Like many people, the summer of 2020 was a moment of personal and professional reckoning for me. The uprising that followed the murder of George Floyd had me revaluate my position in the world as a white male.
I work in private equity, which gave me more urgency to consider how my professional position could influence the challenges and inequities highlighted in the aftermath of Floyd’s death. Private equity manages around $7.5 trillion in assets and owns companies that employ around 11 million American workers. Yet the industry is not representative of the country, as only 11% of C-suite executives are people of color.
For private equity to be reflective and responsive to the current moment in our country’s history, we need to make some changes across the industry. This is not only the right thing to do, but can also add value to your company.
Recruiting the best and brightest
Being out front on racial justice is a strong recruitment tool. Younger employees are interested in this issue, and would rather work for a company that has similar values than one that doesn’t. Since my firm – LLR Partners – decided to explore how we could support racial justice, about half of our new hires have been diverse, a dramatic increase. This leads to a flywheel effect, increasing our employee diversity as recruits see that we are acting on our values.
If you are looking to hire the best and brightest, you need to do this work. The workforce is increasingly diverse and ignoring racial justice as a part of that trend will keep potential employees away and make it harder for the staff of color you do employ to advance and grow within your company.
For private equity, more diverse staff has the added benefit of bringing in different deals and building greater trust with portfolio companies founded or led by people of color. Solid deal sourcing is a critical component of our business model, and we are beginning to see anecdotal evidence of stronger performance from diverse teams and companies. This is consistent with research on the topic.
Three steps for racial justice
What does embedding racial justice within a company or firm look like in practice? Here are three things you can do:
- Take steps individually. Personal commitment and exploration around how race has influenced your life is a critical first step to bringing racial justice considerations to a firm. If individuals can’t grapple with what the history of racism means for their lives, your company can’t do it. This is especially true for executives and C-suite.
I joined the White Men for Racial Justice, a group of white men from different industries, who meet regularly to explore our own biases around race and learn more about how we can be better allies to the people of color in our lives. This helps me create a solid foundation of tools, skills and resources to bring to my firm.
- Take steps as a team. In addition and in parallel to this individual work, companies should invest in teams to build their skills and capacity. This includes general capacity building around the history of racism in this country – as many of us did not receive the education we should have – but also industry-specific workshops and trainings that highlight the specific opportunities for your firm.
- Take steps as an institution. Once you have engendered an understanding of racial justice across your teams, you can use that as a foundation for systematic changes across the organization. We have begun to explore how our firm can help our portfolio companies to support racial justice, and how we can better invest in the communities in which we operate. This work is long-term and ultimately requires a complete analysis of firm operations. We have contracted the impact investment and advisor firm CapEQ to support this work as an external expert to help us take a comprehensive approach.
One of the major lessons I’ve learned in my two-year journey is that there is no end point to racial justice. The ultimate goal should be to create a new way to operate that meets the needs and demands of our changing economy. This requires on-going dedication of time and energy. It will not be easy, but we have to start somewhere, and these steps will help your firm move closer to racial justice.
David Reuter is a partner at private equity firm LLR Partners.