Q&A with CenterCap’s Deborah Smith: Industry Still Lags on Women and Minorities in Senior Ranks

Diversity, equity and inclusion (DEI) has been a talking point in commercial real estate. The extent of the progress behind the conversation is debatable, though. Ahead of Connect CRE’s forthcoming “2022 CRE Women’s Outlook” webinar, we sounded out Deborah Smith, co-founder and principal of boutique investment bank CenterCap Group and one of the panelists, for a candid survey of where the industry stands regarding success in achieving DEI goals. 

Q: Can you provide a “state of the state” on DEI in commercial real estate as we’re heading into 2022? What does it look like compared to five years ago? 

A: Based on my own experience, as I look out across the C-Suites of our clients, my peers and senior industry professionals there just aren’t a lot of women out there. I think for the past ten years there has been increasing pressure for firms to have gender diversity as a goal. In theory, many inroads have been made in the awareness category, but are we finally breaking through the glass ceiling? Lots of companies talk about DEI, lots of companies have policies to address DEI as well. Yet, the industry still lacks women and minorities in senior ranks. Where’s the disconnect? I think the reasons for that are complex. If we want the answer to be different going forward, then I think it’s a mistake to solely make this about hitting targets, or percentages, or quotas (which unfortunately is where I think the dialogue has moved) and focus on getting good candidates into the ranks – at any level. Companies often are so focused on meeting DEI goals that the basic purpose behind DEI initiatives is forgotten. DEI conversations get wrapped up in providing internal mentors, salary and pay-parity studies, and tracking career paths. Seems we have been doing these things for years.  

To me, if we want long-term sustainable change, the conversation needs to start at high school or at the college level. The goal being to create a widespread culture of bias irrelevance. For those raised in a DEI rich environment, this mindset already exists. Real, sustainable, and meaningful change takes years to achieve, particularly at the senior levels. We know we are making real progress when we get as many resumes from women and other DEI categories across a wide section of positions and levels, as men. I doubt anyone thinks that’s the case right now. We talk about leveling the playfield – but it’s hard to do that when the numbers showing up for each side aren’t the same. We have got to do more – and earlier. 

Q: Did the pandemic and the move to remote working slow or even reverse DEI progress? Alternately, were there ways in which the unusual circumstances of the past 20 months advance DEI progress? 

A: It is easy to jump to the conclusion that women and minorities were disproportionally impacted by the work-from-home policies over the past couple of years. For example, with no in-person schooling, women are often the de-facto parent to take the lead on childcare and family duties. In all likelihood, the impact is not uniform and depends on so many individual circumstances that grappling to create a global answer is misleading, although plenty of folks have tried. What I can say from our firm’s experience, is that I have two business partners – both women; and I don’t think the remote working environment created many more headaches than we already have each day.  

What we did see firsthand in the marketplace is that moving to a virtual office environment also had some positive impacts. The pandemic facilitated greater online and virtual training opportunities, and particularly as they pertain to DEI. The virtual nature of DEI initiatives had the potential to lead to greater participation, thus awareness of DEI issues.  

In many respects, this is progress. Throughout our careers we had seen half-hearted efforts to allow women with young families to off-ramp and then on-ramp. These efforts failed because digital infrastructure and corporate leadership mindset had not evolved to enable remote or hybrid work structures. With that in mind, COVID brought women an unspoken gift that has the capacity to change things forever for those women who choose to grab it – flexibility. Flexibility can be a woman’s best friend; the pressure to deliver on-time but without confines in between. Flexibility is now the norm; not the exception. Virtual workspace, work flows and interactions translates into measuring performance purely on its merits. Women really can have it all – family, career and a successful homelife – all at the same time.  

It’s a juggling act for sure. But we are a women-owned firm, so I know it can be done. I think the three of us achieved it the hard way, and perhaps imperfectly. Going forward, it will be far easier to roll out training programs and other virtual events across geographies. We also have seen many firms make a concerted effort to maintain culture and create in-house communities in an effort to keep employees motivated to work. Outreach programs like this can be advantageous and productive if effort and commitment push them forward exists. Combining connectivity tools, a flexibility mindset and a downstream talent development focus, has the potential to drive further change. 

Q: We’ve been hearing a lot about ESG initiatives generally, and in commercial real estate in particular, but it seems as though much of the attention is focused on the E (environmental) of ESG. What can be done to help focus more attention on the S (social) aspect without diminishing the importance of E? 

A: This is a loaded topic and it mixes a couple of themes which are better served talking about separately. Firstly, to us, ESG initiatives are policy objectives. Goals, ambitions, desirable outcomes. The problem is that they aren’t typically aligned with uniform deliverables or target outcomes. Thus, what any company is, or isn’t doing, is difficult to measure, because we don’t have a uniform measuring stick, although more progress has been made on this front within the environmental bucket. Secondly, where the “S” is ESG has become interesting is when it sits in the crosshairs of social impact investing. In this framework, it is getting a lot more traction and notoriety.  

As a firm, we were very early proponents of talking about real estate in the context of social impact investing, particularly as it pertains to ‘social infrastructure’. Social impact investing is taking ESG and attaching investor performance goals and targets to it. What these new ideals are challenging is the idea that you can’t do good for the world and make money while doing it.  

So, let’s take an example – workforce housing. Institutions have been investors in this sector for decades. Have they been able to make money out of it – sure. How about life sciences, data centers, cell towers – these all have social infrastructure components to them. Do these investments create real value for those who need it? Absolutely. With institutional capital flowing into these property types, standards of quality are installed and developers and operators strive to meet them. The United Nations released a broad-based set of interlinked global sustainability goals pertaining to creating a better and more sustainable future. These goals are helpful in framing the discussion and provide various areas of institutional real estate that meet those objectives. Going a step further, today, institutional funds have been raised around serving these objectives. It is both exciting and rewarding to be part of it. 

Q: Finally, is fair to say that advances in DEI and progress in the G (governance) aspect of ESG complement one another? What kind of progress has the industry made regarding governance? 

A: Governance can take on different meanings for different people. Those focused on DEI objectives have focused on utilizing governance as a mechanism to progress those objectives. If we take that as a starting position then the first question becomes who is sitting on the Board, corporate committees and who occupies the C-Suite.  

I think there is no doubt that there is increased awareness of who the occupants are of these seats. Many boards have prioritized increasing gender, racial and ethnic diversity and they are making progress, particularly with respect to gender diversity. But the topic of conversation then moves to what is a Board’s role, if any, with respect to DEI in the business. There is a growing view that DEI needs to be a business imperative for attracting and retaining top talent and delivering on best outcomes requires diversity of thought.  

The responsibility to execute on DEI programs sits with management, but they require the support and oversight of the Board to truly succeed in this effort. As with any good policy it needs to be harmonious with the maturity, operational strategy and culture of the individual company. I also think we must recognize it takes time to effect real change and patience is required when we don’t see instantaneous results. Similar to my comments above, we have to consider whether this predicates changing the makeup of the employee applicant pool first. Policies regarding compensation, social governance and talent oversight are important, but these changes on their own are unlikely to be enough.