The draw of diversity

Companies are quick to tout diverse staffing. But that doesn't guarantee a bottom-line boost.

It's almost a corporate mantra: Diversity is good for business. Many companies recruit with that mantra in mind. They devote meetings to it and tout it in ads. But does a workforce with a mix of races, genders, and cultures really make a difference to the bottom line?

Not as automatically as those glossy ads suggest. At least that's the conclusion of a recent study that looked at four companies with diverse staffs.

Overall, racial and gender diversity did not have any resounding impact - positive or negative, the researchers found. At one company, store branches where employees were as diverse as their customers did not outperform the others. In some instances, racial diversity seemed to hinder teamwork.

But the study's key conclusion: For businesses to make diversity a real asset, they have to know a lot more about how to manage it well. It's an idea that's starting to push companies to move beyond feel-good messages.

"When you look at it strategically, there's very little science attached to it," says Luke Visconti, cofounder of DiversityInc magazine. "[Diversity] as a management subject is in its infancy."

Measuring diversity's impact isn't easy, and it's not just a matter of dollars and cents, diversity experts say. But the challenge is to figure out how best to use the varied perspectives that people bring to the office.

"Our concern is that some consultants are still focused on diversity awareness and [changing attitudes] ... but that puts people in a defensive posture," says Thomas Kochan, professor of MIT's Sloan School of Management in Cambridge, Mass., and lead author of the report from a group of independent scholars. "You can get more positive results from diverse groups if you provide the skills to help people learn from each other's background - communication skills, conflict and negotiation skills, drawing out the strengths of different people."

Commissioned by a group that advocates for diversity - the BOLD Initiative (Business Opportunities for Leadership Development) - the five-year study tested many diversity theories.

Since the report was published in the Human Resource Management Journal earlier this year, at least one large company has responded by shifting its whole diversity approach, says Beatrice Fitzpatrick, president of BOLD.

Rather than continue with diversity-awareness training that dwells on people's feelings, it plans to help managers tap into diverse work groups to increase productivity, Ms. Fitzpatrick says of the company, which did not want to be identified.

Achieving the right mix

Some workplaces are still trying to recruit a more diverse staff. Others may look like a rainbow but have an undercurrent of cynicism because employees equate diversity with "annually being held hostage for a seminar," Mr. Visconti says. But where there's a top-down commitment to diversity, it's becoming much more intertwined with other aspects of employee development and accountability.

The term some consultants use is "inclusion" - creating an environment in which people feel valued as individuals.

"Here in the US, we like to pretend to be all the same ... so we list five or six criteria that mean you are professional - generally based on the values of white males ... in their 40s or 50s," says Elmer Dixon, vice president of Executive Diversity Services in Seattle. In trying to conform, "people lose parts of who they are, and you're not getting the most out of them."

The skills people need to develop to change that "are typically referred to as soft skills," Mr. Dixon says with a laugh, "but I think they're hard."

After offering training, some companies tie managers' bonuses to demonstrating these skills and meeting other diversity goals. If you want to show better business outcomes, they argue, make it something that is tied to individuals' own bottom lines.

Ford's success

Consumer-products companies are leading the way in making a business case for diversity, experts say, because they can see the potential for hundreds of millions of dollars in lost market share if they aren't able to reach out to the fastest-growing groups of consumers. Estimates of the buying power of African-Americans, Asian-Americans, and US Latinos range from $750 billion to $1.3 trillion a year.

That's not to suggest that only Latinos can market to Latinos, Visconti says, but if you have a staff where people from minority groups are encouraged to speak up about viewpoints that differ from the mainstream, it can improve the "cultural competency" of everyone on the staff.

In 2002, Ford Motor Company encouraged its employee-resource groups (organized by racial background or other commonalities) to reach out to friends and neighbors with discount offers for Ford autos. They brought in $100 million worth of business, according to DiversityInc, which granted Ford the No. 1 spot on its list of Top 50 companies for diversity this year.

"Supplier diversity" is another area Ford emphasizes. The company spent more than $3 billion last year with businesses owned by women and minority men. And to create jobs and wealth that it hopes will translate back into auto purchases, Ford moved a company that builds motor-home parts from Mexico to inner-city Detroit.

Because major companies like Ford pay attention to the diversity of their suppliers, there's a strong spillover effect. "I'm getting more inquiries [from businesses] that are not retail oriented ... [but] they're getting challenged by their potential clients to advance their diversity," says Michael Hyter, president of Novations/J. Howard & Associates, a management consulting firm in Boston.

That may help explain why the recent economic downturn led companies to cut diversity training budgets only 15 percent, compared with 30 percent cuts for other training, according to a Novations report.

Value of change

Even companies recognized for their devotion to diversity know they have a long way to go toward changing the subtle biases in their culture.

"Senior leaders who have seen the value of diversity see it as a long-term strategy," says Laura Liswood, senior adviser to Goldman Sachs on diversity issues and a fellow at the University of Maryland's business school. "They want to be in the Top 100 workplaces that are good for women or for minorities; they know that to get the best and brightest [employees], they're going to have to do that."

When Shirley Harrison was promoted in 1992 to vice president in charge of diversity at Altria, the parent company of Philip Morris and Kraft, she found that senior executives wanted to put diversity into the parameters of a one- or three-year plan. She persuaded them to see it as a lifetime plan.

"I was looking for the [senior team] to define for me, early on, what was their legacy: If their children worked [here], what did they want to leave behind [so they] would be able to see a culture that supported diversity," she says.

Everyone from vice presidents to mailroom clerks have partnered with the diversity staff to conduct relevant training sessions, Ms. Harrison says. That helps people see the link between diversity and business, instead of resenting diversity training as something imposed by an outside consultant.

"What's neat is when leaders of any color, or white males in middle management, will share their story of how they corrected an issue on their own," Harrison says. "I hear about those things all the time."

At times, other business goals trump diversity, but Harrison has learned not to take it personally. When her company divested itself of Entenmann's baked goods, it took a big bite out of the number of Hispanic employees.

"I could have been bummed out," she says. Instead, she urged the company to boost its recruitment efforts and she helped organize a focus group for current Hispanic employees to share ideas for new products and marketing.

The dangers of 'guerrilla bias' and how to tackle subtle stereotypes

By the time she realized that a hidden bias had crept in, it was too late. The human-resources director of a Beverly Hills hotel was interviewing a woman for sales director, and everything about her seemed perfect - until it came up that she was from Japan. Suddenly, images of shy and soft- spoken women took over.

A competing hotel snapped up the candidate - who's as outgoing as they come - and has been doing brisk convention business ever since.

Many people sheepishly confess such stories to Sondra Thiederman, a longtime consultant and the author of "Making Diversity Work: 7 Steps for Defeating Bias in the Workplace."

Biases happen in all directions, she says. An African-American man being interviewed by a white Southern manager might sabotage himself by assuming he won't get fair consideration.

"This isn't just a bad white guy thing," Ms. Thiederman says. "I put responsibility for fixing it on everybody."

But how to fix it? Here's a condensed version of her advice:

• Recognize your biases. Over the course of a few weeks, watch the first thought that pops into your mind when you see skin color, hear an accent, or meet someone in a wheelchair.

• Prioritize which biases to address based on what will be most likely to interfere with work. Do you hold members of certain groups to lower standards because you think they can't handle criticism? That's what Thiederman calls a "guerrilla bias," because it comes under the guise of being nice.

• Dissect your biases. Where did you learn them? Do you know many people from a group you stereotype, or are you judging based on one encounter?

• Identify what you have in common with people in groups you hold a bias toward. Maybe it's a similar work ethic, religious values, or emotions.

• Practice shoving biased thoughts aside as soon as they come up. The steps above drain the power from biases, Thiederman says, and help you make a habit of stopping them before they do damage.

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