Diversity Inside & Out & Across Functions: Netflix and Business Diversity
An HR leader at Netflix set a path to promote economic growth in distressed areas through the expansion of the streaming giant’s banking relationships, paving the way for others to follow suit. As you look around your own personal and professional lives wondering about patterns and approaches you just accepted, what opportunities for greater business diversity have you never thought of? How can you use the four principles that drove Aaron Mitchell’s initiative — leadership, investment, innovation, and collaboration — to make a change in your industry and function? And in the process, influence change more broadly?
It Takes a Village to Rebuild One
The Local Initiatives Support Corporation (or LISC) is one of America’s largest social enterprises. It supports programs and projects all over the country that aim to revitalize communities, increase economic opportunities to residents, and bring back life to disinvested places. Netflix is the world’s leading streaming entertainment service with 193 million subscribers and a market capitalization of $245 billion. Their paths crossed to help address one of the main causes of economic distress — lack of financing for Black communities and businesses — a major contribution to the racial wealth gap. This wealth gap was expected to cost the U.S. $1.5 trillion in direct lost productivity by 2028 if unaddressed and did not account for the social and mental costs across generations.
In June 2020, Netflix partnered with LISC to create the Black Economic Development Fund which is intended to offer direct financing to Black-owned banks and other financial institutions that will in turn fund various projects in Black communities to fuel growth; Netflix seeded the fund with $25 million as part of a broader $100 million commitment (or 2% of its cash holdings) to support economic growth through expansion of its banking relationships to include more Black banks and Community Development Financial Institutions Funds ( CDFI). In late August, retail giant Costco followed with $25 million. The fund is expected to have its first closing in the fall and aims to raise $250 million.
In addition to LISC, in August 2020, Netflix made another $10 million available to HOPE Credit Union, a CDFI in the Deep South that created a deposit product called a Transformational Deposit, to attract depositors like Netflix to directly participate in the transformation of some of the most underserved communities in the region.
A Dinner, a Book, and an Idea
The road to this investment starts with Aaron Mitchell who was at the time head of Talent Acquisition for the Finance, Legal and HR departments at Netflix. He spent his days focused on partnering with business leaders to increase diversity in the streaming giant’s staff and management ranks. But in the COVID pandemic and its disproportionate impact on black and brown communities in the U.S. and the world, he also wondered what Netflix could do to address systemic inequality as a regular part of Netflix’s business dealings.
During a virtual networking dinner Mitchell organized in early April, an external business leader asked why major corporations weren’t expanding their banking relationships to include the 21 Black-owned banks, which prompted him to raise the issue with Netflix CFO Spence Neumann.
Following a positive discussion with Neumann, Mitchell read the book The Color of Money: Black Banks and the Racial Wealth Gap by UC Irvine Law professor and banking law expert and historian Mehrsa Baradaran. Her work provides a comprehensive accounting of the history of the financial system and the systemic racism that has led to the persistent racial wealth gap as well as recommendations for measures that may close the gap. Mitchell contacted the author for advice and wrote a proposal on May 22 to get Netflix to do just that.
Rethinking Business Diversity
Two days following George Floyd’s murder on May 25th, Mitchell wanted to act and recognized the issues that prompted his original exploration of what Netflix could do to address racial inequality. To him, Floyd’s murder at the hands of police officers were symptoms of the same underlying disease. He sent the proposal to Netflix co-founder, chairman, and Co-CEO Reed Hastings who was supportive and then he partnered with Netflix treasurer Shannon Alwyn to bring the idea to life. On June 30, 2020, Netflix announced its allocation of 2% of its $5 billion cash holdings, initially up to $100 million, to financial institutions that work with and support Black communities in the U.S.
“To get this done, we had to show corporate leadership through turbulent social times and wanted to help address racial inequity and other forms of systemic inequity through investment rather than a donation,” Mitchell explained. A term that more accurately represents the approach Mitchell decided to pursue was Business Diversity, a term coined by John Rogers of Ariel Investments. He used the term to describe a concept that is more holistic than Supplier Diversity, which includes banks and other professional services that are historically excluded from supplier diversity.
Beyond applying a broader view to how Netflix could support actionable change, executing this idea also required managing across the organization chart and having HR partner with finance in a way that is completely out of the box: an HR person driving discussions around where and how a company might invest its cash, an exception to the traditional rules but an expectation within Netflix’s culture. Picking the right exceptions and setting the right expectations is our current collective responsibility to play our part, too.
Originally published at https://www.linkedin.com.
