The Impact of Diversity on Innovation

Our latest research, The Impact of Diversity on Innovation in the Social Investment Sector, uncovers a disconcerting problem in social investment firms – a lack of diversity amongst those making investment decisions… but not only in ways that you would expect.

As anticipated, we found that these firms were lacking in the more “conspicuous” areas of gender and ethnic diversity. Indeed:

  • In 91% of firms surveyed, women made up less than 50% of those making investment decisions. In 83% of cases that figure dropped below 25%.
  • In 83% of firms less than 25% of decision makers were from a BME background.

Yet significantly, all interviewees voiced a third area of concern – an unconscious bias that led to a lack of diversity in class and professional backgrounds within their firms. They identified this class bias as a major gap in diversity not frequently considered. Respondents felt investors were more likely to invest in organisations whose proposals and pitches reflect the hallmarks of university education and a previous private sector career.

This unconscious bias significantly reduces the scope for businesses to innovate and come up with “outside the box” solutions to problems that don’t necessarily reflect the “tried and tested” ideas favoured by many existing investors. If social enterprise is meant to meet the needs of an increasingly diverse society, shouldn’t the backgrounds of those that hold the purse strings also reflect this?

This research has led us to following conclusion: it is time we rethink the way social investment sector leadership is organised. At TSIC we believe in the instrumental value of promoting investor diversity (join us at @Marmalade on April 7th to continue the conversation!) This ensures that our sector is grounded in principles of inclusion that reflects the diversity of the wider society. This approach will bring a greater wealth of ideas to the table, providing a catalyst for innovation.

We believe all social investment firms can reduce ineffective practices by understanding the presence of unconscious bias in their firms. To contribute to this growing library, we have developed a handy checklist from the findings of our latest research to help you begin your journey towards a more inclusive form of social innovation.

1. Take stock of your boardroom.

  • Seek to better understand and recognize unconscious bias that exists in your firm
  • Identify who makes investment decisions for your organisation
  • What types of experiences do they bring? What experiences are missing?

2. Make deliberate choices to structure processes towards a more bias-free organisation

  • Be mindful of the way decision making teams are formed and what the criteria is for their members.

3. Develop your own tools for defining success

  • Consider elements that may be important to your beneficiaries that are not captured by traditional measures of successful investment.
  • What other measures can you observe, aside from hallmarks of university education, previous professional experience and private sector careers when assessing both your team and your investments?

4. Find ways to foster innovation and creativity through diversity

  • Consider seeking placements and secondments for investors within charities and social enterprises to develop a better day-to-day understanding of this sector.

Have any other recommendations for our checklist? Join us @Marmalade on April 7th or write to us at [email protected]


The Social Investment Consultancy (TSIC) operates at the intersection of the for- and non-profit worlds, dedicated to helping charities and businesses maximise their social impact. The latest models of social enterprise, revenue generation and social investment, and the integration of skills and expertise from across the public, private and third sector form the basis for our work. 

TSIC’s research, Impact of Investor Diversity on Social Innovation which analyses levels of diversity in social investment firms and considers whether the characteristics of those making investment decisions have an impact on social innovation will be launched this month. Join us April 7th at the Skoll World Forum fringe event Marmalade to continue the conversation.

 

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