Over the past few years, organizations everywhere have tuned into the importance of diversity, equity and inclusion (DEI)—and private equity firms are certainly no exception. DEI initiatives ensure that opportunities are accessible to individuals regardless of factors such as gender, race, ethnicity, ability, sexual orientation or socioeconomic status. DEI in private equity is not only crucial from an ethical standpoint, but also because diverse and inclusive teams have been shown to yield better business outcomes.
However, McKinsey’s State of Diversity in Global Private Markets Report shows that the private equity industry as a whole has a long way to go to become more diverse. Women as well as ethnic and racial minorities are underrepresented in private equity leadership positions, with both groups representing only 20% of managing director roles.
Although progress has been made on the issue of private equity diversity and some leading firms are way ahead of others, the report found that it would take more than six decades to reach gender parity in investing roles at the managing director level given the current rate of progress—underscoring a need for intentional change.
Meanwhile, institutional investors are increasingly asking for DEI metrics, with more than half (52%) asking firms to provide diversity data spanning their investment team, portfolio companies, C-suite and board. Some even have minimum diversity metrics that must be met before they consider investing. Your marketing strategy must tend to these metrics with the same importance as financials or ESG reporting.
In his blog post, we will discuss how DEI affects your private equity marketing strategy.
What is DEI in Private Equity?
DEI in private equity is the intentional practice of establishing policies and processes designed to create a culture of diversity, equity and inclusion that starts at your firm and extends outward to its portfolio companies, board of directors and investor base.
To be effective, DEI programs should touch every aspect of your business, including recruiting, promoting, continuing education and training, exit strategies, investors, lenders, suppliers and other partners. You must also establish metrics to evaluate the overall success of your DEI programs and their impact on your firm, portfolio companies and community at large.
Should Private Equity Firms Use DEI Messaging in Their Brand’s Marketing?
Publicly showcasing your DEI program is a delicate matter. Private equity diversity and inclusion are more than just a bullet point in your firm’s marketing strategy. Instead, these programs signal a commitment to fostering an inclusive environment where individuals from diverse backgrounds can thrive, contribute their unique perspectives and collectively drive the industry forward.
That being said, firms that actively incorporate their DEI values into their marketing strategies do gain a competitive edge with limited partners, founders and employees who prioritize these principles., So, yes, DEI should be strategically included as part of your firm’s brand message.
How to Incorporate DEI into Your Firm’s Messaging Without “Getting Political”
To avoid appearing overly political, your DEI messaging should focus on the principles of fairness and equality, as well as the business benefits of having a diverse team. Avoid divisive or politically charged language so it’s clear that your values support unity and collaboration rather than any kind of partisan affiliation.
When possible, use data and reference credible studies to highlight the positive impact of DEI programs on employee satisfaction and business performance. Relevant DEI metrics to collect and share as part of your marketing strategy can include:
Gender and ethnic/racial diversity ratios
Gender and ethnic/racial pay disparities
Age distribution and experience levels
Hire referral sources for successful candidates (e.g., word of mouth, direct applications, recruitment agencies)
Promotion rates of employees from different demographic groups
Employee engagement and satisfaction scores from workplace culture surveys
Inclusion scores from workplace culture surveys
Participation in diversity training
Number/quality of learning and development opportunities
Supplier diversity and spending ratio
Accessibility features of your workplace
Given that DEI is a sensitive topic, you must also be careful to not tokenize people within your organization for the sake of marketing. If you’d like to spotlight an individual, make sure they’re comfortable with it and that they’re receiving recognition based on their own merit rather than to put a feather in your firm’s diversity cap. Firms that take advantage of their diverse members will quickly find that doing so is counterproductive to the goals of DEI, as making insincere claims can result in backlash.
How to Share DEI Initiatives Within Your Marketing Strategy
Incorporating DEI into your marketing strategy should be a collaboration between your marketing team, leadership, human resources department and possibly even legal advisors to ensure the messaging is accurate, ethical and on brand. It’s important that the information is easily accessible so socially conscious investors can recognize DEI as a priority for your firm.
Here are some tactics for incorporating DEI into your marketing strategy:
Dedicated DEI Materials: You can share information about your firm’s DEI initiatives and outcomes on a dedicated webpage, through a comprehensive DEI report, and as part of your pitch deck.
Marketing Campaign: If you’re particularly proud of your firm’s DEI achievements, you may like to explore the idea of crafting a comprehensive marketing campaign that strategically positions your firm as a trailblazer in championing diversity and inclusion within the private equity industry. Your campaign may deploy your message with tactics such as digital ads, email, social media and sponsorships.
Internal Marketing: Making your commitment to DEI well known across your organization is equally as important as communicating it externally. Leverage employee channels like Teams or Slack groups, emails, and internal meetings and presentations to encourage an open dialogue about DEI and foster a workplace environment that embraces differences.
Best Practices for Preventing & Mitigating DEI-Related Crises
No private equity company is perfect when it comes to diversity and inclusion. DEI initiatives and the messaging around them are continual works in progress, as truly meaningful change happens incrementally. The best way to prevent or mitigate DEI-related crises is to practice transparency. Address potential issues head-on before they escalate, and respond swiftly to any negative feedback regarding diversity at your private equity firm.
Here are a few proactive measures you can take to prevent or mitigate DEI-related crises:
Develop and communicate DEI policies that are clear and well-documented. Be sure to include messaging around specific actions that are taken in response to violations.
Actively engage with stakeholders, including employees, portfolio companies and investors, to gather feedback and input on your DEI initiatives. This collaborative approach reinforces that your commitment is driven by shared values.
Make DEI training and other learning and development opportunities available for all employees, including leadership. Your internal marketing strategy must ensure that all key stakeholders are aware of these opportunities.
Keep employees informed about the organization's commitment to diversity and the steps being taken to address any issues that may arise.
Celebrate diversity achievements within your firm by highlighting success stories, milestones and positive contributions to reinforce that your brand values diversity and inclusion.
DEI initiatives are ethically essential to combat the lack of diversity in the private equity industry. As institutional investors increasingly demand DEI metrics, your marketing strategy must evolve to meet these expectations. However, it’s important to remember that incorporating DEI into your messaging is not merely a checkbox for securing deals and investments. Instead, it signifies a commitment to fostering an inclusive and supportive environment where diverse voices thrive. With effective communication around your DEI efforts, you can make meaningful strides toward a more inclusive private equity landscape and attract more socially conscious stakeholders to your firm.