by: Brendan Goldman, PhD
The benefits of successful Diversity, Equity and Inclusion (DEI) hiring for private equity (PE) firms have never been more evident. A recent Harvard Buisness Review (HBR) article reports that boards comprised of homogenous ethnic and gender leaders have substantially worse investment outcomes (around -30% acquisition success) than those with diverse senior leadership. Yet the senior leaders of most PE firms remain overwhelmingly white (88%) and male (80%).
Executive search firms like ECA Partners are primed to help PE firms diversify their leadership through hiring practices that target top DEI talents from firms like McKinsey, BCG, Bain and Deloitte. ECA Founder Atta Tarki identified hiring practices that undermine successful DEI searches in his recent book, Evidence-Based Recruiting (McGraw Hill, 2020). These practices include overreliance on conventional recruiting channels—e.g., employee referrals and job boards—and dependence on non-DEI interviewers whose unconscious biases predispose them to candidates with backgrounds most similar to their own.
Another actionable step to increase DEI hires is to champion unconventional resumes. Different groups have different life experiences—a reality that is reflected in their education and work histories. For instance, an HBR article three decades ago identified how female employees were (and still are) more likely to take time off to care for their families, and, as a result, often have gaps of months or even years in their resumes. Companies tend to read such unconventional gaps as indicative of a female candidate’s disinterest in career advancement. This assumption still leads to the marginalization of women in leadership roles in fields like finance.
Best practices for DEI searches also require considering candidates whose educational backgrounds differ from their non-DEI peers. To find top talent, companies often target top-tier MBA programs. This makes sense: Individuals who are accepted and ultimately graduate from elite programs have already been thoroughly vetted by the school; therefore, companies have a good sense of the toolkit they have developed. Unfortunately, students from underrepresented groups have long comprised a small minority of the MBA candidates at these institutions. Fortunately, this is changing, but the long-standing disparity will impact executive search candidacy for the foreseeable future. For the current market, PE firms may target candidates from historically black colleges; doctoral programs; and PE-adjacent industries in finance and consulting.
How can executive search partners and the PE firms that hire them facilitate successful DEI searches?
Executive search firms like ECA Partners can help PE firms develop innovative and creative strategies to approach the assessment of DEI candidates for leadership—including identifying those with unconventional resumes who may have the potential to become successful executives. Such innovative approaches demand resources and expertise that few PE HR departments command. But executive search partners have the means and knowledge to help PE partners find the best DEI candidates for leadership roles.
Brendan Goldman is a Project Manager at ECA. He can be reached at [email protected]