Image may be NSFW.
Clik here to view.
- Diversity has long been treated as a second-order consideration in business, but numerous studies show that teams with a mix of ethnicities and genders perform better than more homogenous teams.
- It's time for business leaders to reexamine how they network, otherwise they'll miss out on financial performance, not to mention the inherent benefits of diverse ideas and an inclusive culture.
- "Warm introductions," a staple of the business world, can lead to a homogenous network, so taking cold calls can be one quick way to widen your scope.
- On the other hand, fostering ecosystems to elevate underrepresented networks is an important investment.
- Visit Business Insider's homepage for more stories.
Diverse businesses are better businesses, so say numerous academic studies that examined how a mix of ethnicities and genders in an organization made a marked improvement in financial performance.
In one study, published in 2018 in the Harvard Business Review, researchers used the venture-capital industry as a stand-in model for businesses in general and found there was a financial-performance "penalty" for homogeneous teams.
"Partners who came from the same school achieved an 11.5 percent lower success rate for acquisitions and IPOs; those who were ethnically homogenous saw a success rate 26 to 32 percent lower," study authors Paul Gompers and Silpa Kovvali wrote.
An analysis from the National Bureau of Economic Research published last year in the journal Econometrica looked at US Census data and showed that industries with higher barriers to diversity kept talent from entering the field, leading to lower aggregate performance.
The problem boils down to how business leaders go about growing and tapping their social networks, which tend to be extremely homogeneous. The HBR paper said nearly half of all venture capitalists went to either Harvard, Stanford, or Wharton.
One cure, according to venture capitalist Del Johnson, is to "ban warm introductions" of the sort recommended by many business leaders, which he described as "a legacy practice that requires the nonnetworked, including founders and other investors, to find someone the VC knows and trusts, and convince that third-party to refer you to the VC before the VC will respond."
Johnson said taking cold calls was the only way investors and entrepreneurs could break out of their respective bubbles and reach a more diverse set of talent.
Another approach comes from Keenan Beasley, an investor and founder of Venture Noire, a support network for Black startups that hopes to help underrepresented founders widen their professional networks. Beasley, who draws on his experience in corporate America and as a West Point alumnus, says Venture Noire helps foster relationships with the companies, people, and capital that are instrumental to startup success.
"It's really about creating this ecosystem to make things more familiar and lower the perceived risk," he told Business Insider.
Su Sanni, the CEO of a mobility startup called Dollaride, told Business Insider about the measures he's been required to take as a Black founder to get the same engagement from investors and business partners as his white peers.
"It makes fundraising for me a little bit more challenging, and I have to be more strategic about who I go after," he said. "I've had to become really emotionally intelligent about this and aware of where the gaps are, and how I can hack the system in order to get an investor who doesn't really know me to trust what I'm saying, and to take the steps further to evaluate us."
That's extra work that Beasley said founders like Sanni could — and should — be putting into building their businesses.
"You want your leadership focused on growing the business, not focused on raising capital needed to survive," he said.
Join the conversation about this story »
NOW WATCH: Tax Day is now July 15 — this is what it's like to do your own taxes for the very first time