Professional diversity is essential for making PE work

Professional diversity is essential for making PE work

Written by James Bishop

Diversity is the big buzzword in business. It is an area that private equity doesn’t particularly excel at when it comes to gender and ethnicity. But another type of diversity is essential to success in business – professional diversity.

This refers to the variety of expertise and professional backgrounds within your team and is what I believe to be the defining feature of the most successful, exciting PE firms.

There have been countless times when I’ve invested in a new company, met their leadership team, and been struck by how similar they are to every other team in the industry.

It’s so predictable that you could be forgiven for mixing them up from time to time, and the same goes for the kinds of approaches and solutions they gravitate towards.

Just a few more diverse hires have had transformative changes on these companies, and watching them grow and develop with a new lease of life has been incredible to watch, and has only further strengthened my belief in professional diversity.

Most private equity firms are managed by people from finance and investment backgrounds. Very few members of leadership teams stray far from the industry, which you may see as a good thing.

After all, surely it means that your key decision-makers are experienced and knowledgeable about what they are doing.

This is true to an extent.

But this doesn’t reflect the human relationships that go into private equity, and often makes it difficult to interact with partners and stakeholders in a way they can relate to and understand.

PE firms can benefit enormously from having leaders from sectors such as HR, tech, marketing, and creative industries.

Bringing a wider range of opinions and perspectives into decision-making helps expose the weaknesses and opportunities both within your firm and within potential investments.

Varied, diverse teams can offer much better solutions to those problems than a one-dimensional team can.

The richness of a diverse team’s experience leads to more interesting and revealing questions being asked, facilitating innovation and ensuring you are making the most of every situation. Without this, it’s easy for business to become stagnant.

Not only is prioritising professional diversity great for PE firms in a commercial sense, but it can also help tackle the growing issue of talent shortages.

With the big financial firms snapping up employees that PE would typically go for, looking further afield can bring exceptionally talented people from other industries.

And this is not just a quick fix or band-aid solution – rather, it can improve your business in the long term.

Professional diversity can mitigate a number of problems stemming from the professional make-up of leadership teams.

From bringing new ideas to the table, to injecting a burst of creativity and offering new lenses through which to see business, I believe that this kind of diversity can have substantial rewards for those willing to prioritise it.