Diversity and Diversification: A Winning Strategy in Leadership & Finance

This month is Black History Month. Following close on its heels is Women’s History Month in March. As I started thinking about the significance of these two month-long celebrations, a question came to mind. Are there similarities between diversification and diversity? 

I’ve spent many decades in finance, and most of my career has been in male-dominated settings. Being the only woman in the room in meetings was not unusual. In banking, the lower ranks of employees have historically been heavily represented by women, while leadership positions have had significantly less female representation. Based upon my corporate experience in the South, representation by people of color in top ranks is even less than that of women.

Looking at the numbers of women with advanced degrees and organizational leadership experience makes one wonder why we don’t have more women or Black Americans in corporate leadership positions. It can’t be due to a lack of talent, education, experience or qualifications. What I saw in banking extended to the broader financial services sector and other STEM-oriented fields such as technology, engineering, and science.  

From experience, I know the glass ceiling is real. I have daughters pursuing their education and will soon be entering the workforce. While there are likely more opportunities for women now than in the 1980s and 1990s, I have no easy answer for my daughters as to why there still appear to be limitations or constraints for women, especially in top corporate echelons.

Should we consider professional opportunities to be “equal” in the modern day? Definitely not. If a woman has an opportunity to break through the glass ceiling, she can face the challenges of working around men who think: 1) it’s beneficial to demote women for doing too much, 2) women should be seen and not heard, and 3) that demotions enhance the value of women by removing a threat or inconvenience for men. Organizations can and will create systems and patterns of behavior that might feel intuitive to a small, homogeneous group in leadership seats but result in less-than-optimal outcomes. 

What if diversity weren’t just a talking point, a label or an “add-on” like dessert after your meal?  What if diversification within an organization, like within an investment portfolio, is actually a necessity to optimize performance?

My love for diversity started at home. My parents came from immigrant families, and they broke the norms of their time by marrying each other at a time when children were expected to find partners within their ethnic community. My parents are two very different people with incredible traits that are connected to their cultural heritage and upbringing. I’ve benefited from their collaboration as they brought together different experiences, diverse education, complementary strengths, and skills to build and nurture their family. 

We were a military family, moving from community to community every few years and I even enjoyed time in Asia while my father was recuperating from a military accident.  These experiences created a foundation for my views on celebrating differences and leaning on each other’s strengths, which is what healthy leaders and organizations do well.  

At their core, organizations can be considered portfolios of people assets with education, experience, credentials, and skills. It’s interesting to think of building a constellation of diverse leaders and workers as you would construct a diverse portfolio of investments. Diversification in all its forms can lead the way to maximizing opportunities and mitigating risks.

With decades of experience as an investor and as a wealth/investment advisor, I understand that diversification provides a long-term benefit and is fundamental in building a sound, resilient investment portfolio with the following benefits:

1. Risk Reduction: By spreading investments across various assets or sectors, you minimize the impact of any single investment’s poor performance on your overall portfolio.
2. Smoother Returns: A diversified portfolio will likely experience less volatility, leading to more stable returns over time. Blended skill sets, views and talents when pursuing the right strategy should take some of the “noise” out and deliver more consistent performance over time.
3. Access to Different Markets: Diversification allows investors to tap into different geographical markets or industries, which can provide new growth opportunities. Celebrating diversity among business leaders can attract more qualified talent and should appeal to a broader customer base. After all, the American consumer represents the height of diversity!
4. Increased Potential for Return: Through diversification, some investments may underperform, and others may outperform, potentially leading to an improved overall return on investment. One of the basic tenets of angel investing is that within a high-risk asset class, diversification is designed to include a “unicorn” which can offset other anticipated losses.
5. Protection Against Market Fluctuations: Different assets often react differently to market conditions. For example, when stocks are down, bonds or real estate may perform better, helping to cushion the blow. Extending this concept to the workforce, a diverse organization can demonstrate greater resilience in responding to business challenges. Greater diversity can minimize groupthink, which can create blind spots that inhibit a company’s long-term opportunity and performance.
6. Long-term Stability: A well-diversified investment strategy can help investors achieve their long-term financial goals with greater stability. Likewise, a diverse workforce coupled with intentional “succession planning” through the ranks contributes toward building a great workplace and attracting more talent.
7. Opportunity for Learning: Diversifying can lead to exposure to various industries and sectors, helping investors learn more about different markets and improving their overall investment strategies. Similarly, businesses can collect more intellectual capital and foster a culture to encourage critical thinking and reinvention. Thinking differently, learning something from another industry, and staying on top of changing trends and opportunities are all supported, enabled, and strengthened by a diverse workforce.

I am a proud American who often reflects on the sacrifices my parents and family made in service of our military and a great democracy. I hope as a country we can harness the benefits of diverse people and cultures for the greater good with intentionality and sound judgment. May we achieve the same benefits in our communities as in our diversified investment portfolios. The well-being of future generations depends on our success.