By Miriam Gottfried

Blackstone Group Inc., one of the most coveted employers on Wall Street, is throwing out a key section of its recruiting playbook in a bid to improve its hiring process and increase diversity.

The investing giant and its private-equity peers have long engaged in a yearly race to pluck junior investment bankers already trained in spreadsheet and PowerPoint wizardry from firms such as Goldman Sachs Group Inc. and Morgan Stanley. The prize for those lucky enough to make the jump: entry-level jobs that can pay as much as $300,000 a year at some firms.

Now Blackstone officials say the firm plans to sit out that contest in favor of on-campus recruiting, already its main source of talent and one that it is expanding to bring in more candidates directly from schools, including historically black colleges and universities and women's colleges. Blackstone, which has been working for years to extend its campus reach, says it will directly recruit from 44 schools this academic year. That is up from just nine in 2015.

Under the new model, Blackstone will still recruit from banks but will do so on an as-needed basis and only after candidates have some experience.

The change has been in the works since last year, but Blackstone is implementing it at a moment when companies are grappling with how to address racial inequality following the killing of George Floyd, an African-American man, while in custody of Minneapolis police.

Globally, 40% of Blackstone's current incoming class of analysts are women, up from less than 20% in 2015. Nearly half of the members of its incoming U.S. analyst class are women or minorities, and the firm says half of its major businesses have a woman or minority as one of the top two leaders. But officials at Blackstone, which doesn't disclose overall diversity figures, acknowledge they have a lot of work to do to transform a business that is still overwhelmingly white and male, especially in its uppermost ranks -- as is the case with most of its main rivals.

Given its heft and prestige, Blackstone's decision to sit out the bank-recruitment rush has the potential to influence how other firms find talent in an industry in which only 11.5% of senior executives are women, according to a February report by Preqin, and an even smaller percentage are black or Hispanic.

Blackstone, the largest buyout firm with $538 billion of assets, received nearly 15,000 applications for just 90 full-time analyst roles that started last year. It has two main sources of new junior talent: campuses and investment banks, which have their own hotly competitive entry-level hiring operations.

In the case of the latter, recruitment used to happen during the summer after applicants' first year on the job, but it has steadily crept forward as private-equity firms jump the starting gun in hopes of securing the best candidates. In 2019, recruiting took place in September, just a couple months after candidates began working at banks -- for roles that wouldn't start until summer 2021.

That has forced buyout firms to predict how candidates with barely any relevant experience will perform nearly two years ahead of their start date and has put pressure on applicants to make decisions about their futures before many are ready. Blackstone executives say that their reliance on investment banks, which have their own diversity challenges, also has the effect of narrowing the funnel of applicants and hampering the firm's effort to draw from a more varied talent base.

"We can widen our aperture of applicants to include a much more diverse group of people," says Paige Ross, Blackstone's global head of human resources.

Blackstone has already developed an internal training program for its summer analysts, who work at the firm between their junior and senior years of college. These temporary hires, recruited directly from colleges, typically end up comprising more than three-quarters of Blackstone's full-time analyst class for the following year.

Write to Miriam Gottfried at Miriam.Gottfried@wsj.com