5 Ways CEO's Do Diversity
For top executives who "get it," diversity in the workplace is a no-brainer: Create a company that respects and appreciates all employees regardless of gender, race, ethnicity, or sexual orientation, and you will attract top talent from all groups. In addition, you assemble a workforce of happy, committed individuals whose different viewpoints combine to stimulate innovation and who can advertise to a wide range of client segments.
To others who do not comprehend, the diversity motto sounds like a misguided liberal concept that shackles businesses with arbitrary hiring requirements and expensive, touchy-feely programs.
The group in the middle consists of CEOs who grasp it but do not yet know how to draw a direct correlation between diversity and earnings. This group of CEOs has heard the shocking projections: According to the most recent data, women and minorities will account for 70 percent of new workers. If realized, this seismic shift can forever alter the nature of major and minor U.S. businesses, creating a variety of new problems for CEOs, not only those leading business-to-consumer organizations. For example, business-to-business enterprises are already discovering that homogenous teams are at a disadvantage when negotiating with different groups or pursuing government contracts. Then there's the global issue; as more firms extend across culturally diverse continents, the capacity to identify, respect, and even celebrate variety is essential for flawless operations.
So, how does one "do diversity" without squandering the funds on ineffective programs or applying ad hoc solutions that have little impact on the company's culture? How, in fact, do you even know what you require?
Fortunately, the pioneers in diversity, typically in "consumer-facing" industries such as hospitality and consumer products, have paved a portion of the road via trial and error and have been able to link some of their programs to profits explicitly. However, these best practices require a real commitment from the CEO, clearly defined policies, measurable objectives, and a compensation system that incorporates incentives for achieving these objectives. As with any other enterprise-wide project, half-hearted diversity attempts will fail.
Determining Where You Stand
A lack of information about where the firm is and where it needs to go is one of the significant obstacles to implementing successful diversity efforts. Until they receive a subpoena, many CEOs are unaware that they are explicitly neglecting to promote minorities or women or that they have a severe discrimination problem. Typically, the first response of the executive suite is denial.
This attitude may permeate the organization, especially if the workforce is homogeneous (i.e., all white men). People who have an advantage do not like to lose it. "Why are we recruiting so many women and people of color?" Why don't we continue to hire the most qualified candidates?'" Others tend to "gravitate toward comfort," which means they gravitate toward people like them. Consequently, they are significantly less likely to be diversity whistleblowers.
Given this obstacle, CEOs serious about diversity have begun requesting formal assessments, often known as audits or diagnostics, of their companies, including focus groups, staff surveys, and retention data analysis to determine who will remain, who will depart, and why?. In addition, some firms utilizing best practices have established internal advisory boards for continuing discovery. For example, the diversity council of Hyatt Hotels meets three times a year to discuss the company's efforts to recognize and advance minorities. They set targets, and then the results must be measured. The internal council has proven so beneficial that the corporation intends to establish an external panel comprised of national minority organization members, conference planners, and convention bureau representatives.
Although external reviews might be time-consuming, they can be valuable for goal-setting. For example, in one major company, the chief diversity officer established an outer diversity panel to conduct a two-year examination of the corporation. "The first year was a thorough dive into what we were doing so that they could hold up a mirror and state, 'This is what you see, happening, adds the CEO. The second year was focused on future instructions. Among the recommendations to the board by the group was a goal to match the multicultural composition of the company's workforce with the available labor pool by the end of the year. "That will be the most difficult transaction to complete," he concedes, noting that the company has made multiple acquisitions in the past two years. "Most, if not all, of them, are ahead of us on the march toward diversity, so we have some catching up to do."
Set Objectives You Can Measure
However, although it may take time, the above company will likely accomplish more diversity simply by establishing a target, as it will attract outstanding job seekers and send a message to minority employees that they are welcome in the management ranks. To some CEOs, setting a certain amount for hiring is reminiscent of a quota system, which can devalue minority candidates and make them feel like token recruits. "Legally, you're condemned if you do and damned if you don't set [recruitment] targets," said one chief executive officer of a New Orleans-based corporation with a significant minority customer base. While he rejects quotas for minority hires, he insists that every applicant search includes at least one diverse candidate. "And the candidate must be qualified," he says. "The excuse that there is none does not hold water; you must continue searching until you find one."
Retention and recruitment are not the sole measurable objectives. You need to look at it from a holistic perspective, not just a representation perspective. For example, some businesses assess the degree to which specific business groupings penetrate minority markets (see graph on the right) or secure government contracts where a certain percentage of subcontractors are minority-owned businesses. It may even be about engagement or employee satisfaction measured by 360-degree surveys.
In actuality, employee experience is becoming an important metric. The Diversity Earnings per Share, or dEPS, Index was developed by the Spartacus Analytics Group to measure the impact of DRIs, or diversity-related acts of incivility, on a company's performance and profit equation. While companies typically address bias incidents in the workplace to reduce the risk of lawsuits, "we also started seeing huge impacts around measurable business areas," says Craig B. Clayton Sr., CEO of Spartacus Analytics and director of the International Institute for Diversity & Cross-Cultural Management at the University of Houston. For example, it affected safety events, creativity and innovation, and readiness to improve work processes.
Analyzing the outcomes of previous efforts is another method of data collection. At the Haskell Company, each project is its own little laboratory. After significant projects are finished, the organization evaluates the lessons learned regarding what worked, what did not, and the team composition. For example, most of the project team on one successful project consisted of women. They posed the question, 'Was there a causal connection between the fact that the personnel was predominantly female in a firm that is not female-oriented?' This becomes a rather convincing piece of evidence for the case.
Companies such as Marriott International, American Express, Cendant, and Coca-Cola, among others, have set the measurable objective of increasing supplier diversity. Dallas-based construction management company Turner Corp. tracks, per business unit, the amount of work it performs with minority- and women-owned firms. In any industry, having the most exemplary people is the sole metric, and acquiring the best is a struggle. One must provide an environment conducive to their success wherever these individuals are.
A crucial aspect of assessing is holding leaders accountable for these outcomes, just as they are for meeting their quarterly and annual targets. For example, at Hyatt, which has 52 percent, women in management, 15 percent of bonus potential is contingent on diversity goals. And at Wyndham, commitment to specific company programs, including diversity, is rewarded with 10 percent of future incentive income. If a manager meets their financial goals but scores poorly on diversity goals, "we'll believe you probably cheated to reach those financial figures."
When Novartis Pharmaceuticals was slammed with a $100 million sex discrimination lawsuit, the significance of responsibility became very evident. The previous year, the pharmaceutical company landed on Working Mother's list of "Best Companies for Working Mothers." However, the twelve female plaintiffs, whom all worked for different managers in different parts of the country, asserted that the company's diversity policies did not extend to lower management. Most chief executive officers agree that middle management is where your strategy may go off the rails, or your buy-in can become congested.
To prevent this, our client, a Fortune 500 company, implemented both a top-down and a bottom-up program. This includes training for all employees on the business case for diversity and the company's goals, as well as a "So You Want to Be a Leader" program for those who desire to become first-line supervisors. He claims that women and persons of color utilize this program significantly more than the rest of their population. Therefore, if you are in the middle zone and try to ignore this, you will feel pinched on both sides.
If you're at the top of another company and don't embrace diversity, you will lose far more than your bonus. A CEO said, "You're either on board or not. The folks who aren't buying into it need to be replaced. Taking $100,000 from them will neither solve the problem nor improve their lives. There is simply no room for you here."
From Human Resources to the C-Suite
Given the rising demands on the CEO's time, many companies are discovering they need someone in charge of the company's diversity programs, someone who can readily communicate with the CFO about the impact on the bottom line and the CMO about multicultural marketing. Therefore, diversity is being transferred from human resources, where it originated, to its own office in the executive suite.
Elevating the diversity officer role and removing it from HR clarifies its importance to the corporation and makes it easier to implement diversity across the enterprise. It would help if you had someone who can communicate directly with the senior management team about their performance," who meets with the CEO once or twice weekly.
The only thing that will keep a diversity initiative on track is the CEO's unwavering dedication, particularly during difficult times. Because you may put in place all the systems with diversity panels and officers, all kinds of things will fail unless you make a real commitment that this will become part of your cultural norm. Thus, the diversity issue of today is comparable to the "quality" movement of the past two decades: it cannot be added later. Instead, it must be incorporated from the start.
Image courtesy of Steve Johnson @steve_j
About Jim Woods
Jim has a passion for accelerating talent across organizations. While this passion has fueled his work in leadership assessment and development, it has crystallized in the area of Diversity, Equity & Inclusion.
Jim's experience spans a broad range of industries, including public, finance, consumer, retail, pharma, industrials, and technology. 'Organizational & people agility,' 'design thinking,' and 'digital transformation' are some of the critical themes Jim works with clients across the globe.
His consulting experience includes assessing, training, coaching, and developing leaders. In addition, he has delivered work in defining competencies and success profiles, designing and conducting assessment centers, integrating talent analytics, and designing and facilitating development roadmaps.
Jim is a certified coach and facilitator for Woods Kovalova Group's virtual leadership assessment and development tools, including leadership accelerators, and WKG Potential. Jim holds an MS degree in organizational development and human resources. He served as an adjunct professor at Villanova University; taught fifth-grade math and science.