KKR, Carlyle: How GPs Can Increase Diversity

Private equity and venture capital firms are increasingly re-examining their hiring and retention practices to ensure that they build diverse teams.

“In the past year, there has been a greater momentum to try to drive change on this topic both by the firms themselves and [by] their LPs,” says Suzanne Donohoe, member and head of client and partner group at KKR. “We are conscious of the fact that the private equity industry, like other financial services firms, is not very diverse, for historical reasons, since it really was a cottage industry comprised of quite small firms until recently.”

Donohoe, as well as Matthew Wells, principal and global head of learning, diversity and inclusion at the Carlyle Group; Kate Mitchell, partner and co-founder at Scale Venture Partners; and Sonja Perkins, founder of angel investment group Broadway Angels and former managing director at Menlo Ventures spoke to Privcap about ways to increase diversity in the space.

FIND BEST PRACTICES—AND COPY THEM

Carlyle modeled its diversity strategy after portfolio companies like Nielsen and large financial firms like Goldman Sachs, says Wells, whom Carlyle hired in 2013 to jump-start its diversity and inclusion effort.

Nielsen was named one of the 2015 Top 50 Companies for Diversity by DiversityInc Magazine. One of the strategies that Carlyle “borrows” from the company is using employee resource groups (ERGs) that host events and participate in the recruiting process to “get more diversity in the door,” says Wells.

Kate Mitchell, co-chair of the National Venture Capital Association (NVCA) Diversity Task Force, is building on the best practices used by GE, Intel and Pinterest. The latter launched an Inclusion Lab initiative last year that made its commitment to hire more women and minorities public, and now encourages other companies to do so. The NVCA board recently held an “unconscious bias” training session with diversity strategy experts Paradigm, which is also advising Pinterest and numerous other Silicon Valley firms.

EXPAND YOUR NETWORK

Like hires like—it’s easy for people to hire others who are like them,” says Sonja Perkins of Broadway Angels. “They need to plan for a diverse workforce.”

To do that, both Carlyle and KKR formed diversity and inclusion councils. One of the Carlyle’s ERGs established a connection with schools such as Howard University and Virginia Tech that are near its D.C. headquarters, and organized a breakfast event in partnership with the National Association of Black Accountants.

KKR’s Founding Partner Henry Kravis, several members of the firm, and Carlyle Managing Director James Attwood sit on the board of the nonprofit Sponsors for Educational Opportunities. The group prepares students from underrepresented backgrounds for careers on Wall Street.

Scale Venture Partners also committed to a minimum of 20 hours a month to participate in educational programs for women and minorities, including Hackbright, Toigo Foundation, Manos Accelerator, and Kauffman Fellows.

Members of the NVCA task force, including Scale, have also committed to a so-called “Murray/Rooney Rule”—a requirement that women and minorities be interviewed for senior-level positions. The Rooney rule was instituted in the NFL in 2003 to address a lack of black coaches, while the director of Intel’s Human Resources Division, Patty Murray, implemented her namesake rule requiring that women be interviewed for open senior positions.

“Networking is one of the most important skills a venture capital professional needs to have to find good deals,” says Mitchell. “Use it to attract diverse candidates as well.”

KKR follows a similar policy by including people from different backgrounds in its hiring teams for business schools.

“People tend to hire in their image,” says Donohoe. “If you send only white males to interview, it is not that surprising that that is what you get back.”

FOCUS ON RETENTION

“[To retain these candidates] you need to build an inclusive and supportive culture,” says Carlyle’s Wells.

Another piece of the puzzle is adopting HR policies that fit the needs of various groups within the firm, says Donohoe.

KKR recently extended its maternity leave to 16 weeks and unveiled a “forward-leaning” childcare travel policy that allows the parent to bring an infant of one year old or younger, along with the caregiver, on an expenses-paid business trip. The firm also provides private spaces for nursing mothers and enlists support of executive coaches who aid a woman’s career when leaving for and coming back from maternity leave.

The situation is a little different at venture capital firms that, because of their smaller size, do not always have a human resources department to design these policies, Scale Venture’s Mitchell notes. However, later this quarter NVCA’s task force plans to suggest HR best practices to its 300 member firms, including those for recruiting, parental leave, mentoring, and the development of affinity groups.

Bloomberg News reports on KKR’s Maternity Leave Perks

HELP WOMEN BRIDGE THE CONFIDENCE GAP

“Women tend to discount their own abilities,” says Donohoe. “You’ve got to lean in and try.”

Last month, Mitchell gave a keynote speech at the Rise of the Female Entrepreneur event at the Montgomery Summit in Santa Monica, Calif., highlighting the importance of a confident mindset when playing in fields traditionally dominated by men. The event attracted close to 450 female C-level executives, partners and entrepreneurs.

When hired, women specifically need to make sure that they form mentor-type relationships to stay on top of what’s going in the organization. Having such a high-level understanding of the company and its role in the industry is part of the senior-level skillset, Donohoe explains.

Candidates do not necessarily need to come from financial backgrounds, but need to show up with cutting edge, special skills, says Perkins.

“VC is a great job for women who are naturally good at research and finding solutions,” she says. “It is also an apprentice job so we need to make sure we attract enough women at the entry level [who will then become partners].”