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Tech and Venture Capital Industries Have Real Work to Do to Hire and Retain Diverse Employees

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Despite Google’s stated commitment to increasing diversity within its workforce, the tech giant is losing black and Latinx workers at nearly the same rate they are being hired. The annual Google diversity report, released last week, stresses that Google “care(s) deeply about improving workforce representation” and is “moving in the right direction.” But so far, its strategy of increased grassroots hiring of black and Latinx workers has not led to greater representation within the workforce.

Google says that it wants to more accurately represent its users. However, black and Latinx workers currently only make up a combined 6 percent of the Google workforce in an industry dominated by straight white men.

These employment figures are even more striking when examined within the context of national demographics. Google employs only 2.5 percent black and 3.6 percent Latinx workers in a country whose citizenship is 13 percent black and 18 percent Latinx. By these measures, Google falls short of proportional representation by a significant margin.

This Year’s Stats

Google began reporting its diversity figures publicly four years ago. For the first time, this year’s report includes an Attrition Index, which reveals a gap between hiring and retention. Attrition is highest for black and Latinx workers, so despite modest increases of diversity in hiring, overall representation continues to flounder. This fact leads to more diminished representation than one would expect looking solely at hiring data.

This is the first year that Google has recognized intersectional data as well, examining the overlap of multiple identities in hiring and retention. While hiring for women slowed this year, attrition for women also slowed, resulting in an increase in retention and greater representation in leadership positions, at 25 percent. But even amid these gains, there is room for improvement. Women of all ethnicities are less represented than men of the same ethnicity, and gains in gender equity are most present in white and Asian demographics.

In the past, diversity in inclusion has largely been a grassroots effort, dependent on low-level managers hiring women and people of color at the entry level. However, the hires don’t stick if the workplace is perceived as a hostile work environment and diversity is not visible in leadership.

Amid a wage discrimination investigation led by U.S. Department of Labor last year, a 10-page anti-inclusion screed penned by Google engineer James Damore was circulated widely within the company and later went viral. The 10-page manifesto claimed, in part, that women are unsuited to tech due to biological differences. It went on to argue that efforts towards inclusion and racial and gender equity in hiring lowers the bar for Google employees.

In its most recent diversity report, Google pledged to up the ante this coming year. It states an intent to link executive pay to inclusion metrics and increase those metrics by proactively considering women and workers of color in leadership roles, as well as providing unconscious bias training to workers and managers throughout the company.

Diversity (or Lack Thereof) in Venture Capital

To understand the value of diversity beyond simply an ideological or moral pursuit of equity, a recent article in the Harvard Business Review examined the venture capital (VC) industry, another popular career destination among freshly-minted MBAs.

Even as compared to modest diversity gains made at Google and elsewhere in tech, VC has remained strikingly homogeneous. A data set of every U.S. VC organization and investor since 1990 shows that today only 8 percent are women, 2 percent are Latinx, and fewer than 1 percent are black. This lack of diversity, it turns out, comes at a measurable cost.

Paul Gompers, professor of business administration at Harvard Business School, specializes in research on financial issues related to start-up, high growth, and newly public companies

Venture capitalism is a field largely defined by homophily, or the desire to spend time with the people most similar to oneself. Specifically, racial similarity and shared educational background are high predictors for the likelihood of working together.

But when Harvard Business School Professor Paul Gompers and Research Associate Silpa Kovvali examined the financial outcomes of homogeneous VC teams as compared to more diverse teams, they discovered dramatic differences.

Along all dimensions measured, the more similar the investment partners, the lower their investments’ performance. For example, the success rate of acquisitions and IPOs was 11.5 percent lower, on average, for investments by partners with shared school backgrounds than for those by partners from different schools. The effect of shared ethnicity was even stronger, reducing an investment’s comparative success rate by 26.4 to 32.2 percent.

Gompers and Kovvali suggest that diverse collaborators are more suited to the creative thinking needed to survive uncertain competitive environments. “Given that homogeneity imposes financial costs and diversity produces financial gains, a natural next step is to assess what managers can do to increase representation across groups,” they write.

Their recommendations include making diversity a priority from the earliest days of establishing a firm; recognizing that subtle, intentional shifts have ripple effects, and working to diversify even beyond the workplace by being willing to openly recognize and address bias. Read the complete article, “The Other Diversity Dividend,” for more on how to do each.

Jonathan Pfeffer
Jonathan Pfeffer joined the Clear Admit and MetroMBA teams in 2015 after spending several years as an arts/culture writer, editor, and radio producer. In addition to his role as Contributing Writer at MetroMBA and Contributing Editor at Clear Admit, he was also a co-founder of the Clear Admit MBA Admissions Podcast. He holds a BA in Film/Video, Ethnomusicology, and Media Studies from Oberlin College.