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Winna Brown

Welcome back to the EY NextWave Private Equity podcast. I’m Winna Brown, and I’m your host. According to a report that EY recently published on diversity, equity and inclusiveness, the private equity industry’s ability to meet stakeholder demands, access capital, win deals and compete for talent is increasingly contingent on progress against DEI metrics. Talent management has become the No. 2 strategic priority across PE firms of all sizes, second only to asset growth. DEI initiatives, and now proliferating in private equity, as the industry begins to address how its culture has historically impeded diversity. Today I chatted with Pam Jackson, CEO of Level 20. Pam has worked as an adviser to the private equity industry for over 35 years. And she has been at the forefront of the diversity agenda throughout her career. Level 20 is a nonprofit organization based in the UK that is dedicated to improving gender diversity in the European PE industry and specifically in senior leadership roles at PE firms. One of their marquee programs is their mentoring program. Established in 2015, it’s designed to enable women in PE to gain critical insights and perspectives that will help them build long-term careers in private equity. My conversation with Pam provides a unique and data-driven perspective on how mentoring is a critical way to engage and retain female talent in private equity. I hope you enjoy our conversation. 

Brown

So, Pam, thank you again for joining us today. We’re really excited for this conversation. So, as we kick off, perhaps you could share with us the current state of gender representation in European private equity firms.

Pam Jackson

Well thanks. I’m very happy to be here. And I suppose you can look at this two ways — either as glass half full or glass half empty. I prefer to look at it as half full. The industry may not be where we want it to be yet, but it is actually in a better place than it was a few years ago. And why is that? I think DE&I has assumed a position on firm strategic agendas. We have DE&I leaders in PE firms. There’s an understanding that diversity really matters and that decision-making by diverse teams is better and leads to financial improvement. So, firms are actually on the case. They understand it. They buy into it. And of course, LPs, investors, potential employees all want firms to pay attention to ESG in general, but DE&I. And at the moment, we did a survey back in March 2021 of women in private equity GP firms. The stat that we came up with at Level 20 BBCA report said that at senior investment role positions, 10% of those are held by women. That’s not great. But you know, we can talk later. It’s better than it was before. So, more encouraging is that, in the junior roles, we now have 33% representation by women. And, again, when you think about that, that’s not 33% new hires, that is an amalgamation of probably three or four years’ worth of people. So, it’s improving. Anecdotally, we believe it’s around 40% new hires are women across the board. So, I think we have a lot to be reasonably proud of.

Brown

And how has that trend evolved over the last, you know, 10 years? You mentioned that over the last three or four years, you’ve seen an increase in hiring of women. And what do you think is the catalyst? Like, why has this trend moved towards focusing on DEI and bringing onboard a diverse group?

Jackson

When you think about, if we take gender diversity, women are 50% of the population. It’s only reasonable that they are better represented at the top than 10%. There has been a seismic shift across all industries, across quoted companies, across various bodies to say, “Better representation is needed for gender.” And, actually, that’s just at the tip of the iceberg for a broader diversity message. When we did this survey back in 2018, there were only 6% senior investment roles held by women. So, 6% to 10% is a massive shift. Given that PE is a tenured profession, and it takes a long time for people to come into the bottom and move their way to the top. So, it has evolved. It’s still stubbornly low. But I think the real issue is the recognition of the need for diversity — and firms actually starting to understand how they can change. So, the EY report really highlights that firms have a number of different tools now to help them, you know, with their measuring of KPIs, recruitment metrics, internships. There’s been a big focus on that. You look at what started as a 100 Black interns in the UK. And there’s now 10,000 Black interns. That program across the finance sector has been massive in helping us find a broader, more diverse base of talent. And I know there’s similar things going on in the States in training programs. So, I think the people now understand the benefit and they’re focused on making a difference. And if I look at Level 20, we have doubled our sponsorship in the past two years. That’s not because I’ve been going out and begging people to sponsor us. People have been approaching us saying, “Pam, how do we make a difference? How do we move our numbers? Help us understand what works and how we can get there quicker.” So that’s what so encouraging. It’s the industry is pushing the agenda — not bodies like Level 20.

Brown

Got it. And given the work that you’ve been doing with private equity, from your observations, what are some of the cultural hurdles, almost, that PE firms need to get over in order to embrace diversity and, you know, focus on recruiting more women and diverse individuals?

Jackson

There are a whole range of things. But if we start with the fact that, you know, the recognition that, at the moment PE firms are still broadly led by white males — from a certain background, probably from an investment banking background. The PE industry is still relatively young in terms of its formation. And one of the things we look at is allyship. You know, trying to get the leaders to understand that just — they are privileged, and they benefit from being part of that group of people. They are different. And getting them to think about the people who are different, how uncomfortable that is. How different it is. How difficult it is for them to make their voice heard — to be part of the group. We all remember, you know, walking into rooms as the only woman in the room. And how uncomfortable it was or trying to speak up and not being heard. So, getting people to understand that they’re already in a very different position and to help, and to befriend, and to understand different people, I think is one of the first hurdles to overcome. And, you know, with the pandemic, we now have this ability — we have got to know people as human beings, not as just work colleagues. We’ve had a window into their lives: the career couples, the homeschooling, the eldercare, all of those issues. And I think now we can continue with that and then show that we understand people as humans, not just as work colleagues. And if you take it on another level and you look at sponsorship. Sponsorship goes on normally as part of life. But what we point out to many of our sponsor firms is that they instinctively sponsor people who are like themselves. It happens informally, you know, the voice, choosing somebody to work as a team. They’re comfortable with somebody. And trying to bring that to the fore and explain that we need to sponsor diverse talent, need to find a way to feel comfortable with bringing people into those groups. It’s really important, so that you deal with some of the system inequalities that naturally happen. We’ve all had the situation where it comes to promotion and the view is that maybe John is ready for promotion and Jane is actually really, really good but hasn’t really proved it yet. But why was that? Maybe it was because she wasn’t given the experience, the opportunity. So by bringing those items to light, we’re helping the leadership understand how they need to bring people on and to sponsor them.

Brown

I completely agree that sponsorship is critical. I’m curious, though, how do you help these executives break down years of conditioning and ways of doing things and sponsoring like-minded, or people that they’ve continually worked with, how do you break down that culture and that habit?

Jackson

You really do it in small steps at a time. I think the critical thing is, when I look at the people that support Level 20, we have a lot of discussions with our, what we call our lead sponsor partners. These are people at the tops of their organizations saying, “Tell me what I can do.” And they’re very smart people. And actually, just explaining some of those issues about people not being heard or not being chosen for jobs is often like a lightbulb moment. So I think the critical thing is, in the industry, leaders want to understand and want to change. They want to be more diverse. So they’re listening. Possibly a few years ago, people weren’t listening, and they were delegating, well “…go fix my diversity to their HR department.” I think there is an understanding now that inclusive leadership, the culture of the organization, is the tone from the top. And you do this through stories. We say to people, “People don’t leave firms; they leave people.” And, therefore, the leadership and the culture that leadership has to understand how to embrace different cultures, different diverse groups. So I think we’re pushing at an open door here. It’s just lots of discussions and anecdotes at work.

Brown

That makes complete sense. And I understand that role modeling is also a very interesting and successful tool that leaders can deploy in order to help them on this journey. Can you explain why it should be or why you think it should be a key focus for PE leaders?

Jackson

You’re right. Role modeling is absolutely crucial. And, basically, if you can see it, you can be it. And when you look at PE firms, many of them are very small. They might only have one woman in the investment roll. So at Level 20, we promote what we call ‘inspiring women’. We tell their stories, because if you’re alone in your private equity firm. If you can actually look up and see a whole bunch of other women, like yourselves who’ve done this, who’ve made it. And these aren’t the people at the pinnacle of their career, like 10 years, 15 years away. These people, two or three years more experience than yourself. And it’s a aha moment that, okay, they’ve done it, you know, we don’t have to be perfect, but here’s somebody who has some issues like mine, and I can actually see how she’s made it and become a successful person in her own firm. So we have a lot of inspiring women role models, but it’s not just about women. It isn’t down to women to role model to women; it’s down to men to also role model. So one of the things we’ve encouraged, for example, a lot of firms have family leave policies. But a policy is one thing — living the policy is another. So we’ve focused on different role models. Men who’ve taken paternity leave. And talked about how difficult that was to be the first person in their firm to take paternity leave. And then talked about the absolutely, overwhelming positivity when other people have followed their track and done it. You’ve opened the floodgates for people modeling different behaviors and showing that it isn’t a negative on their career. It’s actually — they’re a success story. Because at the end of the day, millennials, both male and female, are not going to work in the way that we did and leaders of PE did 20, 30 years ago. They want a different lifestyle. They want to be engaged with families. They want to have dual career couples. So the role modeling, the inclusive role modeling, by all, is really, really important. And to celebrate the success of some of these iconic role models, male and female, is what we’re aiming to do.

Brown

And that makes a lot of sense. To your point, there are a lot of policies out there. You really need to live them and, you know, walk the walk, and talk the talk for people to believe it. And then, to truly then start that trend of making a difference. I’ve seen that in my organization. I’ve seen it in other organizations. It really makes a difference when you actually live it, as opposed to just talk about it.

Jackson

I’d say, it’s not just living it, it’s actually — what really is the icing on the cake is when the leaders of the firm call out people for role modeling. When —

Brown

To celebrate.

Jackson

Celebrate the fact that X took this time out, that did something different. Rather than people hiding it, they are promoting it. And they’re basically giving permission to people to do this. Because people live in fear of doing something different and being criticized for it. So by leaders calling it out and celebrating it, it really expands the programs and promotes it.

Brown

That makes a lot of sense — absolutely. So perhaps, Pam, you can tell us a little bit maybe about Level 20’s mentorship program. Can you explain the program?

Jackson

Well, Level 20’s mentorship program was one of the first things that was a backbone behind Level 20 when it was formed 6, 7 years ago by 12 women who recognized the need to support each other and mentor each other. So our mentoring program is about to start its eighth year of programs in the UK. And we have 220 pairs, that’s 440 people, across our chapters, across Europe — about half of those are in the UK. We run programs across Europe. And we know it works. We aim it at the people at the mid-level with about five years’ PE experience who are looking to push towards higher levels. Because that really is the, the crunch point where every bit of your life is sort of competing for attention. And our stats are fantastic, I believe. Maybe I’m blowing our trumpet. But we’ve looked back at the first four years of the program, and 93% of the women who have been mentored are still in the industry.

Brown

Wow.

Jackson

Which is great.

Brown

That’s amazing.

Jackson

It is. And because we’ve helped facilitate them seeing how they can stay in the industry. 69% of those have been promoted, which is also a very good stat because we’re talking people who are pushing at mid to senior level. And we all know that getting to the top is, is quite difficult. But it’s not just the stats that are important. Because I think the Level 20 mentoring program has a pyramid effect. So we now have people who were mentored three, four years ago, maybe seven years ago, and they’re now mentors. So, they’re actually — they’ve been in one end of the program, now they’re coming out mentoring other people. And I didn’t say, but 50% of our mentors our men.

Brown

Right.

Jackson

So we have a whole population of senior people who are committed to giving back to mentor people in a one-year program. And they meet about six times a year, but then supplement with other programs. Anecdotally, we find that many mentors and mentees continue those relationships on informally and to act as a sounding board. And the feedback we’ve had for the mentors, especially the male mentors, is really, really positive. You know, it’s almost evangelical about the benefits, because they find that they’ve had a deeper and better insight into the issues that diverse people are struggling with when trying to make their way in a very, you know, different world. And they’re our best advocates.

Brown

And do they mentor women within their own firms or it can be from anywhere?

Jackson

We’re very careful that we match people in different firms. But we’re also very careful that we’re not matching competitors.

Brown

Yeah.

Jackson

They’re not going to be working on the same deal. We’re not matching somebody at a $50 billion AUM organization with somebody who’s in the VC area. So there’s a lot of work. The reason it can’t be many more people — a lot of work goes into getting them matching right, between the characteristics. How the mentor can help the mentee. How they’re going to feel comfortable with each other. And we always check out that those pairings work, before we kick it off. And I think it’s important that they’re not in the same firm. Some firms do have mentoring programs internally. But I think one of the benefits of Level 20 is the openness of the program. And, also, the no-poaching rules.

Brown

Right.

Jackson

It’s really, really important that that relationship stays arms at third parties. This is not a way for people to recruit other people.

Brown

Yeah, that would —

Jackson

That would blow it.

Brown

That would kind of defeat the purpose. It would blow it up. Absolutely. And so you’ve mentioned how people who were mentored have now come back to do some mentoring. What’s some of the feedback that you’ve heard from these people who successfully gone through the program and have come back? Are there any, like, observations that they’ve shared or, you know, anecdotes around why this program has been so important to them?

Jackson

I would say that the feedback, overwhelmingly is — by going into the program, we require every mentee to set out what it is they want to achieve from the program. And some of the issues that they’re, challenges that they’re coming across. And it’s almost a feedback that, by having somebody else outside their organization who they can even spend time sharing those thoughts with, some of them are just blown away quite quickly. Others, they help them working on. Our mentors are also trained. We encourage them to guide and to ask questions and challenge, not to solve problems. And, you know, most of our mentees, very, very smart, but busy women. And it’s allowing them to take that step back. They found really, really helpful to put some time back into themselves — to reflect on some of the issues. And to, you know when you get stressed by something, the problem gets bigger and bigger and bigger. And, actually, the mentoring allows them to break it down into little issues, to stop stressing about it, to think about things for themselves and to move on. We’re really just helping them to help themselves through facilitation. There are firms who actually don’t put forward their best or talented women to a mentoring program because they’re scared of losing them. And we’ve all had many, many years’ experience working in big firms. You can’t hold onto somebody who doesn’t want to be there. If you deny them the opportunity, they are probably more likely to leave, which is why our stats are so important. Because if you give people opportunity, you help them. You offer them up to mentoring program. You help them grow and develop in your firm and you help them succeed. And it’s such a short-term view, thinking, “If I don’t let them do something, they won’t actually be able to look over the other side of the wall. Therefore, they won’t leave me.” If you’ve always been in the majority in a room, you’ve never thought about how anybody else feels. And when, at Level 20, we bring some men into the discussion — and there are 5 men and 60 women — I always say to them, “How does this feel?” And they say, “Well, you know, it’s a bit uncomfortable.” And I say, “Well, this is how we feel every day of our lives. Just reflect on that, because you are in a minority in virtually everything you do.” And so there’s constantly that added pressure — that added, How do I fit in? How do I get heard? What are the rules of the game that these people are playing? And I think that’s really important, which is why we have male mentors, male sponsors. We have a lot of men because this isn’t a problem for diverse groups to solve; it’s a problem for the collective to solve.

Brown

We’ve talked a lot about the fact that private equity firms have stepped back and have changed their recruiting processes and are hiring, you know, maybe 50/50 women to men. We’ve talked about mentorship. We talk about sponsorship. But what are some words of advice that you can give to the men within private equity firms, you know, the everyday — what can they do on an everyday basis to help them support their female colleagues, you know, even if it’s not formal? How do we help them succeed?

Jackson

I would encourage each of them to recognize that they are the role models. That they have to live the experience. And not to be afraid to engage with people who are not like themselves. Don’t be afraid of engaging with different people. And please don’t pass this as a task to somebody else. If you’re a leader of a firm, ensure that DE&I has a strategic focus that is discussed at every meeting. How are we doing? I’d encourage people — because PE is a very competitive industry, go and use the tool in your report, which is really good, the diversity integration model, and model out how your firm will look with your current retention rates and your current hire rates. And model. But it does not give you the answer you want it to give you. Because many firms look and say, “Oh, yeah, well, we’ve got a turn rate of X%.” Break it down between the majority, white males, and your diverse tools of talent. If they’re diverging, what can you do to bring it back? Because you’re never going to achieve your objectives. PE loves models. I mean, we all do different modeling. We all have sensitivity analysis. So what if your churn rate goes from 12% to 17% on your women? Where does that take you? How do you compare to your peers? Because if you look at Level 20 BBCA report, you can model how you compare to your peers by AUM. And everyone likes to win. So go and look at it. And my other plea would be, please do not go and say, “Let’s just hire lots of senior women.” Because the population is very small. It’s not a quick win. The goal must be to build from the bottom. Buy and build. Go find the diverse talent recruit. Do not try and mold them to be like everybody else. Celebrate the difference. And that’s where you’ll have a successful retention policy and you’ll build a better diversity.

Brown

Wow! Thank you, Pam. Great words of advice and very clear. You know, the path is its you’ve raised great ways for private equity to actually follow their own principles. The buy and build, I love it. Thank you very much. 

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