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Driving gender balance in Private Equity

Nearly all organisations are facing pressure to be more diverse, whether that be gender or ethnicity. Public companies have long had scrutiny of their boards and leadership gender make-up. 

There is a more recent and increasing focus on ethnicity at board level in listed companies too.  Many organisations have introduced various ED&I gender targets as part of their short or long-term compensation schemes to try to change executive behaviour with compensation. Some businesses have successfully addressed entry level and driven more gender balanced intakes. Many still struggle with driving a better balance at middle to senior management levels. Targets are often just that with limited accountability and ownership because they seem too abstract and future focused.

Despite different interventions, many organisations are still struggling to meet their initial gender targets, particular in sectors such as engineering, where less female talent has typically been available. This same issue applies to the Private Equity world where there is a lack of female talent and of senior roles models. So, what else can be done to facilitate positive change in this space?

PE organisations need to find ways to promote and develop the women they hire from the entry level stages in order to produce a sustainable pipeline of female talent and provide senior role models within the organisation or their portfolio companies.

One systematic method is to use the gender proportionality principle or ‘GPP’ which was highlighted in a Harvard Business Review in 2021. This simple methodology sets a goal to replicate the gender balance of the level below at the current level. By way of example, if the gender balance at entry level is 50%, for first line manager it is 35%, for director level is 30% and for C suite it is 20%, then the targets for managers becomes 50%, for directors 35% and for C suite 30%.

The difference with this approach is that it makes everyone at every level accountable. Accountability is completely distributed. It drives real ownership and it is easy to track year on year with scorecards. It is much more immediate and effective, with achievable and ‘owned’ short-term rather longer-term ones which not many people own. The approach will also drive the right internal conversations around progress or lack thereof.

Using GPP can deliver a long-term sustainable pipeline of talent with a start point that reflects the current talent pool. Aside from demonstrating that an organisation is taking this issue seriously, it is flexible and can be adapted to improve any underrepresented groups within business, not just gender.

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