Even though the Private Equity (PE) industry has made significant progress in improving gender imbalance within the workforce, there is still a long way to go for the industry to reach true equality.
The sector has conventionally developed a reputation for being an entirely male-dominated industry. The established reputation has been a significant detriment for the industry in terms of consumer perception and hiring challenges.
According to a recent European Union Equality Index Ranking report, women make up only 20% of boards at companies owned by Private Equity firms.
PE firms need to move to a better balance to support the broader growth of the sector. Firms need to put more females in decision-making positions for a number of key reasons.
Reasons to Shift to Better Gender Diversity in PE Companies
Decrease in Microaggression
Microaggression has been identified as a significant form of everyday discrimination experienced by the majority of women in the workplace. Forms of microaggression can range from vocal cues to behavioral directives. In a recent study by DIF, over 64% of professional women expressed personal experiences with microaggression in workplaces. Having women in positions of power will tilt the balance and allow PE firms to decrease instances of subtle discrimination.
Improved Decision Making
Workplace diversity can play a major role in improving organizational decision-making by bringing different perspectives to the company. Diverse teams have the ability to contribute variable opinions and explore a wider array of options. In segments like PE, having a broader outlook towards decision-making can help the sector shift to an improved management structure. Strong female leadership at companies can offer unique outlooks towards problem-solving and help PE firms make creative decisions by combining multidimensional applications.
Embracing Diversity in the Workforce – The Benefits
Shifting to a workforce centered around diversity in religions, sexual identities, cultures, ethnicities, and ages can bring forward optimal productivity for firms by creating impactful decisions. PE firms will struggle to attract viable talent in core segments without creating a positive working environment for new talent.
Due to the combination of demographic changes, globalization, and technological innovation, companies are already struggling to recruit diverse talent. It can be challenging to create agile workforces without having a positive diversity reputation in the broader context.
Evidence points towards the effectiveness of diverse teams in studies conducted on enhancing diversity in workplaces. Diversity often results in increased employee engagement and creativity to lead to better quality decisions within the company. The biggest impact is often in the form of higher returns for the company.
The current gender diversity landscape still requires extensive changes in the PE sector. Despite the progress made, the number of females in investment teams needs to increase at a faster pace extensively. Firms must make efforts to create better working environments for female talent in their workspaces and culture.
Requirement for Active Communication – Brand Positioning
Aside from taking steps to change internal organizational culture, PE firms also need to improve their public communication on incoming changes. Private Equity’s reputation needs to change from an all-men fraternity to a diverse working industry where opportunities exist for talent from all backgrounds. This branding communication is essential to change the established assumptions about the industry and attract quality talent.
Steps to Improve Diversity Landscape in Companies
According to research done by leading consulting firms, Private Equity companies can transform their future trajectory by taking the following key steps within the organization.
- Establish a team-centric culture that focuses on the development of teamwork and mutual collaboration.
- Shift to Inclusive leadership models to promote diverse leaders within the organizations.
- Enhance internal transparency and equality through systems that reward performance.
- Provide comprehensive support for employee families along with humane considerations.
- Transform the existing overworking landscape to talent-friendly working mechanisms within the industry.
- Offer supporting ecosystems to employees for their lives beyond the company’s internal working careers.
Companies can slowly modernize their existing cultures and create vibrant environments to attract better talent by implementing these steps. The industry needs to continuously explore newer strategies to attract leading female talent.
Retaining Female Talent in Private Equity Companies
Attracting women is only the initial step of the equation for these companies. The key to developing a positive culture is to retain this talent. Even though McKinsey has explored that progress has been made in terms of the internet culture at organizations, further progress still needs to be made to ensure that diversity initiatives can be enhanced across the entire sector.
Building a gender-diverse team is about unlocking multidimensional success for the organizations. PE firms need to focus on developing future leaders by creating an environment where junior employees can grow and expand their skillset. However, a negative progression has emerged in the industry, with investing declining in female-founded companies. According to DIF experts, this trend can have a negative impact on female leadership in the PE sector.
International Finance Corporation’s (IFC) research findings showcased that female-led partners invest twice as much in female-led business.
The finding showcases the importance of having female leaders in senior positions across the Private Equity industry. The progression would allow increased investment to flow towards female-owned businesses and would serve as a positive factor in developing the broader ecosystem.
Diversity Progress – The Path Forward
Leaders across the industry realize the gravity of the equation. Leading companies are taking steps to create better ecosystems to ensure that female representation can be enhanced across all layers of the leadership spectrum. Improvement of the diversity landscape would be a broader positive step for the entire industry is changing the reputation. Transitioning to better gender diversity will also allow the PE sector to create a positive environment to attract qualified talent in the future. DIF anticipates improvement of the existing landscape in the PE industry centered around the initiatives taken by industry leaders.