1. Don’t Wait Until Later: The First Few Hires Are The Most Crucial. If You Don’t Set Diversity As A Priority At The Beginning, It’ll Be Hard To Change later.

Palantir and the Problem with Referrals If only we could all look into a palantír and foresee the unintended consequences of our actions. All logos, products, and company names are trademarks of their respective owners.The U.S. Department of Labor filed a lawsuit today against Palantir Technologies, a data and analytics company based in Palo Alto. Valued at ~$20 billion, the company allegedly discriminated against Asian engineering applicants who were “as qualified as White applicants” partly due to a “referral system that disproportionately excluded Asians.” The government agency cites stark numbers: For a QA engineering intern position, more than 70% of applicants were Asian. Yet, out of the 21 interns, just under 20% were Asian. The DOL says the likelihood of this happening is one in a billion. The bigger problem is that Palantir is not alone. Startups routinely rely on employees to bring in their most talented friends. Some offer generous referral bonuses that can exceed $10k. YC recently backed a startup that helps other startups launch referral programs. Venture capital firms blog about how employee networks are the best source for recruiting pipelines. Google’s much-respected HR leader has written about how companies should “ask your best-networked people to spend even more time sourcing great hires.” Anecdotally, an internal referral is the best way to get on the radar of an understaffed recruiting team at a popular company. At my last startup, a not insignificant percentage of the company was hired through referrals. As we continued to grow, it became pretty obvious that there was a flaw in this system: our team wasn’t diverse. I still remember the afternoon I walked into the microkitchen to see a small group of our engineers (all men at the time) huddled together. They were talking about an engineering candidate. A woman. She seemed quiet, they said. Competent, but they weren’t sure she was a great culture fit. I listened, asked a few questions, and then they paused and looked at me — one of the few senior women in the company. To their credit, it occurred to them that another perspective would be helpful. Would I mind interviewing her too? I jumped in as a last minute addition to the interview schedule, had a lovely and informal chat with someone who was intelligent and interesting, and confirmed to the team that yes, she did have a personality — even if it was different from what they expected. They extended her an offer, she accepted, and the rest is history. But what if I hadn’t walked in to the microkitchen that afternoon? We only had a few engineers at the time but, as we continued to grow, how would other women engineers feel as they walked in the door? What about other minorities? We had hired a number of Asians in various roles, but our outreach to and hiring of other people of color was pitiful. Our sales team, which composed about half of the ~50-person company toward the end, was effectively entirely White. Our internal referral system exacerbated the problem because we would only be able to improve the diversity of our team if our employees had a diverse network. It became a chicken and egg problem. We were large enough that any minority applicant (as determined by gender, race, age, educational background, etc.) who applied for a job might look around and conceivably determine that this was not the right fit for them. At the same time, if we didn’t get that first employee in, then the issue would just become worse. In retrospect, the answer was simple: we should have made diversity a priority from the very beginning. For your first few hires, it’s really tempting to say that it’s too hard, that there are bigger fish to fry, that it’s something we can focus on when we grow. The reality is that we never tried hard enough — a source of shame for me, given that I used to lead Google’s LGBT employee group. Here’s what I would have done differently, and how your startup can avoid the same fate as Palantir: 2. Diversify your sources: Use referrals as a channel, but don’t become reliant. Look broader. Ask for help if you’re having trouble reaching diverse candidates. 3. Measure: Quantify the diversity of your pipeline at all stages to determine where there’s a leak. Analyze and fix the leak, if any. 4. Implement best practices: Project Include has created great sources on this topic. Read them. Execute. If you enjoyed this article, please click on the blue heart below so that others may stumble upon this post. For more essays like this, follow me. Cynthia Yeung has criss-crossed the globe working for Google (where she won an OC award along the way), a social enterprise startup accelerator on a ship (which counted the Archbishop Desmond Tutu and US CTO Megan Smith as mentors), and a travel startup (led by a member of the KAYAK founding team). She was invited to the White House LGBT Tech & Innovation Summit and, as an INFJ, she spends a lot of time thinking about interpersonal relationships.