Tech Shows Progress on Diversity, but There’s Still a Long Way to Go
The tech industry has long struggled to make progress on diversity, equity and inclusion (DEI) efforts — whether in terms of workforce diversity, the makeup of company boards or the companies to which venture capital flows.
There are, however, a number of indications that the sector is finally making strides in this area. Big tech companies have reported an increased number of women in their workforces in recent years, and more companies are formalizing their DEI plans.
But there is still a long way to go, and the current labor market will likely only exacerbate the tech sector’s longtime challenges around recruiting and retaining talent. In what some are calling the “Great Resignation,” high numbers of professionals are leaving their jobs with the understanding that the market is currently in their favor.
The pandemic is not the only factor: One recent report found that in tech specifically, “part of the issue is the industry’s long struggles to achieve workplace diversity and equity,” Fast Company reported in August.
Now is the time for technology companies to prioritize diversity and inclusion efforts. Those that hone their approach around creating a diverse and inclusive culture will likely reap the benefits in developing a stronger workforce — and thus outperform companies that do not give DEI efforts the attention they require.
There has been no shortage of news headlines in recent years about the lack of gender diversity in the technology sector. In many mature economies, “fewer than 20 percent of tech workers are female,” according to a 2019 McKinsey Global Institute report. And among the top 14 global gaming companies in 2020, women made up “only 16 percent of executive teams,” according to Forbes.
The industry has also long struggled with becoming more racially diverse: Of the FAANG companies (Facebook, Amazon, Apple, Netflix and Google), only Amazon had a workforce that consisted of less than 40 percent white employees as of 2019, according to TechCrunch. At the other companies, white employees made up anywhere from 46.4 to 54.4 percent of the workforce.
But it’s important to note that major tech players have made some progress over the last decade. For example, in 2014, only 15 percent of Facebook employees were female; that figure was up to 23 percent in 2019, Wired reported that year. That report also noted an increase in the number of women working at Google and Apple, up from 17 and 20 percent in 2014, respectively, to 23 percent in 2019.
Just as crucial as these metrics at tech companies themselves is the shifting diversity and inclusion landscape at venture capital firms and regulatory bodies. One example is a recent decision by the Nasdaq, an exchange that contains a significant number of technology companies. On Aug. 6, the Securities and Exchange Commission approved Nasdaq’s Board Diversity Rule, which requires companies listed on the U.S. exchange to:
- Publicly disclose board-level diversity statistics using a standardized template.
- Have or explain why they do not have at least two diverse directors.
By Nasdaq’s definitions, those two diverse directors should include “one who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ+.” It’s worth noting that the rule isn’t a mandate, per Nasdaq: “If a company chooses to explain why it does not meet the diversity objectives, it can provide its explanation in its proxy statement, information statement for its annual shareholder meeting, or on the company’s website.”
There has also been DEI progress in 2021 in the area of venture capital raised by female-founded businesses. Access to capital is very important for the technology sector, particularly in a company’s early stages. Women-founded companies raised a record-setting amount of capital in Q1 and Q2 of 2021. This year marks the first time that over $10 billion has been raised by women-founded companies in a given quarter.
Similar to the markets where venture capital is more generally deployed, there is also a concentration of venture capital for women-founded companies in the New York tri-state market, the Bay Area, Los Angeles and Boston. From 2017 to June 30, 2021, more than 1,600 deals were struck in these four markets.
Inclusivity Makes Better Business
Diversity encompasses so much more than metrics. Developing a holistic perspective on this topic and dedicating resources to inclusion efforts can lead to increased fairness and more equitable arrangements for tech employees. This can make individuals feel more welcome and valued, in turn fostering better long-term job satisfaction.
Companies reap the benefits, too. Studies have shown that it is advantageous for a company to have diversity and inclusion top-of-mind. Employees of firms with inclusive cultures are 45 percent more likely to report a growth in market share over the previous year and 70 percent more likely to report that the firm captured a new market, according to the Harvard Business Review.
Diversity and inclusion can lower turnover rates and increase productivity and margins, while also creating a better customer experience. Until diversity and inclusion become second nature for technology companies, ingrained in their culture, it is likely that organizations will continue in old ways of thinking and not reap the full benefits that can come with developing a more holistic approach.
Here are the top five statistical areas in the U.S. by capital raised for companies with all women founders over the past five years:
In a recent RSM-hosted panel of middle market leaders, Digital Asset Chief Financial Officer Emnet Rios shared a few suggestions of ways technology companies can promote diversity and inclusion.
4 Ways for Companies to Promote Diversity and Inclusion
- Promote DEI efforts through hiring and promotion practices.
- DEI can’t be a one-and-done exercise; it should be at the core of every initiative an organization takes.
- By putting people first in everything from the composition of the board of directors to inviting different voices to the table when making decisions, diversity and inclusion can become a central tenet for how a company does business.
- DEI can also be furthered within an organization by checking for unintended biases within company communications.
These approaches can help technology companies incorporate DEI into the fabric of their corporate actions, making employees feel valued and understood.