Diversity in Tech Business: Some Facts and Insights

Many firms are eager to talk about their diversity initiatives, but they are less vocal about their actual success. This paradox is well reflected in research on diversity in tech business. Different studies highlight figures which are in sharp contrast with diversity mission statements. For example, according to the 2021 Blendoor report on diversity, equity and inclusion in tech, black and Hispanic employees accounted for only 4.7% and 6.8% of the tech industry in 2021. It is only a slight improvement since 2014, when there were 4.3% of black employees and 6.3% of Hispanic employees in tech business in total. In 2014, the US Equal Employment Opportunity Commission found that top tech firms had only 1.9% of black executives and 3.1% of Hispanic executives. 

While white male employees still hold the majority of positions and executive seats, that comes at a cost. For instance, firms that lack employee diversity face challenges with attracting talent. For 47% of Millennials, diversity is an important factor while considering a job offer. The same is true for 33% of Gen Xers and 37% of Boomers. Furthermore, in 2018, McKinsey and Company found that firms in the top quartile for ethnic / cultural diversity at the executive level were 33% more likely to make above-average profits. By contrast, firms in the bottom quartile were 29% more likely to earn below average.

Although research shows that diverse founding teams have a better return on investment (ROI) than white founding teams, there is still too little ethnic and gender diversity in the venture capital (VC) ecosystem. That is well reflected by the distribution of venture capital. In 2020, women-led startups received only 2.3% of venture funding. As of June 2021, less than 20% of venture capital was provided to startups with at least one female founder. As of July 2021, black female startup founders received only 0.34% of venture capital. In addition, from 2015 until August 2020, only 2.4% of venture capital was raised by black and Hispanic founders.

While laws ensuring gender diversity on public company boards have been passed in some US states, the lack of ethic minorities on boards has not been addressed so well. According to an autumn 2020 analysis, only 12.5% of the board directors of the 3,000 largest publicly traded US companies belonged to underrepresented ethnic and racial groups, despite the fact that they account for 40% of the US population. The Alliance for Board Diversity (ABD) and Deloitte found that in 2020 Fortune 500 board seats were held by 8.7% of black people, 4.1% of Hispanic people and 4.6% of Asian people.

According to the Diversity in Tech: 2021 U.S. Report by mthree and Wiley, 70% of US firms identify the lack of workforce diversity as a problem, while 70% of young tech employees identify the lack of inclusion and belonging to company culture as problematic. Although it is estimated that US firms spend about 8 billion dollars a year collectively on diversity and inclusion training, that investment alone will not help achieve diversity in the workplace, observes Todd Zipper, President of Wiley Education Services. “We need to take an ecosystem approach to workforce diversity: making science and math education more accessible for all learners from an early age through college, and creating more equitable on-ramps to employment through short-form skilling and ‘last-mile’ training solutions,” he explains.

To illustrate the extent of the lack of workforce diversity in the US, the report highlights many disturbing facts. Although 89% of business leaders are going to recruit junior tech talent in 2021, only 46% of them are trying to address the issue of poor diversity within tech teams. 7 out of 10 (68%) young tech employees have felt uncomfortable at work “because of their gender, ethnicity, socio-economic background, or neurodevelopmental condition”. The same is true for nearly 8 out of 10 (77%) women of colour. Half (50%) of young tech employees have left or have considered leaving their jobs because the company culture has not been inclusive enough. That number is slightly higher for women of colour: nearly 6 out of 10 (57%) do not consider their company culture to be inclusive. 

Moreover, 64% of survey respondents believe that tech job applicants with minority backgrounds are discriminated against during the recruitment process. Daniele Grassi, Chief Operating Officer for mthree, a Wiley brand, highlights the impact of recruitment bias on the US economy in the long term: “With nine million unfilled jobs currently in the U.S., the economy will continue to struggle as it experiences a labor shortage, especially if companies are ill-equipped to recruit and retain a diverse tech workforce.”

References:  Jennifer Sor, sfchronicle.com | Blendoor State of DEI in Tech 2021 | the Equal Employment Opportunity Commission, eeoc.gov | webershandwick.com |  McKinsey and Company, Delivering through Diversity | kauffmanfellows.org | Jennifer Fan, techcrunch.com | Ashley Bittner and Brigette Lau, hbr.org | pitchbook.com | Sophia Kunthara, news.crunchbase.com | Crunchbase Diversity Spotlight 2020: Funding to Black and Latinx Founders | nytimes.com | deloitte.com | mthree and Wiley, Diversity in Tech: 2021 U.S. Report | njbmagazine.com