City Voice: Ignore talk of “diversity distraction”
The world witnessed the collapse of Silicon Valley Bank last week. The high-profile, California-based financial institution that served nearly half of all venture-backed tech startups was seized by its regulator, the California Department of Financial Protection and Innovation (DFPI). Since then, experts and industry pundits have dissected the developing situation to share their post-mortem findings of the bank’s demise, including declining start-up funding, rising interest rates and the bank’s sale of government bonds. . At a huge loss to raise capital.
In addition, SVB’s management team demonstrated an inability to assess clear signals and developing trends in the market, poor risk management, and careless management of customers’ cash needs, which inevitably accelerated the bank’s collapse. a situationpersonal opinion In wall street journal mentioned the bank’s commitments to Diversification and environmentally and socially conscious investments, as well as the composition of the management team, were part of its downfall. ‘Diversity distraction’, the authors indicated, could have contributed to poor decision-making and ultimately the collapse of the bank.
As quoted in the piece, ”In their proxy statement, SVB notes that in addition to 91% of their board being independent and 45% women, they also have “1 Black,” “1 LGBTQ+” and “2 Veterans.” I’m not saying 12 blondes could have avoided this mess, but the company may have been distracted by the demands for diversity.,
Although there is no direct conclusion that diversity equates to poor management decision-making, this statement dangerously suggests that an emphasis on diversity and inclusion efforts may prove to be a distraction from the critical business strategy that needs attention. Is.
In the days following the announcements of the bank’s collapse, many conservative pundits and politicians have echoed the view that corporate ‘woke’ policies, including workplace diversity and investment in environmentally and socially conscious activities, were a significant contributing factor. Claims have been made in the media and on social media platforms that the initiative was a distraction from the core mission of the bank, which has proved to be harmful if not fatal.
These claims do not hold up, especially considering that the bank’s diversity policies, goals and investments are similar to other banks in the region.
A recent article Linda Quie in The New York Times provides a credible fact check for these claims, debunking their plausibility. In the article, experts agree that placing the blame on diversity, equity and inclusion policies, and environmental and social investment “is either a complete lack of understanding of how banks work or a misrepresentation of the cause of bank failure”. make a deliberate effort.”
A diverse leadership team is actually more successful in challenging decisions from an ethical, compliance and risk perspective, as well as breaking away from group thinking. When groups work together to make decisions, collective thought can become distorted, resulting in hasty decisions without properly vetting ideas or blind spots to major implications. Groupthink has been blamed for some of the most famous business failures in history, such as Lehman Brothers, Enron and WorldCom. It has also been blamed for national disasters, such as the subprime mortgage bubble that led to the global financial crisis. This can lead to unrealistic optimism, biased analysis, and a disregard for ethics.
Studies have shown that incorporating diversity of thought into management teams, which include groups of people diverse in gender, race, culture, sexual orientation, educational background, and other aspects, fosters innovation, creativity, and critical thinking over time. Let’s give Heterogeneous (diverse) management teams challenge the decision-making process to make more ethical decisions and expose potential blind spots, such as developing trends in the market that could be influential.
The bank’s race was exacerbated by declining start-up funding, rising interest rates and the company’s sale of government bonds to raise capital. Management displayed extreme arrogance in being denied valuable insight and input from a diverse group of people who could have helped prevent the collapse of SVB.
Kamlesh Province is the author of The Human Side of Digital Business Transformation,
Credit: www.standard.co.uk /