Why Hiring for Diversity Makes Business Sense

Caitlin MacGregor (Co-Founder, Plum.io) wrote a 2,000 word open letter to a VC partner at Sequoia Ventures after Vanity Fair published an article using his words: “Oh, we look very hard. In fact we just hired a young woman from Stanford who’s every bit as good as her peers, and if there are more like her, we’ll hire them. What we’re not prepared to do is to lower our standards”.

Caitlin’s perspective: It is the company’s responsibility to find a diverse pool of applicants, not the other way around. And the benefits of ensuring that you do hire for diversity are extensive.

The opinions in Caitlin’s letter are noteworthy because this is what her startup does: Plum’s SaaS platform uses cutting-edge behavioral science to quantify company culture, optimize teams and predict successful new hires.

This prompted GO NORTH Summit to invite her to speak on diversity. Discover why it makes business sense to hire for diversity; actionable methods founders can use to eliminate bias in the hiring process; and why setting metrics is the key to ensuring diverse perspectives thrive in your startup.

Q: Why does it make business sense for a founder to consider diversity when building out their team?

Caitlin: Businesses that have more diversity have more market share growth, more ROI, and more revenue growth. The most diverse businesses foster innovation. Because when you get different opinions in the room, you get better, more robust ideas. So from a business perspective, it makes sense to increase diversity within our organizations.

We have a 45% greater likelihood of growing market share with companies that have greater levels of diversity and inclusion. And, we’re 70% more likely to capture new markets and have out-of-the-box ideas.

There’s a 45% greater likelihood of growing market share w/ companies that have more diversity  @caitmacgregor

Q: When speaking about diversity, you urge companies to “set a metric” to attract minorities and women. Can you explain that?

When running our businesses, we are encouraged to set monthly sales targets, and NPS scores, and velocity of our development team. In tech we’re obsessed with measuring everything. Why? Because when you set a goal and write it down, you’re more likely to obtain it by prioritizing it.

For the reasons mentioned above (and many more) hiring for diversity is just as relevant as your sales, customer support, and development metrics. You can’t simply say “We are going to increase diversity in the hiring process”. It has to be a set metric, or you will not allocate the time and resources necessary to achieve it.

I believe that as a startup community we have done a great job of recruiting a specific type of applicant— white males. However, we have done a poor job of hiring enough women and minorities.

Saying “Not enough minorities and women apply”, doesn’t solve the problem. If it came to sales, we would never say “oh, not enough companies are buying our product”. It must be put on the company to make that change.

Starting with simply, “Of the X employees we plan to hire this year, X percent should come from a diverse background.”

After setting that metric, the company must establish how they will attract and locate these hires. In order to to solve the problem of attracting more customers, we put time, resources and money around creating marketing campaigns to increase our sales funnel. Once a company sets their diversity objectives, they also need to establish their strategies and campaigns around how they will target this “new audience”.

Hiring for diversity is just as relevant as your sales, customer support, and development metrics. @caitmacgregor

Most founders consider hiring within their Network a good thing. You say it’s limiting. Why?

Because your network is most likely composed of people like you. And that does nothing for diversity.

Oftentimes, we assume that if we have a great existing colleague, and they like having beers with someone on the weekend, that person will also make a great employee, merely due to the association.

In reality, referrals are poor predictors of future performance. It’s not a debate, it’s a fact. You want people that are smart, hardworking, that fit the actual needs of the job. Referrals are a lazy way to hire. They can help your pipeline, but they shouldn’t create your shortlist.

For the most part, your young, white male is going to know other young, white males. So you’re getting a lot of the same when you hire in your network.

And when we continuously pull from our network, we’re creating this club and either you’re in or you’re out. This discourages highly skilled, eligible applicants who do not fit that mold from applying. In tech, we need to do a better job of making everyone feel welcome.

How do we make them feel welcome? Our campaigns need to be geared towards people that don’t even know that the best jobs in the world are in our industry. We need to reach out to them, educate them and make them feel truly welcome. Companies need to ask themselves, “What are ways, other than having after hours beer meet-ups, that can reach a new target and make them feel wanted and welcomed?”

Referrals are poor predictors of future employee performance. It’s not a debate, it’s a fact. @caitmacgregor

Why is unconscious bias so damaging to the hiring process?

The reality is, when we think about hiring, a certain amount of bias happens. We use patterns to associate what we think equals success; where somebody went to school, where they previously worked, whether or not they know somebody in the company, whether or not we think they would be fun. Our culture is so important that sometimes even as businesses scale to over 100 employees, founders feel like they still need to personally approve each hire. That they alone can check for culture fit with their own “gut check”.

If we treated hiring for diversity like we run our businesses, we would go back to the data. We would go back to the metrics. And realize that where somebody went to school, where they previously worked, has zero ability to predict future success. 89% of failed hires are due to attitude. If you’re looking for somebody that is a self-starter, that’s incredibly motivated to get the job done, is a great team player and an out-of-the-box thinker— those have nothing to do with where they went to school, and where they previously worked.

89% of failed hires are due to attitude. @caitmacgregor

What are actionable ways for founders to remove unconscious bias and hire for diversity?

• Recognizing what actually predicts future success: An example of unconscious bias; hiring someone based off of if they went to an Ivy League school or Community College. That doesn’t predict success. Some recent companies are taking education out of the requirements completely. The name of the school doesn’t give you any greater indication if someone is going to do be better at the job. Their major may predict help them hit the ground running faster, but it can’t predict future success.

• Stop using bias methods for evaluating in an interview: In the first 90 seconds of meeting someone, we decide if we like them or not. Extroverted interviewers do better than introverted. Companies need to ask themselves if those skills actually apply to the role, and if they matter at all.

• Test for intelligence, attitude and culture fit for the role: Measure for the intelligence and attitude that is needed for the role and culture fit. We use tools to quantify metrics in every element of our business, use pre-employment assessments to remove the bias in the hiring process and measure intelligence, attitude and culture fit.

The more metrics that are measured, the less likely companies are to default to unconscious bias.  

Watch Caitlin’s keynote on Diversity.