Partner, The Lancer Group, specializing in C-Suite searches for private equity firms and their portfolio companies in software. 

Diversity and inclusion are front of mind for many investors, as recent events have further highlighted gender and racial inequality in the U.S. today.

More than just a social movement, recent research has also shown the potential for financial outperformance from diverse teams. On average, diverse companies are 70% more likely to capture new markets, have 19% higher innovation revenues and have 9% higher margins on earnings before interest and taxes (or EBIT).

Diverse boards and management teams have been shown to drive innovation through diversity of thought, skills and perspective. Other benefits include better risk management, a deeper understanding of consumer priorities and greater customer responsiveness, and higher employee engagement and satisfaction.

There are significant rewards for forward-thinking companies to take advantage of this massive competitive gap by making inclusive employment practices a key foundation of organizational hiring practices. While I’ve observed many private equity firms say diversity is a priority, the paradigm has been slow to change. Because private equity firms are accountable for driving long-term returns for their limited partners, and the right executive team can mean the difference of tens to hundreds of millions of value creation, there is little room for error in hiring.

Given this backdrop, how should private equity firms solve the “pipeline” issue and look to find and attract strong diverse candidates in the near term? The key to finding and hiring high-caliber leaders is to expand networks and examine which qualifications will really drive success for the hiring company and its private equity backer.

Source: Forbes