SaaS companies benefit from a diverse and inclusive workplace. These benefits range from better returns to more innovative and competitive offerings that allow these companies to capture more of the market share.

But while the concept of creating a diverse, inclusive and equitable workplace is not complicated, achieving such an environment is not as easy as it might first appear. Therefore, it’s no small wonder that we’re seeing more and more inquiries into how our organization can help SaaS companies establish and/or successfully expand their D&I efforts.

McKinsey and Company, a leading management consulting firm, continues to document the business case for diversity and inclusion. In their May, 2020 report titled Diversity Wins: How inclusion matters, McKinsey stated:

“Our latest report shows not only that the business case remains robust but also that the relationship between diversity on executive teams and the likelihood of financial outperformance has strengthened over time. These findings emerge from our largest data set so far, encompassing 15 countries and more than 1,000 large companies. By incorporating a “social listening” analysis of employee sentiment in online reviews, the report also provides new insights into how inclusion matters. It shows that companies should pay much greater attention to inclusion, even when they are relatively diverse.”

Source: McKinsey & Company

As you can see, there are measurable, tangible benefits to establishing a diverse and equitable workplace, aside from the clearly moral arguments that can be made. In other words, not only is it “right” to ensure that everyone who desires a seat at the table gets that opportunity, but there are true financial and business incentives to do so.

Current Outlook in Tech

An unfortunate fact is that the tech sector, which you might think would be ahead of the curve when it comes to diversity and inclusion, is in fact, lagging other industries.

A report compiled by Pew Research Center found some disturbing statistics.

majority of STEM jobs are taken by both Asians and Whites.

69% of STEM workers are White

Blacks make up 11% of the U.S. workforce but just 9% of STEM workers

Hispanics comprise 16% of the U.S. workforce but only 7% of STEM workers

Asians are overrepresented in the STEM workforce, relative to their overall share of the workforce.

And the EEOC reports the same troubling facts:

“Compared to overall private industry, the high-tech sector employed a larger share of whites (63.5 percent to 68.5 percent), Asian Americans (5.8 percent to 14 percent) and men (52 percent to 64 percent), and a smaller share of African Americans (14.4 percent to 7.4 percent), Hispanics (13.9 percent to 8 percent), and women (48 percent to 36 percent).

In the tech sector nationwide, whites are represented at a higher rate in the Executives category (83.3 percent), which typically encompasses the highest level jobs in the organization. This is roughly over 15 percentage points higher than their representation in the Professionals category (68 percent), which includes jobs such as computer programming. However, other groups are represented at significantly lower rates in the Executives category than in the Professionals category; African Americans (2 percent to 5.3 percent), Hispanics (3.1 percent to 5.3 percent), and Asian Americans (10.6 percent to 19.5 percent).

Of those in the Executives category in high tech, about 80 percent are men and 20 percent are women. Within the overall private sector, 71 percent of Executive positions are men and about 29 percent are women.”

Why are underrepresented groups not reflected in higher numbers in STEM?

The chart below offers some insight into possible reasons why…

 Source: Pew Research Center

Why is tech less diverse?

Research has shown that “Black people, Latinos and Native Americans are underrepresented in tech by 16-to-18 percentage points compared with their presence in the U.S. labor force overall.”

But why?

In addition to what we’ve already discussed, experts point out the need for the tech industry to make a shift in its hiring and promotion practices.

The nonprofit CODE2040 says making these changes would “serve as a catalyst for achieving racial equity” across industries.

The “right fit” is often “code” for someone who has the “right” age, look and degree, and it’s the tendency to go with “familiarity” when looking for candidates that keeps the status quo and limits the effectiveness of an organization’s diversity and inclusion efforts.

Company values and workplace

When a company focuses on hiring for values (not culture fit) they will finally get results for their diversity and inclusion efforts.

Why?

Because people, no matter who they are, will thrive in an environment where they are genuinely appreciated – and valued – for the skills and unique perspectives they bring to the table.

Familiarity

Another factor which may be impacting the diversity of SaaS organizations is a concept known as “fluency heuristic”.

Simply put, fluency heuristic is the natural human tendency to prefer information that we can easily process, especially if it’s similar to what we already know or have experienced. We judge this information positively, believing it to be more true or more beautiful.

This technique makes sense from a biological standpoint when you consider that decisions which are the easiest and simplest allow us to conserve energy…a strong indicator of survival.

However, as noted above, this bias is not helpful to SaaS businesses who recognize the importance of building a more diverse and equitable work environment.

Here’s an example of this processing bias in action.:

  • An interesting study of fraternity and sorority members tasked with solving a murder mystery discovered that while a more homogenous group (e.g. everyone from the same fraternity or sorority) was rated by members as being more effective, it was not.

The study found that “among groups where all three original members didn’t already know the correct answer, adding an outsider versus an insider actually doubled their chance of arriving at the correct solution, from 29% to 60%. The work felt harder, but the outcomes were better.”

Benefits of diversity and inclusion in SAAS companies

Competitive advantage

Improving diversity and inclusion in SAAS companies will create enticing prospects for business partners, top talent and industry experts.

Why?

Because these organizations possess team members with a diverse range of skills, perspectives, mindsets and experiences that inform their perceptions and ultimately, the solutions they bring to an organization which is trying to solve problems (or offer benefits to) the marketplace.

Simply put, the more diverse your workforce, the better the odds of creating a team with the ability to design more innovative products or services.
Market share

Unlike some industries, the marketplace for SaaS products is essentially global in scope. Therefore, the onus on these companies to design and offer products that appeal to a wide range of individuals is clear.

This fact, combined with the talent and creativity found within a diverse workforce, only serves to increase an organization’s ability to capture more market share within their industry.

Traditionally, SaaS companies look for markets where a need for their product is clear and well defined, however without a diverse workforce they miss the opportunities that are often found within secondary markets.

This is because they lack the resources to bridge the gap between their offerings and those consumers who may be unaware of its existence and/or its benefits, or it’s not available in the language these potential consumers speak.

What diversity and inclusion “success” looks like

Every organization must set their own criteria for “success”, however it’s important to note that diversity and inclusion is not a “box” to be checked off; we’ve done “X”, now we’re finished.

  • The C-Suite has prioritized D&I, with both funding and accountability in place
  • The state of current DEI efforts and a clear synopsis of what remains to be done
  • Creation of an outline of specific actions needed, with everyone clear on their responsibilities

Finally, it’s important to realize that you’re never really “done” with your diversity and inclusion efforts. It’s an ongoing process.

If you want to improve retention, expand your market share and compete in the marketplace, your focus should be on building a truly diverse, inclusive and equitable environment for all, from the ground floor to the C-Suite.