly planning in siloed spreadsheets. This makes it difficult for leaders to visualize the overall state of the organization. 

So even if an organization wants to prioritize DEI efforts, they’re left unaware of where they stand. Data can help uncover the various ways that your company’s monoculture curbs growth and innovation. It’s good practice to track each of your hires across gender, race, title, compensation, and more. Also consider making the data available for all your employees to see. 

At our company, for instance, we standardize compensation bands for every position. We include salary ranges in open job descriptions so that applicants have that information before they even apply. Our employees can also access each other’s band information via our org chart. Sharing price ranges associated with different bands helps set expectations for each role and provides our people with clear paths to promotions. Transparency is key to everyone knowing potential gaps and sharing responsibility for closing them.

Progress is possible. Fundamentally changing the way we build and run companies needs to start with us. Whether you’re building your company culture from the start, or shifting course on one that’s already established, it’s everyone’s responsibility to make diversity, equity, and inclusion a priority. 

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