Erik Larson is the CEO and founder of Cloverpop, a Next Coast portfolio company and decision-making platform based in California.
Why is it so important for companies to quantify diversity and inclusion in the workplace?
If you don’t measure it, it won’t get better. Right now, measurements are weak or don’t measure actual business performance, especially when it comes to inclusion. When we started doing this research I found the general lack of ROI calculations when it comes to diversity kind of shocking. There’s very little direct measurement of the ROI of diversity, and most importantly the critical role inclusive decision-making plays in unlocking that ROI. Measuring this is critical because unless companies keep track of who is involved in decision-making, our research proves that diverse perspectives are not included, and thus the biggest benefit of a diverse workforce is unrealized. The status quo persists just because we’re not aware of this inclusion gap. Companies think they are succeeding when in fact they are making very little progress. Direct measurement reveals the problem, and motivates change.
What was the most surprising result from your research?
That the much bigger problem is the inclusion problem. Our research found that diversity without inclusion, can actually be a drag on the business. There’s more difficulty communicating within the team which creates more operational friction. Companies are spending billions on these diversity initiatives but aren’t realizing the full ROI because they aren’t working on the inclusion piece. Right now, less than half of the decision-making teams in a typical tech company involve women. This shocking lack of business savvy that is obvious as soon as you do even simple measurements. Not only does excluding women reduce the decision-making effectiveness of those teams, but also women who are underutilized in decision making are less fulfilled and less engaged. It’s not an explicit conspiracy, but it’s exclusion that is inevitable without management measures and controls.
What were you most surprised by when you began your research with looking at your own company specifically?
We first started our research by measuring ourselves and I thought we were going to be awesome, but when we measured our inclusion we actually had this big gap, specifically a 30% gap in gender. I was blindsided by it and I think that most CEOs and senior executives would be surprised by their results as well. We thought we were addressing the problem by hiring female leadership positions, but that didn’t do enough. The problem wasn’t that we needed new diversity hiring initiatives, the problem was that the people who were already present were not getting involved. The cool thing is we found it can be fixed really quickly if you measure it — it’s just a blind spot problem. We had to actively and explicitly say that in our culture, we include different perspectives because we know it leads to better decision making, and as soon as we started measuring these decision-making inclusion rates and reviewing them in our leadership meetings, the gap started closing. Within six months we were able to completely close the inclusion gap, because we knew it was there and we had a tool to fix it.
What would you say to entrepreneurs about the importance of diversity and inclusion that are scaling their businesses?
When you’re first starting a business, it can be hard to think of diversity and inclusion as a crucial piece to scaling your business. But as soon as you hire the first person outside of that founding team, you are fooling yourself if you think diversity is not an important decision. If you’re not thinking actively about diversity, you will run into culture problems and hiring problems. It’s shortsighted. When your company hits 10 or 20 people, that’s when culture starts to gel, and the last thing you want is a bro culture, or a narrow team with a narrow overlapping network that makes it harder to hire people by referral. Thinking about inclusion early on and pursuing it actively is a strategically smart thing to do.
Given how much toxic work environments have been in the news recently, where do you think we are in the lifecycle of creating inclusive workplaces?
I’m hoping that the dialogue will move from rhetoric to action, which will broaden the focus from moral imperatives to also become more about business performance. Often inclusion is a behavioral problem, not an evil-people-in-charge problem, and it’s bred through vague performance measures and inadequate action, not through malice. There are clearly bad actors, and the news recently has taught us that are especially bad apples in charge at some companies. But I think just as executives are held accountable for missing on profits and revenue in general, they should be held responsible for underperforming because of lack of diversity and inclusion in particular. Too often diversity and inclusion initiatives are started out of fear, for compliance or risk management or good PR. They should really be about improving fundamental business performance, engagement and competitiveness. If companies insist that they are going to change their approach diversity and inclusion, but they have no direct ROI metrics in place to measure it, then they’re not taking it seriously. Period. When companies start bragging about their ROI measures, then things will change. I believe these issues are too mainstream, and the ROI is too large, for that not to happen soon.
About Erik
Erik is the founder and CEO of the decision-making platform Cloverpop. He spearheaded their latest diversity and inclusion project titled ‘Hacking Diversity.’ Prior to that, he spent the past decade launching a dozen v1.0 SaaS products at Adobe and Macromedia. He is a decorated U.S. Air Force captain that attended MIT before getting his MBA at Harvard Business School.
