Building a diverse and inclusive organization starts at the top, says Scott Freidheim

What if your company had its pick of the top graduates from the top universities around the world every year? The constant influx of creativity, problem-solving, and market knowledge would surely give you a leg up on the competition. Year after year, the talent crop would renew, and you’d be able to build a sustainable powerhouse.

Scott Freidheim

“Imagine how much firepower you would have,” says Scott Freidheim, a longtime Wall Street executive who is the managing partner of Freidheim Capital and author of “Code of Conduct: Tales of the Roller Coaster of Life.”

“You’d be a force to be reckoned with by all,” Freidheim told BOSS.

You’d have a better business model, higher-quality decision-making, and winning go-to-market strategies. Your organization would be much better off.

It’s not a pie-in-the-sky fantasy. It’s what you can have when your organization makes diversity and inclusion part of the fabric of its culture. It goes far beyond checking the DEI box, though. It takes hard work and investment from the people at the top.

Defining Legacy

Early in his career, Freidheim was a junior member of a team responsible for recruiting talent from business schools. One particular candidate had excellent credentials and already had an offer from a big Wall Street firm. One of the managing directors overseeing the recruiting called Freidheim into his office and asked about Freidheim’s support for offering the candidate a job. Freidheim rattled off the candidate’s credentials.

“The managing director looked at me somewhat befuddled and said, ‘But he’s Black.’”

Freidheim affirmed that that was correct.

“He then looked at me for a sustained period of time wondering what the disconnect could possibly have been that I wasn’t on the same page as him,” Freidheim said.

He left the managing director’s office not sure if he’d keep his own job. He also vowed then and there that when he was in a position of power, he’d work to change practices and attitudes like that.

“Every seat, every job, every place in our community, you’re not just doing a job,” he said. “You’re someone who is in control. How are you going to define that seat? How are you going to define your personal legacy?”

Years later, Freidheim joined the board of trustees at Spelman College, a Historically Black women’s college in Atlanta and created the Center for Economics and Finance there. He set up a mentorship program for students featuring vice presidents at a Wall Street firm. The vice presidents’ bonuses were tied to how well their mentees did in school, whether they graduated, and the job offers they got.

“What I said was, ‘I don’t care if you spend every single day mentoring the woman we’re going to assign to you. I don’t care if you never do. What I care about is, does she end up in a place of employment that’s a wonderful career opportunity, whether it’s a direct competitor or not.’”

Unconscious Bias

The bias in Freidheim’s example was glaringly conscious, and thankfully such blatant discrimination is rare these days. But there’s still plenty of unconscious bias that goes into hiring and promotion decisions.

“You sit down for an interview, and you have 5 to 10 minutes of pleasantries simply out of human behavior and nature, as opposed to contributing to any form of assessment during that period of time, the two of you scramble for common ground, and when you achieve common ground it warms the heart,” Freidheim said.

Interviewers feel a connection to people with similar backgrounds, even if that has nothing to do with whether the interviewee is qualified for and capable of excelling in the position.

“What it does is make it so that I’m developing in real time a bias and appreciation because it’s all so familiar to me,” he said.

So Freidheim consulted the work of Harvard psychology professor Mahzarin Banaji to devise a recruiting and interviewing process to largely sanitize the process of such unconscious biases.

He’s not a fan of quotas, but, he says, a firm with a broad range of perspectives will be better at identifying market opportunities, craft a differentiated and sustainable business model, and understand the marketplace and distribution channels better than a company where everyone has the same perspective.

“If you take any sport and say, ‘Wow, that player is wonderful, I wish we had a whole team of players just like that’” the team might look good on paper, but it would lose a lot of games. Different positions require different skills. It’s the same in business.

“Homogeneity doesn’t help in business,” he said. “In fact, it limits and constricts. It creates blind spots.”

Cultural Fabric

Diversity for diversity’s sake is not the solution, Freidheim says. Putting more minorities on the board of directors doesn’t mean a whole lot if the people on the operating committee or management committee all come from the same background.

“How diverse is that group? Over the last 30 years, it’s changed negligibly,” he said. “I think that the vast majority of companies out there have diversity and inclusion as a checkbox. It’s either legal protection or it’s philanthropy or something that is not core to the business.”

Too often, DEI initiatives are left to HR departments that don’t have the real decision-making power as to the direction of the company that the business line presidents with budgets do. Those line presidents are charged with things like hitting targets that look good on a quarterly earnings report and often don’t have time for shaping the culture of the business, because there are big consequences for missing an earnings projection. That’s damaging to the long-term focus of corporate America, Freidheim said.

“The CEO really has to make (diversity and inclusion) part of the fabric of the culture,” he said.

“I think we can all agree that we would like all Americans to have opportunity. If that’s going to be the case, then whoever it is who’s in a leadership position has a responsibility to contribute to opportunity for all, because there just isn’t (currently). If you don’t apply yourself to the subject matter and you focus solely on your business, then you’re implicitly endorsing behaviors which include unconscious bias.”

You’re also limiting how successful your organization can be. Leaders should start with their company missions, work their way into strategy, and figure out how to make their organizations attractive to the top talent.

“What is known as a standalone DEI vertical, to my mind, is much better addressed comprehensively in the vision of the company,” Freidheim said.

Build a culture that will support and foster that talent no matter where it comes from, and you’ll have a diverse, inclusive, and successful enterprise.