February 24, 2009

Diversity in Hiring? - By Sanjay Anandaram

One of the things that intrigued me when I visited a startup recently was the amazing conformity and homogeneity on display. Most of the team members were from a particular community, from a particular part of the country, had studied in the same set of colleges and had worked in similar roles in similar companies prior to this startup. Only two of the more than 15 members I met did not conform to the profile of the majority. The CEO subsequently mentioned that one of them had resigned and was on his way out soon while they were looking for a replacement for the other.

The above may not be a very typical case but it is also not atypical. Companies are started by people who share a certain set of common bonds and vision. These common bonds are a function of backgrounds, gender, age, education and prior experiences. In addition to these bonds, there are other bonds e.g. of community. The bonds of community are generally perceived to provide something that the other bonds don’t. Namely, that of trust and loyalty. There’s an implicit assumption that people of the same community can be trusted with confidential information about the affairs of a company. There’s a self-policing and self-supporting mechanism at play that has history, family and social forces behind it. It is therefore not unusual to see strong representation of members of a community in businesses where these values are prized above all others. For example, the Jain community in the diamond trade, the Reddy community in real estate, the Marwari community in jute. Even where there are professionals employed by the business, the reigns of the company are in the hands of members of the community. Several Parsi founded businesses are a case in point here. The former Satyam board and executive leadership too were heavily biased towards Andhra members.

However, there’s a difference between loyalty and competence. Between a professional attitude that keeps the company’s interests in mind and respects all and clannish attitudes that tend to favour those from a particular group. Diversity is an important element in hiring. There’s strong empirical evidence that suggests that a diverse workforce is more innovative and productive. Silicon Valley in particular and the US in general are great examples of the success of diversity. Meritocracy has no skin-colour or community. Having homogeneity and conformance mindsets is not very conducive to innovation but more suited for say, ordered production and shop floor environments. Less diverse workforces in say Germany and Japan therefore are far less innovative than the US. Look at the top leadership of US companies and the top leadership elsewhere for another view of the role of diversity in workforces. One of the big challenges for our IT services companies is create and manage a diverse workforce as the world they inhabit becomes increasingly global. Equal employment opportunity and wanting to hire the best for a role are complementary.

India is fundamentally a very diverse country and therefore as our country, minds and attitudes grow, the workforces in our companies will increasingly reflect this. Startups too should keep this issue of diversity in mind especially if they’re to innovate. Hiring should be for the job as opposed to fitting a person into a job. For example, there’s a tendency for some youth oriented businesses to hire young people for various jobs under the assumption that they would appreciate the customer and company better. These companies tend to confuse youth with youthfulness. Most of the great youth oriented businesses like MTV, Disney, Virgin Mobile are in fact run by “boring” old people who are youthful!

As Mitch Kapor, founder of Lotus, says: One must be careful not to create mirrortocracies in place of meritocracies. Mirrortocracies are companies where people tend to hire people like themselves as opposed to hiring the best people for the job. The company will inevitably suffer as a result. Hiring and sustaining a diverse workforce requires an open company culture, transparency in decision making and equitable governance. We need to take steps fast in that direction.

What do you think?

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.