Tech’s Hidden Diversity Problem: Executive Headhunters

alex cole

Executive search firm True often gets the call when hot tech companies seek to fill key jobs. The New Jersey–based outfit has grown as quickly as some of its startup clients, having hired 350 employees across several continents since its founding eight years ago.

True resembles its tech industry clients in another way: Just one of the firm’s nearly 70 partners is Black. Other prominent tech headhunting firms are similarly lacking in diversity within their upper ranks, a gap that tech professionals and recruiters said likely contributes to the underrepresentation of Black and Latino executives throughout Silicon Valley.

“We have fallen into the same trap [as our clients],” True co-CEO Brad Stadler said in an interview. True said its top priority for its own internal recruiting team is to boost the number of partners who are Black or Latino.

THE TAKEAWAY
The recruiting firms who play a significant role in spotting candidates for top jobs in the tech industry themselves lack diversity in their upper ranks, contributing to Silicon Valley’s overall diversity issues.

Executive recruiters often hold the keys to top jobs in Silicon Valley. Partners at these firms leverage their networks to come up with slates of potential chief marketing officers, finance executives and engineering chiefs for startups. Yet the searches lead only infrequently to the hiring of Blacks and Latinos, making it more difficult for nonwhite executives to gain access to the upper echelons of the tech industry.

There are few Black partners at other startup recruitment firms, including SPMB, Daversa Partners and Riviera Partners. Daversa Partners declined to comment. Riviera Partners declined an interview request. SPMB didn’t respond to a request for comment.

Tech’s diversity issues extend beyond the racial and ethnic makeup of recruiters. Black and Latino professionals in the search industry said hiring managers tend to gravitate toward candidates who attended elite schools or worked at name-brand companies, and as a result they overlook other talented prospects. And for underrepresented minorities who do get hired, they said, companies need to invest more in leadership and mentorship programs for these employees to boost retention.

But the lack of diversity among search professionals can affect which candidates get called for important jobs, particularly among startups, said Dan Portillo, a former talent partner at the venture capital firm Greylock.

“[The search process] is all done via network—knowing who you know, knowing who you know over multiple years, having access to people with successful careers,” said Portillo, who is Latino and now serves as a managing partner at VC firm Sweat Equity Ventures. “Until you figure out how to get that out of the way of running searches, this problem will persist.”

The tech industry doesn’t appear to have made significant progress in bringing more underrepresented minorities into top jobs.

An average of 2.7% of executives at 10 big tech firms, including Apple, Google and Uber, are Black, according to an analysis by The Information of 2018 federal filings by the companies. That’s slightly lower than the share of Black executives across the Fortune 500, and much lower than the percentage of U.S. computer science graduates who are Black.

Many of the tech sector’s most prominent startups don’t release diversity reports that detail the racial or ethnic makeups of their leadership. Two of the most valuable privately held startups, Airbnb and Stripe, have said publicly they aren’t diverse enough. At Airbnb, just one out of the 16 people on its executive team is nonwhite. Stripe doesn’t release diversity data, but CEO Patrick Collison wrote earlier this month that inside the company “the fraction of U.S. employees who are Black is substantially lower than that of the American population.”

The issue has come into focus in recent weeks, following the killing of George Floyd by a police officer and protests around the country. Companies have issued statements and donated money for racial justice causes. Executive recruiters said companies are already asking for more-diverse slates of candidates. Google, Facebook and Airbnb have said they would increase the number of executives who are underrepresented minorities in the coming years.

But it may be too little, too late, said Amy Vernetti, a former partner at True who also served in a senior recruiting role at Alphabet. She said startups and executive recruiters should have been building more diverse networks of candidates a decade ago.

“The startups are just as bad as the big companies, and the big companies are terrible,” said Vernetti. “Executive recruiters who authentically understand this issue—I don’t know if there are any.”

Some tech veterans emphasized that the makeup of recruiting businesses is one of many factors in the industry’s lack of diversity. Marinda Thomas, a former executive recruiter at Facebook, said younger firms often don’t nurture or coach junior managers who are underrepresented minorities.

In addition, she noted, the tech industry’s leadership roles are often based in the San Francisco Bay Area, where the share of residents who are Black has declined in recent decades. The growing openness to hiring workers remotely could help attract more underrepresented minorities, Thomas said. Google said last week that it would look to hire more senior executives in Atlanta, Washington, D.C., and London, where it already has offices, to attract more-diverse candidates.

Thomas now works on searches for digital publishing firm Issuu, where she said she is the only Black employee. She attended Howard University, which she said means her personal and professional network is likely more diverse than that of other recruiters.

“I have more conversations now with CEOs or heads of HR that put diversity on the table—the need and desire for it. That wasn’t a conversation I had in 2010 with the same people,” said Thomas, who also worked at search firm Riviera Partners. “People are still grappling with how to get there.”

Successful executive searches can be lucrative. Search partners often are paid a fee equal to one-third of the executive’s first-year salary. True, which is privately held and works almost entirely with tech firms, pulled in $91 million in revenue last year, up 36% from the previous year, according to industry publication Hunt Scanlon.

Alex Cole, director of talent at private equity firm VMG Partners, used to work as a senior associate at True. Cole, who is Black, said the search industry hasn’t built a diverse workforce in part because relatively few people know about these careers. “Quite frankly, so many people are taught to be doctors, lawyers, but nobody hears about executive search,” she said.

Stadler outlined True’s plans to increase diversity. One step the firm is taking is to launch a platform next month, called Above Board, where underrepresented leaders will be able to share personal demographic data and see available executive positions.

Lucinda Duncalfe, a longtime software executive who will run Above Board, said it was clear to her that search firms have diversity problems. “We can’t look to organizations that are less diverse than the tech firms to solve the tech diversity problem.”

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