By Hannah Lucal, Associate Director, Open MIC
A new report by the Kapor Center for Social Impact puts a $16 billion price tag on widespread systemic bias and mistreatment in the tech industry.
The Tech Leavers Study is a first-of-its-kind national study examining why people in tech decide to leave their jobs. The study found that turnover due to unfairness or mistreatment — often based on race, gender, sexuality, and/or immigration status — is an expensive, preventable problem costing tech companies billions of dollars annually in employee replacement costs. Tech employees are significantly more likely to leave their jobs due to unfairness than technical employees in other industries.
It’s no secret that white men hold disproportionate power in this extremely profitable sector with tremendous social, political, cultural and economic influence. Across the industry, people of color are hired, paid and promoted less. Tech companies continue to produce products and services that often perpetuate racial bias and discrimination. And in many cases, major tech companies have contributed to gentrification and the displacement of communities of color.
The many costs of systemic bias in tech — including the resulting lack of diversity — have been well documented. In February, Open MIC released Breaking the Mold: Investing in Racial Diversity in Tech, a report describing the legal, financial and reputational risks for companies sustaining a hostile, inequitable work environment for people of color. Breaking the Mold also includes recommendations for companies to begin to change the internal policies, practices, norms and behaviors that uphold systemic racial bias.
The Kapor Center’s Tech Leavers study provides investors, companies and the public with a deeper understanding of the costly cycle of bias, retention and risk. It found that underrepresented people of color in tech experienced stereotyping at rates almost twice as high as white and Asian men and women, and nearly a third of underrepresented women of color were passed over for promotion. The study, which is based on survey findings from a nationally representative sample of over 2,000 U.S. adults who have left tech jobs within the past three years, found that workplace culture in tech “drives turnover, significantly affecting the retention of underrepresented groups, and costing the industry more than $16 billion each year.”
For an individual company, those numbers can be substantial: the estimated cost of unfairness-driven turnover is $27 million per year. As Tech Leavers explains:
“If we assume a large tech company pays engineers an average salary of $100,000 and it employs 10,000 engineers, even with a lower turnover rate (5%) and turnover rate due to unfairness of 37%, that company alone would lose $27 million per year by allowing their workplace culture to drive talent out the door.
Beyond the financial costs, there are additional reputational costs to companies due to unfairness-related turnover. Within this study, 35% of former employees said their experiences would make them less likely to refer others to seek a job at their former employer, and 25% said they would be less likely to recommend others to buy or use products from former employer. This adds significantly to the $16 billion annual price tag for replacing employees.”
More than any other reason, the study found, tech employees cited “unfairness or mistreatment within the work environment” as the main reason they leave. Specifically, “individuals were almost 2x as likely to leave due to unfair treatment than to be recruited away from an employer.” Kapor also found that “bullying and hostility were most often perpetrated by senior-level employees (53%).”
The cost to companies is a “self-inflicted wound.” Sometimes, employee turnover is inevitable: people get offered jobs elsewhere, they seek new professional opportunities, they shift careers. But when it comes to the quality and fairness of the workplace, company leadership has full control. Because the cause of the problem is largely internal, the solutions must also be internal-facing.
Accountable action is possible. Kapor found that companies with comprehensive diversity and inclusion strategies were associated with lower levels of stereotyping, harassment and leaving due to unfairness. Companies that implemented 5 specific initiatives (below) saw “a larger reduction in unfair experiences than any single initiative alone.”
Actions associated with lower levels of stereotyping, harassment and leaving due to unfairness:
“(1) Having a Diversity and Inclusion director,
(2) Setting explicit diversity goals,
(3) Paying bonuses for employee referrals of candidates from underrepresented backgrounds,
(4) Conducting unconscious bias training,
(5) Establishing Employee Resource Groups (ERGs).”
Among the report’s key findings:
- “Nearly 40% of employees surveyed indicated that unfairness or mistreatment played a major role in their decision to leave their company, and underrepresented men were most likely to leave due to unfairness.
- 78% of employees reported experiencing some form of unfair behavior or treatment; Women from all backgrounds experienced/observed significantly more unfairness than men and unfairness was more pronounced in tech companies than non-tech companies.
- Underrepresented men and women of color experienced stereotyping at twice the rate of White and Asian men and women; 30% of underrepresented women of color were passed over for promotion.
- Experiencing and observing unfairness was significantly predictor of leaving due to unfairness, and the more bullying experienced, the shorter the length of time that employees remained at their previous company.”
- 1 in 10 women experienced unwanted sexual attention, while LGBT employees were most likely to be bullied and/or experience public humiliation."
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Hannah Lucal is Associate Director of Open MIC, a non-profit organization that promotes shareholder engagement in media and technology companies, You can find out more about Open MIC’s work on diversity here.