Data and Research

This ain’t no anecdote – it pays to be diverse in UK tech

Data & research , , ,

Henri Egle SorotosHenri Egle Sorotos, October 30, 2018

I’ve been exploring what ‘good’ corporate governance looks like in UK tech. In our latest piece of research, it’s clear that having a gender diverse and internationally-mixed board leads to better financial outcomes. With diversity in the tech industry notoriously poor, this research shows there is a huge economic incentive and opportunity in its promotion. With diversity in tech showing little sign of improvement in recent years, what can be done to move the dial?

Read the report here >

I love the administrative data of business populations – it’s great, get involved. I love it so much so that this summer I requested the entire database of every UK company directorship from Companies House.

Luckily it was this summer that Tech Nation dived head first into the workplace diversity and inclusion conversation, and the two have come together quite nicely. Myself, and colleagues Francesca, George and Lucy have been using this data to model which combinations of company directors yield the best financial results.

Analysis of all 12.5 million UK directorships and companies has revealed:

  • Directors sitting on gender diverse boards make 0.7% higher turnover than those that don’t – the equivalent of £70,000 on average.
  • Those sitting on internationally diverse boards raise 453% more investment than boards from a single country.

Despite the encouraging findings, these financial ‘diversity premiums’ are not being felt by many, particularly in the our sector, and that’s a problem. In the tech sector:

  • A whopping 77% of tech directors are men, and only 23% women. However, this is marginally better than the broader tech workforce which is 81% male, compared to 19% female.
  • Tech sub-sectors boards vary broadly in their makeup; 87% of computer game developer directors are men – the most polarised tech sub-sector for gender representation.
  • Despite a burgeoning number of interventions that aim to shed light on, and address gender disparity in the boardroom, the proportion of men and women being appointed directors of tech companies has remained almost exactly the same since 2000.
  • If the present trajectory continues, the gap between men and women appointed to boards will continue to grow.

Beyond these top line statistics, we’ve been trying to glean the demographic makeup of the community of tech directors across the country. Some fancy machine learning reveals there are 8 distinct clusters of tech directors. Many of these clusters have a high proportion of a particular gender.

In addition, tech leadership is highly international. 18% of directorships are held by individuals with a non-British nationality, compared to 13% in the wider economy, and roughly 13% of the UK population.

Responding to our findings that the just 13% of directors of gaming companies are women,  Lesley Eccles, co-founder of FanDuel said: “I’m actually surprised that it’s as high as 13%. Only 6% of females identify themselves as “gamers” (i.e. PC & console games). Women are more likely to play mobile games than console or PC games, and if you include those, then the demographic is much closer to a 50-50 split. However, looking at the exec team in some of the key companies in the mobile gaming space, like King.com, there is still a massive lack of females even there.

Read the report here >

So what?

What are we going to do about all this then you ask? Well today marks the launch of OneTech, an initiative led by Capital Enterprise, with Your Startup, Your Story (YSYS), Diversity VC, Loughborough University, The Accelerator Network, JP Morgan Chase Foundation and Tech Nation, to double the number of female and BAME founders in three London boroughs (to begin with) by 2020. Find our more here, and keep your eyes peeled for more Tech Nation thought-leadership in this area.

Other initiatives to promote tech diversity include Founders4Schools and the F4S spinout Workfinder app. Sherry Coutu is founder of F4S, and believes that giving back is crucial to solve the diversity crisis:

“I have always found having a solid representation of women engineers and a solid representation of board members to be critical and can’t recommend it more highly.  This is why I call on women who are engineers and board members to volunteer their time to shape the thoughts of girls.”

Eccles added:

“There is no silver bullet to fixing this – acknowledging the situation is the first step, but it’s mainly about changing perspective and mindset of people who are hiring. As a female marketing and selling a product which had 90% male customers (FanDuel) I was often questioned (by men) on how I (a female) could do that. I would be willing to bet that nobody has asked the board of King a similar question. We have come a long way, but still have far to go.”

On diverse investing, Julia Hawkins, Partner at LocalGlobe, said:

We agree that diversity on boards – but also, among founders, teams and investors – is important, and delivers financial results, as shown by these stats, and other reports.

At LocalGlobe we fully believe that diversity brings different perspectives and ultimately improves better financial returns for our investors so we have worked hard to make sure our team is 50% male, 50% female, with 38% of the investment team being female (compared to 18% of all industry professionals). We are also from 10 nationalities and span a 41 year age range.

We urge the companies we back to increase their diversity as well. This has to start with a conscious decision to hire for diversity, underpinned by a core set of values and behaviour. It’s not easy, but once you map out the core values that underpin your company, then you can test for capability and diversity, as well as cultural fit.”

Administrative data wins again

Well, who knew that most of this report could calculated using publicly available data sources and programming languages?

To provide some context – we started by analysing the Companies House data. This rich dataset gave us access to approximately 12.5 million UK headquartered companies and their associated directorships. This allowed us to look at the people who are running UK tech businesses.

The data from Companies House tells us all we need to know about the directors of tech companies – from age to gender to nationality, and where they are based, as well as the company with which they are associated. One missing piece of the puzzle is financial information – which is not available in this dataset.

But, the fact that each company has a unique reference – a company number – allows us to combine Companies House data with financial data from Beauhurst (where companies in the database also have a unique company number). This means that we can start to understand economic outcomes resulting from particular characteristics of tech directors.

So, for example, we can answer highly anticipated questions like – what impact does being a female tech director have on the likelihood that the company they are associated with will receive investment? Or, what is the relationship between the characteristics of the directors of a tech company and the amount of money that the company turns over?

To provide a benchmark we use data from the Office for National Statistics’ Annual Population Survey to give us broader workforce diversity comparisons.

All that being said, the Companies House data isn’t the easiest to work with. First up you are required to request the data formally. Then the bulk product of directorships arrives from the government agency on two DVDs in an unformatted .dat format. It took me a good day wrangling to get it in a nice, clean and structured JSON and CSV.

Great news. All data featured in this project is available online for non-commercial use by third parties. The data can be accessed through the data.world platform. If you use the data, please let us know. We would love to showcase your work. A full methodology can be found on the data.world too.

If you’d like know why we are doing this, check out our blog.