The paucity of female senior executives is now a widely-recognised concern for most industries, not least Private Equity.
This problem is by no means solely encountered in firms’ upper echelons, but in fact is quite clearly also a grass-roots issue. The gender ratio amongst UK undergraduates, both across elite Russell Group institutions and the country’s universities overall, is often weighted in favour of women. However, the proportion of female applicants to junior roles in Private Equity is dramatically lower.
In European capital markets, only a quarter of Board Directors and just 18% of Executive Committee members are female, according to New Financial’s research
Explicit measures must be employed both to increase successful hiring of women, and then subsequently to ensure their retention. So how do we start to face this issue and make a difference? In both our broader studies into diversity, and more explicitly through a recent industry round-table organised by Altus Partners with several top executives from global funds, we assessed the key factors and how we may start to address them.
“As the industry has grown, the percentage of women in senior investment roles has not grown with it” – Jeryl Andrew, CEO of Level 20
When it comes to applying profound changes to corporate DNA and modus operandi, any business (Private Equity firm or otherwise), cannot expect to build Rome in a day. To advance on an effective trajectory towards a gender-balanced workforce, it is essential that the adjustment process is undertaken both honestly and organically. This strategy usually proves far more successful in the long-term and causes minimal disruption in the short-term. Instigation of progress must come from the highest levels of management, likely requiring a so-called ‘opening of the pool’. As the upper echelons of Private Equity remain heavily male-dominated, these firms must become even more mindful of the dangers of hiring direct referrals at these levels, which often serves to reinforce a ‘mirror-imaging’ effect amongst personnel.
Job descriptions and company websites are often the first reflection of a firm that a candidate receives, so it is essential that they convey a message that resonates well with women. It is no surprise that the echo-chamber of a male-dominated management team is likely to create copy – be it in a mission-statement, explanation of responsibilities, or other incidental content – that is male-oriented. This is likely mostly unintentional and extremely subtle but can nevertheless subconsciously spread apprehension among female candidates, who may already feel marginalised by the industry before they even apply.
Firms’ materials that effectively convey values with which women can readily identify could help to attract a greater volume of high calibre female candidates, and at the very least would serve as a stimulus for diversity. From a broader perspective, success stories of female professionals in Private Equity should be documented, shared and published for a wider audience to read about, thereby forging role-models for others to emulate in turn.
In relation to improving retention rates of women at more senior ranks, the principal issues regard making provisions for a balance between work and family or other obligations. The undeniable fact is that every employee and every family face their own idiosyncratic array of challenges. In response to this, it is the duty of firms to adopt a culture of flexibility, and to appreciate a desire to achieve some aspect of a ‘best of both worlds’ scenario. For example, this could mean encouraging working from home, rather than a face-time culture.
It is also imperative to acknowledge and seek out the considerable potential that lies in hiring women back into Private Equity roles after they have spent significant periods out of the workplace, perhaps raising their families. Individuals who can bring well-honed skills, professional drive and a wealth of prior experience offer immense value to various functions within any Private Equity fund. This is also a clear and simple means with which to drive gender diversity and expand the range of thinking within the upper echelons of a firm.
The McKinsey report suggests that companies in the top quartile for gender diversity are 15% more likely to outperform competitors with less balanced representation
The concepts discussed here hardly seem revelatory, so why have firms not adopted them? Does anybody in Private Equity contest that a gender-diverse team is a long-term driver for competitive advantage and profitability, or that it is an immediate catalyst for a more balanced culture? Proliferation of key research on diversity, such as the McKinsey report, which firmly substantiate its valuable commercial implications, is an easy but vital step in the right direction. Reinforcing the relative simplicity and manageability of the initial costs of steering towards a diverse working environment should sway those institutions willing to accept the theoretical, but too cautious to implement practical measures.
Clearly, the industry can change under its own steam, as evidenced by the profound increase in charitable donations from private equity firms over the last decade or so. Pressure from within the wider community will help to advance the cause, for example LPs demanding team diversity from the GPs into which they invest. Private Equity firms need to learn how to present themselves in a more nuanced fashion to prove that they are not embodying of traits and practices that antithetical to successful female careers. Instead, they need to show that they are not only positively disposed to women, but empathetic to their (and indeed every employee’s) needs, that they recognise key role-models, and are actively embracing change.
For further details on how to promote gender diversity and ensure a balanced team, please contact: firstname.lastname@example.org