| crack­ing the code

Chal­lenged by a fe­male em­ployee, Gusto, an hr-soft­ware uni­corn in san fran­cisco, fig­ures out how to hire women engi­neers.

Forbes - - CONTENTS - By su­san adams

Chal­lenged by a fe­male em­ployee, Gusto, an HR-soft­ware uni­corn in San Fran­cisco, fig­ures out how to hire women engi­neers.

One spring day in 2015, Ju­lia Lee, a top per­former on the en­gi­neer­ing team at the pay­roll-soft­ware startup Gusto, asked Ed­ward Kim, the com­pany’s co­founder and chief tech­nol­ogy of­fi­cer, for a one-on-one meet­ing. Sit­ting to­gether on a gray couch in the mid­dle of their open-plan of­fice in San Fran­cisco’s SoMa neigh­bor­hood, Lee, a Stan­ford grad who had in­terned at Google and Palan­tir, told Kim that she loved her work but was strug­gling with one is­sue. Of the 18 peo­ple on Gusto’s en­gi­neer­ing team, Lee, then 26, was the only

woman. Be­fore she got to Gusto, she told Kim, “peo­ple of­ten as­sumed I didn’t know the an­swer to a prob­lem be­cause I was a fe­male en­gi­neer.” Even at Gusto, she was re­luc­tant to share her feel­ings of self-doubt. Kim, Lee says, was ex­traor­di­nar­ily re­cep­tive. In fact, he made it a per­sonal project to study the gen­der break­down on the en­gi­neer­ing teams at other tech firms. The numbers he found were dis­mal.

Only 12% of the en­gi­neer­ing staffers at 84 tech firms were fe­male, ac­cord­ing to statis­tics gath­ered in a pub­lic Google Doc posted in 2013 by Tracy Chou, then an en­gi­neer at Pinterest. Kim read a U.S. cen­sus re­port on ra­cial and gen­der dis­par­ity in STEM em­ploy­ment and was trou­bled by a Na­tional Pub­lic Ra­dio re­port that showed an in­crease in women grad­u­at­ing with com­puter sci­ence de­grees through the early 1980s and then a steep de­cline from 1984 on. He also read a 2015 McK­in­sey study show­ing that com­pa­nies with di­verse work­forces out­per­form fi­nan­cially. “The fact that no one else in tech was able to re­ally crack the gen­der di­ver­sity nut and solve it rep­re­sented an op­por­tu­nity for us,” Kim says. “If we want to reimag­ine what HR is like for the very di­verse work­forces of our small-busi­ness cus­tomers, we our­selves have to build a di­verse work­force.” Af­ter a se­ries of meet­ings with Kim and Lee, Gusto’s hu­man re­sources team launched a plan to at­tract women engi­neers. Ini­tial steps in­cluded writ­ing job de­scrip­tions that avoided mas­cu­line phrases like “Ninja rock star coder.” Gusto’s most im­por­tant step: For a six-month pe­riod start­ing in Septem­ber 2015, the com­pany de­voted 100% of its en­gi­neer­ing re­cruit­ment ef­forts to women. While it so­licited only women, it con­sid­ered male ap­pli­cants who ap­proached the firm and treated all can­di­dates equally, which kept Gusto from run­ning afoul of an­tidis­crim­i­na­tion laws, ac­cord­ing to Gusto lawyer Liza Kostin­skaya. The pitch to women in­cluded emails signed by Lee invit­ing fe­male can­di­dates to have an ini­tial talk with her and was backed by $60,000 the com­pany spent to be a spon­sor for two years at the big­gest an­nual women’s tech con­clave, the Grace Hop­per con­fer­ence.

Kim also pub­lished a blog post that made Gusto’s di­ver­sity numbers pub­lic and broad­cast its goal of hir­ing more women engi­neers. “We be-

lieve that di­ver­sity is in it­self a core strength that will en­able us to write bet­ter soft­ware and build bet­ter prod­ucts,” he wrote.

In line with more than 80% of star­tups, ac­cord­ing to a 2017 Crunch­base study, Gusto’s three founders are men. Kim and Gusto’s CEO, Joshua Reeves, both 34, met as un­der­grads in Stan­ford’s elec­tri­cal en­gi­neer­ing de­part­ment. They launched Gusto in 2012 along with Tomer Lon­don, 33, an Is­raeli im­mi­grant who got to know Reeves while a Ph.D. stu­dent at Stan­ford. Like its boom-and-bust com­peti­tor, Zen­e­fits, which launched the fol­low­ing year, Gusto sells cloud-based com­pre­hen­sive sub­scrip­tion soft­ware to small busi­nesses to help them man­age em­ployee records like pay­roll and health ben­e­fits. At the out­set Gusto even had a sim­i­lar name, ZenPay­roll, which it changed in 2015 when it started of­fer­ing a more com­plete se­lec­tion of em­ployee-track­ing soft­ware.

Zen­e­fits at­tracted $584 mil­lion in ven­ture cap- ital and hit a val­u­a­tion of $4.5 bil­lion in 2015 be­fore run­ning into reg­u­la­tory prob­lems re­lated to the way it sold health in­sur­ance. It sacked its CEO, re­worked its busi­ness model and saw its val­u­a­tion slashed to $2 bil­lion. Gusto, mean­while, grew less fever­ishly. By late 2015 it had raised $176 mil­lion from firms like Cap­i­talG (for­merly Google Cap­i­tal) and Gen­eral Cat­a­lyst, and 75 in­di­vid­ual in­vestors hand­picked by Reeves, in­clud­ing Ashton Kutcher and PayPal co­founder Max Levchin. That year it broke through to a $1.1 bil­lion val­u­a­tion. Forbes es­ti­mates Gusto’s an­nual rev­enue at nearly $100 mil­lion.

At the start, Gusto’s founders ac­knowl­edge, di­ver­sity was on the back burner, and as it grew, they found that it didn’t hap­pen or­gan­i­cally. When it came time to hire a chief op­erat- ing of­fi­cer in 2015, they made it a pri­or­ity to find a woman. Lexi Reese, a vet­eran of Google and Amer­i­can Ex­press, is one of two women on the six-per­son ex­ec­u­tive team, and firmwide, women ac­count for 51% of Gusto’s 525 em­ploy­ees. Even af­ter Gusto be­gan its di­ver­sity ini­tia­tive, ap­pli­ca­tions from women didn’t flood in. Gusto as­signed two in-house re­cruiters to the job, and it hired Ta­len­tDash, a Sin­ga­pore-based firm that sources tal­ent, to look ex­clu­sively for women.

Though hir­ing women engi­neers took more time, Kim says, Gusto never dropped its stan­dards. “It both­ers me when peo­ple say that pri­or­i­tiz­ing di­ver­sity low­ers the bar in terms of the cal­iber of tal­ent you’re able to hire,” he says. “That is sim­ply not true.” Nor, he says, was there any push­back from in­side Gusto.

Gusto also ad­dressed its com­pen­sa­tion pol­icy. Since 2016 its salaries have been au­dited by Mercer, a hu­man re­sources con­sult­ing firm, which has found no gen­der pay dis­par­ity. Ben­e­fits in­clude 16 weeks of paid leave for a pri­mary par­ent, plus an ad­di­tional $100 a week for gro­ceries and food de­liv­er­ies, $100 a month for six months of house­clean­ing and up to $500 for a baby-sleep coach.

Gusto’s women-only re­cruit­ing ef­fort lasted six months. It stopped, Kim says, be­cause “we ex­ceeded our goals.” In 2015 Gusto was try­ing to hit 18% women engi­neers, the pro­por­tion ma­jor­ing in com­puter sci­ence as un­der­grad­u­ates, ac­cord­ing to the Na­tional Cen­ter for Ed­u­ca­tion Statis­tics, and it reached 21%. Since then it has started staffing a Den­ver of­fice, where it aims to in­crease the en­gi­neer head count by at least 25 this year and where the com­pany is repris­ing its women-only re­cruit­ing strat­egy. Now that 17 of Gusto’s 70 engi­neers are fe­male, it’s get­ting a lit­tle eas­ier, says Gusto’s HR head, Maryanne Brown Caughey. “It’s kind of a domino ef­fect,” she says. “Women know they’re join­ing a wel­com­ing com­mu­nity.”

While Gusto has made progress, its en­gi­neer­ing team has no Lati­nos and no African-Amer­i­cans. Kim says Gusto has two hir­ing goals in 2018: se­nior women and ra­cial di­ver­sity in en­gi­neer­ing. “The way we make progress is by fo­cus­ing on one prob­lem,” Kim says, “and then we move on to the next.”

Ju­lia Lee told Ed­ward Kim she was un­com­fort­able be­ing the only fe­male en­gi­neer at Gusto.

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