These days few journals get published without touching on the importance of talent, hiring and diversity in business. But why are these themes so difficult to get right?
On the first dreary Saturday of no-fun February, I went online in search of ideas to write about talent and diversity. I stumbled upon an email with a link to an interesting read about software company AppDynamics, which accepted a whopping $3.7 billion intent to acquire from Cisco. Founder and chairman Jyoti Bansal, took a moment to reflect on his company’s journey in a blog. Nine years ago the just-out-of-college software engineer spent his Saturday nights in his Silicon Valley apartment writing code and working on his vision for a company that would leverage the power of software to make a difference in the world. His biggest challenge, once he had secured funding and found a market for his product, was building an initial team: “It wasn’t easy, but by being patient and selective in our hiring, we were able to assemble a winning team,” writes Bansal.
These days few journals get published without touching on the importance of talent, hiring and diversity in business. So I looked into these themes and it’s easy to see why, given the relentless pace of change and innovation, they are the mantra of any fintech or bank trying to survive and prosper in today’s world. But why do they keep us awake at night? The answer is simple: they’re still so difficult to get right.
Research by First Round, titled the State of Startups 2016, captured what it means to be an entrepreneur. Of the 700 founders surveyed, talent and customer acquisition were the top concerns. However, the research also shone a light of the lack of diversity. Founders were asked to pinpoint the main driver behind women and ethnic minorities being underrepresented in tech. Men are more likely to blame the pipeline into tech; women place greater emphasis on unconscious bias and lack of role models. 61% of founders say their boards are all-male.
In banks, over 70% of board members are all male. As my erstwhile employer Global Custodian magazine points out in its latest issue, some believe the financial crisis was the turning point away from the male-dominated culture among the top financial institutions. It notes that keeping up with the pace of technological and regulatory change have required major top-down cultural shifts, requiring a mindset shift away from the ill-fitting “we’ve always done it this way” mentality, to getting more diverse ways of thinking on board to help solve today’s problems.
The financial crisis brought about new rules and focus. An article published by strategy+business titled ‘Banks biggest hurdle: Its own strategy’, found that, in all four groups surveyed, banks had at least begun to recover from the financial crisis by 2014.
A top priority for many banks now, says the article, is regaining their relevance and reputation by rebuilding customer trust, demonstrating a positive role as facilitators of economic activity and prosperity, it adds. “They have to demonstrate not just the will but the coherence needed to deliver. They will have to reinvest in new capabilities, including digital and financial technology (fintech) prowess. They also need to revitalise their recruiting and retention practices. In the 2000s, much of the best talent coming out of business schools went into investment banking. Now, the best people go elsewhere, often to technology companies. Banks need to win those employees back.”
Many say that the key to turning the oil tanker in banks starts with nurturing talent and diversity. Diversity and inclusion means getting differing voices and doing things differently than they have been done before. As Global Custodian points out, embracing diversity and inclusion are not only good from a societal stand point but they can also have a positive impact on business. McKinsey research says ethnically diverse companies are 35% more likely to outperform.
For this a cultural shift is required. But change is scary. Unconscious biases and survival instincts edge us towards hiring those who are like us. Many banks are still recruiting as they have done for the last 20 years, notes Corjanne van Drimmelen, coaching lead at Structure Talent, an organisational change advisory firm. “They tend to recruit people that produce and execute and people tend to hire similar to themselves. Of course, it would be possible to adopt new ways of recruiting with the right guidance and support,” she adds. I can’t help but wonder whether AppDynamics’ Bansal might have done things differently today when building his initial team. Would he have hired his “good friend” and engineer as his first founding team member, along with several other like-minded engineers, or would he have gone a different route?
Driving organisational change needs engagement of men and women and an openness to listening and understanding, says the Global Custodian article, which points to a three stage process to igniting transformation. The first part is informing: what does culture mean/values of the organisation. The second is to engage people and get their input on ways forward so that they feel they truly have a say in this and the third is to embed the change. It’s about doing something radical and getting them on-board with the strategy.
For start-ups and banks, a pool of talent to scrutinise whether you’re doing the right thing, open communication and involvement of diverse groups of people at all levels in the strategy would be helpful steps. We’re seeing the first steps of change, with companies hiring diversity officers and heads of culture and talent to drive it. While we still have a long way to run, this year and the next should be an interesting one for talent and diversity in these organisations.