The importance of diversity in leadership (and how to improve it)

6 mins, 45 secs read time

If you’re an avid reader of the Greenhouse blog, you know that we discuss diversity, equity and inclusion (DE&I) often – what it means to be an inclusive company, why diversity is important and how it can be improved.

And we’re excited that the world is listening. Generally, if a company either a) cares about revenue growth or b) has a moral compass, they’re most likely actively looking for ways to improve DE&I (we’ve got plenty of great podcast episodes to help). Obviously, both criteria apply to most organizations. But what a lot of companies are really struggling with is not only making sure that their teams are diverse across the spectrum – in race, ethnicity, gender identity and expression, sexual orientation, age, life experience, etc. – but also ensuring diversity at all levels, especially within their leadership.

By “leadership” we mean the people who actually have a seat at the table. They’re the ones calling the shots and making decisions that affect every facet of the company – from how money is spent to who gets hired, promoted and fired. Their titles range from team directors to executive board members.

Why company leadership is often homogenous (and white)

There’s so much to unpack when dissecting why company leadership is usually dominated by straight white men. Social structures in place since slavery perpetuate inequalities in education, health care, employment, housing, public safety, voting rights, and more. According to Assistant Professor of Sociology and African-American studies at the University of Iowa Victor Ray, “By limiting access to property and the material resources necessary to found and run organizations, slavery created an unequal competitive environment whose effects have yet to be fully overcome.”

And although you may be thinking that slavery is a system from the distant past, it’s not. We’re still experiencing a range of serious residual effects – they just look a little different.

Let’s say a white man wants to found a startup. Because of the advantages that have been historically available to his family for hundreds of years, they’ve been continuously accruing wealth. His parents paid for him to attend college, a privilege out of reach for many young people. And they also invest a few thousand dollars to help him get started with his business. He hires the smartest people he knows, friends from school who all look like him. After that, they hire exclusively through referrals – resulting in the everpresent “stale, male, pale” company dilemma. Once their company really expands, they’ll most likely be more intentional about creating diversity, but guess who’s still in all those positions of power?

Importance of diversity in leadership

Having diversity in leadership does not mean only hiring a Director of Diversity to check off a box and call it a day. While this type of role is incredibly important, there is tremendous value in prioritizing diversity in leadership positions across the board, regardless of whether the roles’ responsibilities directly relate to improving DE&I.

Produces better ideas and business outcomes

There is a statistically significant relationship between a diverse leadership team and better financial performance, as shown in a 2018 McKinsey study. For businesses to be successful, their teams need to fully understand the nuances of their increasingly diverse customer base. Having diversity in company decision makers is the key to that. Otherwise, organizations may struggle to meet customer needs and resonate with their audiences. A lack of diverse leadership also results in tone-deaf or cringe-worthy advertising mistakes that may receive huge backlash (and could’ve been avoided).

Improves employee engagement and retention

Representation matters. It’s critical for people from underrepresented backgrounds to see people like themselves in positions of power. Otherwise, they may not see moving up in the organization as a real possibility, and look for a company where growth seems like an achievable reality instead.

Additionally, when organization leaders are more representative, they can play the vital role of being a mentor to a much broader group of professionals. They’re able to form meaningful connections with a variety of people, as they’re able to empathize, relate and motivate more effectively.

Real organizations that you can learn from

It’s clear that the lack of diversity in leadership often stems from barriers to opportunities that have historically only been available to one group. Companies have a responsibility to intentionally change that. To do so, they should be proactively working on this, both within and outside of their teams. To help bring some ideas to life, we’ve compiled a list of organizations that are taking positive steps in the right direction.

Slack implemented a sponsorship program

As revealed in their company diversity data, Slack created a program called Rising Tides.​ It’s a “six-month program for a talented and diverse group of high performers and emerging leaders at Slack who have historically lacked access to this support.” Program participants receive career development training, executive coaching and one-on-one sponsorship with a Slack executive team member, with a focus on building a supportive community of peers.

Citi created clear promotion paths

Career development is a key priority for Citi. They have a variety of programs, such as their Global Consumer Operations program, which helps high-performing employees build the skills needed to transition to management and supervisory roles. This focus is particularly important for their talent from underrepresented groups as they work to increase representation at more senior levels of the company. So far, “80 percent of participants have been promoted or are on a promotion path.”

Lyft refined their diversity sourcing strategy

In order to have diverse leadership, you need to master diversity recruitment. One way to fill your pipeline with diverse, qualified candidates is by proactively sourcing them. Lyft has optimized their strategy by using Greenhouse to track and measure their efforts. They attend community events, source through non-traditional channels and get creative by utilizing their job descriptions and list of target communities to reach the exact people they want to speak with.

EY made a longer term investment in talent

If you want to create diversity in leadership – zoom out and think big. At EY, they believe that “only the highest-performing teams, which maximize the power of different opinions, perspectives, and cultural references, will succeed in the global marketplace.” They have a variety of programs like Discover EY and EY Launch, which are dedicated to empowering ethnically diverse college freshmen, sophomores and transfer students, and building awareness for accounting and professional services as professions. Participants are also welcome to interview for career opportunities at the company.

Biden’s Cabinet is changing the status quo

We’re not here to give any political groups a gold star, but we do think it’s worth noting that President-elect Joe Biden’s promise of “the most diverse Cabinet in history” is shaping up to be just that. Of course, that isn’t hard to achieve since historically it has been overwhelmingly white and male. Many of Biden’s appointees are women, but disappointment still lies in the minimal amount of Black, LatinX, Native American and LGBTQ+ representation and the lack of Asan American and Pacific Islander representation so far.

Even though Biden’s picks to date aren't as diverse as they could've been, there’s something to be said about these changes being more representative of America – and that they are being made vocally and proudly on a global stage. In a place where underrepresented groups have historically been shut out, they also mean long overdue representation in vital positions of power.

There’s more work to be done

Progress will not happen on its own, and it won’t happen overnight. Improving leadership diversity is a challenge that starts with a series of intentional and strategic decisions, and it’s well worth the effort. It’s not only the right thing to do, it’s a competitive business strategy with a proven return on investment.

We recently published our Greenhouse company diversity data to hold ourselves accountable to reach our goals, and to encourage other companies to do the same. Learn more here.