Behind the Hewlett Foundation’s Top-Decile Returns

(Illustration by II)

(Illustration by II)

Investment chief Ana Marshall’s case against “cultural fit.”

Nearly every investment team in this country is having conversations about diversity.

To foster active dialogue, one approach is rooting the conversation within values that everyone on the team already shares. Successful teams can be successful for many reasons, but perhaps the most critical ingredient is the handful of shared core values and norms that help everyone feel part of the group. That’s what provides individuals the safety to contribute to achieving the organization’s mission.

This isn’t rocket science. The importance of shared values and psychological safety has been written about plenty. But too often in the investment field, the unwritten approach to maintaining shared values is to look for so-called “cultural fit” — people who may look, sound, and think the same as those who have populated teams before.

In my experience at the Hewlett Foundation, embracing diversity as a core value of how our investment team operates has been a key part of our success. It’s as important as intellectual curiosity, integrity, passion for investing, and high performance/competence. All of these values reflect in our practices as investors and as the face of Hewlett in the investment community. All of these values are critical to our performance, which ranks consistently in the top decile of our large foundation and endowment peers.

When I say “diversity,” I’m referring to a few different things. First: expanding opportunity, especially to people of different races, ethnicities, and genders. But overcoming barriers to diversity means more than just adding people from various categories; it’s about inclusion as well as representation. It means coming to appreciate people for who they are, recognizing that every member of the staff is a unique individual who needs to believe they are appreciated for who they are and what they can contribute.

For decades, the investment field rewarded me for my effort to completely assimilate into a white male culture. Only recently have I been given the opportunity to be passionate and highly adaptive — two qualities deeply tied in my Latin roots. I am proud that our 11-member investment team includes eight women and people of color, and we work hard to empower each individual to maximize their contribution to investment decisions.

This leads to a second aspect of diversity, one every bit as important: diversity of thought. To solve the world’s increasingly complex problems we need many ways of looking at problems. Groupthink leads to blind spots that impede success in strategic initiatives. The best way to ensure that a team considers different ideas, viewpoints, and solutions is to populate it with people of different gender, racial, educational, and geographic backgrounds. Leaders need to be intentional in encouraging people to question and challenge views because this almost always results in better decision-making. Sometimes, of course, this diversity of thought can be messy and take more time, but the benefits are more than worth it.

Which takes us to a third aspect of diversity in a team: diversity in the ways people work. This may not seem important at first blush, but to collaborate effectively every individual must believe that every other member works to the same level of excellence. Some firms accomplish this (or try to) by enshrining processes that everyone must follow. But diverse people and diverse thinkers naturally have their own ways of approaching decisions, which leaders who want real excellence should appreciate and accept. Agreeing on objectives and mission, good leaders can and should respect and support for differing work styles. Working from home for the last six months has made the Hewlett team keenly aware that, in the end, it’s the outcomes that matter, not process.

Six months of forced isolation has limited what each of us sees. Recognizing that a narrowed funnel of information likely impedes quality decision-making, leaders must be particularly intentional in soliciting myriad views and perspectives. Those truly superior a-ha moments have the best chance of surfacing as different voices raise and challenge ideas. Building a culture that attracts and develops smart investors is a critical requisite of generating consistently top-tier investment results, as we’ve done at Hewlett.

To some, the imperative for diversity may sound like so-called “virtue signaling.” It’s not. Embracing diversity is how strong teams become better. It is how leaders recruit and retain talent. After all, in an uncertain world, a team in which every person can offer input from their unique perspective, via their unique funnel of information, is more likely to develop a superior strategic vision — and superior returns.

Ana Marshall is chief investment officer of the William and Flora Hewlett Foundation, a $10 billion private charitable foundation in Menlo Park, California.