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How remote work is killing startup productivity and what to do

3 ways high-growth startups can boost productivity remotely

When COVID hit the world economy in March 2020, startups were quick to adapt and transition to a complete remote way of working. Inspired by Tech giants including Google and Twitter, startup founders are now preparing for a long-term remote-work model. As a lasting remote-working model is predicted for startups and SaaS companies, it is important to assess how this new normal has impacted productivity. Initial findings demonstrate that remote work has negatively impacted startup productivity. How exactly has remote-work impacted productivity for startups and SaaS companies and what can be done?

  • Remote work has increased hiring biases in startups

  • Remote work has exacerbated microaggressions in Tech

  • High-growth startups diversify talents to boost productivity in remote work

To find out how to attract and retain diverse talents in remote work and fast track your startup success, sign-up to our webinar.

Remote work has increased hiring biases in startups

Startups have long been well-known for hiring primarily straight white men. A 2016 US Equal Employment Opportunity Commission (EEOC) report shared that in the tech sector, 68.5% of employees are white, compared with 63.5% across the private sector when white people made 62% of the country. Women held only 36% of tech jobs, compared with 48% across the private sector. White people made up 83.3% of tech executives and 80% of all tech executives were men. In the UK, only 17% of UK IT specialists are female compared to female being 50% of the population, according to BCS, The Chartered Institute for IT. The survey also shows that IT specialists from minority groups are more likely than others to be in non-permanent employment.

Since remote-work was adopted by startups and SaaS companies, hiring bias has continued to push more minorities out of the Tech workforce in different ways.

During remote work, distance bias had a significant impact in how startups hire. Distance bias reflects our instinct to prioritize that which is nearby, whether in physical space or time; in remote work, where recruiters are physically away from people who are different from them, hiring managers have preferred candidates who were like them over candidates who were different. A Bureau of Labor Statistics survey reported that women accounted for more than 50% of the jobs lost in April and unemployment reached 16.7% for black people compared to 14.2% of white people.

M.H. Lines, female CEO of startup Automaton explained how the startup ecosystem excluded her since the start of the pandemic: she was set to kick off a funding round for her startup before COVID and the pandemic hit and her meetings with investors got cancelled. Female startup founders have long been ignored by venture capital and since the pandemic heightened, stories from female founders suggest even greater hurdles because investors are turning more risk-averse.

For many startups, there was no choice but to go into ‘survival mode’ when the pandemic hit and they froze hiring and making employees redundant. A Mackinsey report shows the correlation between being laid off and having previously been on a low income, demonstrating how minority groups are more affected by unemployment during COVID: ‘around 7.6 million jobs or 24% of the UK workforce are at risk because of COVID and people with lowest incomes are most vulnerable’.

Remote work hiring biases means lower productivity

According to a Boston Consulting Group survey, diverse teams create 19% more revenue. Another survey by Clover pop shows that diverse teams make better business decisions up to 87% of the time, make decisions twice as fast with half the meetings and deliver 60% better results. A Center for Talent Innovation study shows that 48% of companies with more diverse management improved their market share while only 33% of companies with less diverse management reported similar growth. As supported by research, remote work hiring bias has significantly lowered productivity for startups who need it more than ever.

Remote work has exacerbated microaggressions in startups

The UK workplace was already plagued with discrimination and micro-aggressions before the pandemic. According to Market Inspector findings, 32% of LGBT employees choose to hide their sexual orientation. Another survey by Stonewall revealed that 31% of non-binary people and 18 % of trans people don’t feel able to wear work attire representing their gender expression and one in eight LGBT people wouldn’t feel confident reporting any homophobic bullying to their employer. 18% of LGBT staff in the UK have been the target of negative comments or conduct from work colleagues. It is not just LGBT employees who are discriminated against: according to Forbes, 64% of women are still exposed to gender biased micro-aggressions, with non-white women experiencing it the more than anyone else. According to Perkbox, unfairness or mistreatment at work is higher among BAME employees.

Discrimination during remote-work has been widely reported. Farorelaw reported that at Tech company TeleTech, an employee posted offensive comments about his colleague on Facebook alluding to her sexual promiscuity and the employer included an extremely sexist, offensive comment.

In another case reported by Farorelaw since the beginning of remote work, senior management at Richemont UK, a luxury goods company, instructed a professional surveillance company to conduct surveillance on a black employee who had made a claim of race discrimination against the employer, on suspicion that the employee was being dishonest about her state of health.

Remote-work microaggressions in startups creates added costs:

As microaggressions increase in remote-work, this leads to more employee churn due to firing employees who discriminate against co-workers. A report by Oxford Economics estimated that the true cost to replace an employee is more than £30,000. Croner estimates that the cost to replace a senior staff member can be between £40,000 - £100,000. Micro-aggressions lead to more homogeneous teams which also create added business costs. Research by Harvard Business Review shows that the success rate of acquisitions and IPOs was 11.5% lower, on average, for investments by partners with shared school backgrounds than for those by partners from different schools. The effect of shared ethnicity was even stronger, reducing an investment’s comparative success rate by 26.4% to 32.2%. Remote work cases of discrimination have further accentuated Tech’s already homogeneous workforce which, in turn created additional costs to the business.

High-growth startups diversify talents to boost productivity in remote work

1) Successful startups focus on attracting diverse talents in remote work

Balderton Capital, a London-based firm, explained: "We work with startups to try and anticipate scaling challenges that come their way and for me that involves commercial priorities and fitting organisation plans into that. Diversity and inclusion is a part of that and I don't see it as a separate part to the work we do, which is help companies build thriving teams that are inclusive."

2) High-growth startups retain diverse talent remotely to boost productivity

LocalGlobe, a London-based VC firm, says "It can feel counterintuitive to spend time and energy on something that may seem tangential – to invest in the culture of the company and the diversity of the team where the natural recourse would be to hire the best people as quickly as possible," he said. "This is why we make a point of discussing this early, as we fundamentally don't believe that is a viable approach."

3) Successful startups invest in sustainable diversity and inclusion

EQT Ventures explains: "Early stage startups all suffer homogeneity issues as they recruit through network," she said, "so we take an advisory role and work on hiring process – as usually there isn't one – and you can start to talk about how bias creeps in and not recruiting from networks to challenge that way of thinking."

In summary

Although remote work has presented unprecedented challenges for startups and SaaS companies, it has also presented new opportunities. The most successful high-growth startups focus on attracting and retaining diverse talents in remote work, as supported by Venture Capital firms. To find out how to attract and retain diverse talents in remote work and fast track your startup success, sign-up to our webinar.

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