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Who's the Boss?

Minority startup founders face challenges recruiting top-quality talent, but the same can’t be said for female founders in the startup space, according to research from Lundquist College associate professor of management Peter Younkin and Kaisa Snellman from INSEAD, an international graduate business school.

These findings are included in a paper awarded Best Paper on Environmental and Social Practices from the 2021 Organizational and Management Theory (OMT) Research Committee that’s set to be published in the journal Management Science.

To reach these conclusions, Younkin and his colleague used a reverse audit approach, working in tandem with a hiring startup. After expressing interest in the work, applicants were given one of three hypothetical founder scenarios: two white men, two white women, and two black male founders. Prospective applicants could not complete the process without this information.

What Younkin and Snellman wanted to know was whether or not hiring top-quality employees could also be affected by the ethnicity or gender of the founders.

“We hypothesized this would be a challenge for both female and minority founders relative to white male founders,” Younkin said, but he was surprised to find applicants expressed no reservations about applying to female founders.

“You could even argue there was a preference for female founders,” he continued.

Applicants were significantly less likely to continue on in the application process in the instance of a black male founder, however.

What’s more, most applicants supplied a resume with their application, which researchers anonymously passed by a panel of HR executives.

The researchers found that applicants with high-quality resumes, as determined by HR executive evaluations, were even less likely to pursue job opportunities with minority-founded startups. In addition, gender and ethnicity of a founder mattered less to prospective employees with resumes considered sub-par by those with experience in hiring.

“Not only were black founders likely to get fewer candidates, it was also the best candidates who were most likely to drop out,” Younkin continued.

Not only that, when quality applicants did pursue opportunities with minority startups, they tended to ask for higher salaries than they might have otherwise requested, according to Younkin.

Ascertaining the motivation behind the declining interest among high-quality job candidates when applying to minority-founded businesses proved more difficult.

To come close, however, Younkin and his colleague assembled a random panel of job-seekers, asking them to review hypothetical websites from potential employers, each one presenting different sets of management teams.

According to Younkin, responses from those in this part of the research showed that they felt the cultural fit in a minority-founded workplace would be a taller order, while job-seekers assumed a more permissive, tolerant and less competitive environment when it came to female founders.

“The silver lining?” Younkin said, “No penalty for female founders. We thought there would be. Our next thought: Can female founders leverage this?”

“This paper is representative of Peter's rigorous approach to better understanding race and gender discrimination and the specific impediments minority entrepreneurs face,” said Diane Del Guercio, senior associate dean for faculty and research at the Lundquist College. “It is important to convincingly identify these very real problems so that we can move toward real solutions to mitigate the negative effects of bias in our workplaces.”

Next steps include finding ways to help minority founders moderate this distressing trend, including interventions, updating the wording in job listings and proactive steps to change an applicant’s behavior, helping high-quality job candidates move beyond conscious and unconscious biases toward minority management.

Younkin said he’s honored the research won an award from OMT and will be published in a prestigious journal.

“It’s one of those things that comes out of the blue,” Younkin said. “It’s always nice to be recognized by your peers.”

—William Kennedy, Lundquist College Communications