Every business leader today wants to run a diverse organization, especially since diverse workplace teams have been proven to be more effective than homogenous teams at executing on ideas over time.
In the venture capital industry, diversity among investors improves not just the performance of individual investments but overall fund performance, an analysis by the Harvard Business Review found.
It turns out building a diverse organization is not just in society's best interest; It also yields returns.
My firm, SineWave Ventures, is one of the most diverse in the VC industry. Our team is comprised of different genders, sexual orientations, races and ethnicities.
Our approach to building a business was markedly different than what many people advocate for when they talk about the need for diversity, and I would argue our approach has been more effective.
I can tell you from experience that diverse organizations enjoy distinct business advantages. Here are two important ones:
To put it simply, the realities of business today require a diverse team to effectively execute on ideas and strategies.
Most businesses are trying to approach a customer base made up of individuals of different ages, races and sexual orientations. As a business leader, you need to understand your customers to effectively engage them. This means you will need insights from members of those diverse groups.
Without this kind of input, your business could be flying blind far too much of the time.
Customers also gravitate to companies and products that understand them. Relatability leads to a stickier relationship, which leads to better business.
Some of the best business ideas come from identifying a blank space that no one else has noticed, and which is ripe for disruption. Finding such a space often comes from the melding of unfamiliar or previously unconnected experiences.
For example, my firm is devoted to bridging the gap between Silicon Valley investors/entrepreneurs and the public sector (as a customer, partner, and regulator).
There are very few investors who, like myself, have spent time as senior executive in the government and as investors at the top venture funds, a diversity of experience that allows one to recognize needs and opportunities in ways a traditional player might not.
And you can only turn these types of blank spaces into opportunities by deploying a team with diverse backgrounds and experiences.
Diversity Beyond Categories
Building a diverse organization, be it an investment firm or any other type of business, is a matter of finding individuals with diverse experiences and perspectives. The focus should not be on race, gender or other categories that can be checked off to comply with a mandate or a quota.
A group that looks homogenous on the outside--like a group of white men, for example--could include a range of perspectives just as wide as a group made up of people of different races.
Categorizing people solely by race, gender or other criteria is not an effective way to convey the value they bring and can easily make them feel devalued.
That said, some of the key factors that influence people's perspective and experience are their gender, their race and other categories that come up in conversations about diversity.
As we built the team at SineWave, we searched for a diversity of insights. Finding this range of insights inevitably meant building a team comprised of people with different backgrounds, of different races and of different genders.
We didn't start by trying to check off boxes that would prove we are diverse. We found the diverse points of view that are crucial in business, and the people who brought those insights turned out to be a diverse group. And we would argue that wasn't a coincidence.
Once you have created a diverse team, its success depends on fostering a culture that accepts and celebrates differences of perspective and experience. The team must be able to openly disagree and challenge one another's assumptions.
Simultaneously, members must come together when it's time to reach a consensus. And that only happens when a leader articulates a vision and goals that all parties, regardless of backgrounds, can aspire to realize. This is another key element of establishing a culture where diversity can be effective.
Without it, you get nowhere fast.
Ultimately, diversity should not the end goal of your business. It's merely an effective tool for reaching your goal -- a goal that must be regularly articulated and reinforced in all the work you do.