This post is Part 3 in a series of the ongoing DEIB journey that we are undertaking as a venture capital firm. Make sure to read Part 1 that outlines the uncomfortable conversations we had as a firm that propelled us to take further action and Part 2 about the elements of a strong DEIB survey.
When MATH decided to conduct a DEIB survey for our portfolio companies it was to set a baseline for measurement and to provide our portfolio companies with actionable insights for improving DEIB. As it turned out, we learned as much from the process, group training and individual discussions with portfolio companies as we did from the survey data itself. In an effort to share what I hope is useful to others, here are five key insights from this work:
- 50% of Portfolio Companies Indicated DEIB Was Not a Priority
In 2021, only 31% of our portfolio companies participated in our first DEIB survey. 19% have graduated to their own survey or program. That leaves 50% that either did not respond or responded to say that DEIB was not a priority for the company at this time. We were disappointed with this participation level and as we followed up with the companies that did not participate, many indicated they care deeply about the issue but were simply underwater and could not make time to participate.
We get it. A company has to stay alive.
With a lot of pressure to grow quickly, build product, acquire customers and never run out of cash, focusing on diversity seems like a higher level problem. A counter perspective is getting the team right is the difference maker. Finding the right humans to solve difficult problems and aligning them to a shared vision with high performance culture is the edge needed to win.
I suspect that many of the companies that truly care but did not want to participate, were feeling much the same way the MATH team felt in 2020 (see Part 1 of this series). They were wondering where to start. That is exactly why we were trying to show them a first step, this work is meant to be an introduction to DEIB with measurement and survey tools combined with expert consulting from Peoplism to get them get started.
2. Early Action is Needed to Prevent Diversity Debt
We have some portfolio companies that are early-stage with very small teams. For many of these teams, focusing on DEIB is something they want to do later after they have grown and are adding more people. The trouble with this approach is that as a company hits their inflection point, there is even more pressure to grow fast and hire talent quickly. This results in companies sourcing candidates from their network and soon the company is 50+ people that all look, act and think similarly. The problem with waiting until you are bigger is that it creates diversity debt. Soon, you start trying to recruit diverse candidates for open positions, but those candidates don’t perceive the team and culture as inclusive and as a result it is almost impossible to convince the best candidates to join.
Focusing on DEIB early engrains open, inclusive behavior in the company culture and ensures as the company hits the inflection point; the building blocks are in place to get the best candidates.
3. Source and Recruit for Capability over Experience
Passionate debates ensued in our team and in the portcos about whether we should be sourcing for experience or capability. Historical hiring practices have always put an emphasis on those with the most experience. As one of our portco founders said “I don’t want someone that is learning how to do it, I want someone who is tested and has been on a rocket ship before and succeeded.”
This in particular is an area where I would like to challenge myself and others to think differently. We need new and better approaches to assessing the capability of individuals. It is analogous to how MATH assesses a company’s unfair advantage in customer acquisition – if it is already showing up in revenue, it is too late, we need to be experts at seeing the early signals that others miss. Similarly, we need to get better at seeing the early signals in talent in order to recruit and retain the best talent – giving those with untapped capability the opportunity to soar. Uncovering and building the next amazing CMO, instead of hiring the CMO that was amazing in a prior role.
4. Underrepresented Groups Are Least Likely to Receive Developmental Feedback
Our survey revealed that underrepresented groups are the least likely to receive developmental feedback from their manager that will help improve them in their role. For me this was startling, not because managers in startups are not good at giving feedback (many are first time managers without formal training), but that a difference exists in the way under-represented groups feel about the feedback they receive as compared to the benchmark. This is a type of bias and nuance that can only be revealed in a well-crafted survey tool (see Part 2 of this series). It is also something that must be addressed.
Since uncovering this insight, I have been on a quest to source the most effective approaches on providing developmental feedback. Our companies each need to find what works for them but feedback needs to be delivered and received with a growth mindset. If our companies are 3xing every year, so should our key talent and the only way we can achieve this objective is by providing feedback that will help them grow and be successful in current and future roles.
5. Communicate a Clear, Articulate Vision to Drive Belonging
Hands down the most important aspect of what I have learned is how important a clear, articulate vision is to making diverse teams effective. Vision has always been important, but with diverse teams defining success so clearly that individuals from diverse experiences, backgrounds and perspectives all know they are solving the right problems is essential. Articulating each individual’s ability to contribute to the achievement of key metrics and recognizing shared success is non-negotiable.
If you have insights or resources to share about DEIB, please share them in the comments or DM me directly, I would love to learn more.
Follow @DanaWright_VC and @MATH_V_P to learn more about our work and process.