Diversity, Investing

Company Culture And Diversity Debt

A few weeks ago I was at a conference in Berlin, where I got to meet a ton of great entrepreneurs, talk about my early experiences in venture capital, and answer questions about what 500 Startups looks for in startups and founders we back. While there I also sat on a panel to discuss how the tech industry can address the diversity issue it currently faces.*

By now, most in the industry are familiar with the many diversity reports that tech companies — big and small, public and private — have released and the efforts that they’re now making to increase the number of woman and minorities among their ranks. Some companies have set hiring targets for non-white, non-male employees, while others have hired executives to tackle the issues inherent in acquiring and retaining underrepresented talent.

While these are valiant efforts, it strikes me that many of these companies are seeking to reverse a trend that they inadvertently set into motion, and could have been avoided if they had been more thoughtful in the earliest stages of their formation.

Most founders are familiar with the idea of “technical debt,” which accrues when they delay implementation of sound technical design or processes in the interest of getting a product or project done more quickly.

The tradeoff between a quick go-to market plan and a weak underlying codebase can mean massive refactoring or re-investment later in a startup’s life. Not surprisingly, the longer it takes a company to address these issues, the more difficult (and more expensive) it becomes to do so.

But few think about the issue of what I’d like to call “diversity debt.” That is, the interest that accrues when a company puts off implementing hiring policies that will ensure diversity in the type of people that work for it. And just like technical debt, the longer that a company takes to address the issue, the more difficult it is to do so.

As a venture partner at 500 Startups, I am fortunate that diversity was built into the DNA of the company. Our managing partners come from different cultures and backgrounds and speak a variety of languages. That top-down approach has trickled down through the rest of the organization, where 1/3 of our investment partners are women and fewer than half are white.

But I realize our situation is rare. It’s not uncommon for a founding team to have common interests and common backgrounds, which often leads to the first one to five employees within a startup to look, think, and act the same. At that stage in a company’s development, everyone is working to solve problems together, and this common bond can actually mean increased productivity.

As a team grows, however, and layers of complexity are added to a company’s organizational structure, it becomes increasingly important to add people with different skill sets and specialties to handle individual tasks. At the same time, I would argue that it also becomes more important to add people from different backgrounds and different points of view.

There are studies which show that more diverse workforce environments drive creativity and problem-solving, lower the costs of attracting and retaining talent, and ultimately increase productivity and innovation. But at the earliest stages, few companies are thinking about the long-term effects of diversity. They’re just looking to get shit done.

When hiring their first five to 10 employees, some founders will say that they’re just looking for the best talent, regardless of what a person looks like or where they came from.* But if you are a founder who isn’t thinking about how the makeup of your current team will affect your future team, you are doing yourself a disservice.

Company culture is easy to build at the early stages of a company’s life, but difficult to change once it’s set. On that panel a few days ago, Girls In Tech founder Adriana Gascoigne talked about how at one of her former jobs, she was the only woman on a team of more than 30. She recounted how the company had a bro-y culture, how the guys around her drank beer and tossed footballs around the office.

In short, it wasn’t a comfortable experience for her to be the only woman there, and you can imagine that it would be equally difficult for a company like that to attract other talented women to the team. In fact, the longer a homogenous company culture exists, the less likely it will be that someone from outside that particular demographic group will be willing to join.

Attracting a diverse talent pool isn’t easy, in part because from a pure numbers standpoint, there isn’t as much of it. Especially in STEM fields, it’s been well-documented that women and people of color are not as well-represented as their white male counterparts.

Yes, it will likely mean more work than just searching through candidates that come through applications from job listings. It will probably mean going to events or partnering with organizations that less-represented people in tech. It might mean

The good news is that attracting diverse talent becomes easier the more you do it. By actively hiring people from different backgrounds and giving them opportunities to advance, companies send a signal to other potential applicants. Given a choice between job opportunities, those applicants are more likely to join the company where there are other people with diverse backgrounds.

Changing company culture isn’t just about hiring, though. It’s also about offering opportunities for growth and promotion to a diverse set of employees already on team.

So founders, if you haven’t hired someone who doesn’t look, think, or act like you yet, ask yourselves why or why not. If you don’t have a women or a person of color on your team yet, ask yourselves why or why not. If you have reached the point where you have devised a company org chart but haven’t yet promoted a women or person of color into a management position, ask yourself why or why not.

And if any (or all) of those situations apply to you, do something to change it.

It will be much easier to do so with your next hire than 10 hires later, and infinitely easier than 100 hires later.

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* I realize that being a straight, white man on a panel about diversity is by itself a little ridiculous, but that doesn’t mean I can’t have important things to say!
** The implicit subtext here is that it’s too difficult to find extremely talented engineers or developers from diverse backgrounds, which I would say is a totally bullshit argument, if not potentially racist or sexist.