Expanding the Definition of Diversity

By: Eric D. Starr :: January 9, 2017

by Eric Starr and Claudia Varela

The “right thing to do.” That’s what most organizations look to do when it comes to incorporating diversity and inclusion standards into their social responsibility mission. In the financial arena, Dodd-Frank, Section 342 was intended to be a first step in promoting diversity and inclusion in the financial services industry. The act excluded, however, any real definition of diversity, policy mandates, or time factors for compliance, presumably with the idea that our industry would regulate itself. However, in recent weeks, we have attended numerous conferences and events and am struck with a sense of dismay: there do not appear to be any significant changes in the diversity of our industry. Unfortunately, many of the people that we speak with at these events not only look the same, but they also sound the same.

Research shows that companies with more diverse workforces perform better financially. According to a 2015 McKinsey report, workplaces with gender diversity perform 15% better than those without it. Even more impactful, ethnic diversity increases workplace performance by a whopping 35%.

Diversity has been typically defined in a way that focuses on demographics and cultural differences. We have noticed that while race, religion, and gender factors still play a substantial role in our definition of diversity, corporate America’s definition has evolved to include a stronger focus on individual experiences and ideological differences. One defining aspect of individual experience is education. If we hire three people with very diverse backgrounds, but all have the same degree from the same university, have we optimized diversity of thought?  Moreover, if those same three people are then indoctrinated into a rigid institution and taught that the way we do things is the only way to do things, aren’t we stifling that same diversity of thought?

Diversity of thought looks to push people to stretch their thinking, open their minds, and move out of their comfort zones. It recognizes the need to combine different types of thinkers, create cultures that are open to new ideas, and leverage employees’ unique talents. A study done by Deloitte, the very institution that coined the term “diversity of thought,” found that diversification in business cultivates innovation and creative problem solving.

If we accept the thesis that the diversity of thought produces innovation and that innovation is advantageous, then it makes good business sense to enhance the diversity of thought within our industry as a whole. Through expanding our definition of diversity, we foster unique solutions to complicated problems. 

Diversity has become an integral part of our hiring practices and organizational culture. As we consider new hires at CapX Partners, we evaluate the qualifications of all candidates, and those that add to the diversity of thought of the firm have the advantage. By empowering our employees to speak freely and make recommendations, we are continually challenging the status quo. This novel advisement has the potential to make us better and a better us means higher returns to our investors and a greater impact on businesses, the economy, and innovation. Ultimately, diversity at CapX can contribute to making our world a better place.

Eric D. Starr, Partner

As a Partner with CapX Partners, Eric is responsible for developing technology-enabled solutions to drive scale and operational efficiency. His areas of focus include origination, underwriting, portfolio management, and finance. As a business developer, Eric's industry emphasis is on healthcare, energy, technology, and manufacturing.

Prior to joining CapX in 2008, Eric worked as a hedge fund manager and was a member of the risk committee at Forest Investment Management. Previous to...