Driving diversity; CEOs get it: diverse work forces make for better companies. The question is, how do you get there?

Chief Executive, The, May, 2004 by Jennifer Pellet

For years, CEOs have paid only lip service to diversity. In the 1980s, when the term began popping up in boardrooms of progressive companies, multicultural programs were viewed primarily as feel-good initiatives--important, but hardly imperative. Yet profound demographic changes in the United States and an increasingly global marketplace are driving recognition that diversity is more than simply the right thing to do. Diversity programs represent a way for companies to fuel growth by tapping into fast-growing multicultural markets.

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By 2005, the U.S. Census Bureau projects one in three Americans will be either African American, Hispanic American or Asian Pacific American. Together, these three groups are increasing seven times faster than the population as a whole. This shifting population mix, along with the demands of growing international markets, have CEOs across industries wrestling with diversity as never before.

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"For us, diversity is really a marketplace necessity," Thomas O'Neill, chief executive of New York City-based Parsons Brinckerhoff, told CEOs gathered for a recent roundtable discussion on diversity best practices held in partnership with Pitney Bowes. "Whenever you make a sales pitch to a government agency, you interview with a panel that includes women and people of color. So if we go in there with all Caucasian males, our chances to win a job go way down, whereas if we go in with a group who look like the people on the other side of the table, our chances go up. That's just a marketplace reality."

Clearly, a company's work force--including senior management--must represent all of its customers to win their loyalty. And yet, despite the business case for diversity and increasing emphasis on multicultural initiatives, true diversity continues to elude many corporations. Resistance to change and misconceptions are among the factors impeding the process, reported Phillip Cox, chairman of Cincinnati Bell. "This is very threatening and difficult for our employee base, of which out of 3,000 people we have about 700 people of color," he said. "These are not racist people, but we are all prisoners of the familiar. And that means we don't get up in the morning and say, 'I think I'll go out and make myself as uncomfortable as I can by dealing with someone who is very different from me.'"

Even CEOs at companies with diverse work forces and long-established diversity initiatives continue to struggle to extend multiculturalism to the upper echelons. At North Shore-Long Island Jewish Health System, where 7,800 of 8,000 nurses are women, the executive ranks are another story. "When you go down into most large organizations, you have a very diverse work force," noted Michael Dowling, CEO of the Great Neck, N.Y.-based hospital company. "The problem is getting diversity in terms of race and gender up to the very top of the organization."

It's also knowing how to get the most value from the diversity created, said Michael Critelli, chairman and CEO of Pitney Bowes. "When we talk about diversity, it isn't just about equal opportunity, it isn't just about bringing in the best talent in a broad diverse marketplace, but it's what you do when you get there. Do you get the full benefit of people's diverse life experiences? And do you get the creative tension associated with that?"

What's more, for today's CEOs these challenges come on the heels of a difficult economic period. Metal Management, which survived a bankruptcy reorganization in 1999, is in the early phase of its efforts to promote diversity through internal promotions and external recruitment. "First we had to fix the organization. Now we're focused on the culture," explained Michael Tryon, president and COO of the Chicago company, where a significant African-American and Latin-American presence among the company's labor force is not reflected in upper management. "We need to go out and get more thinking-outside-of-the-box talent within the company. We don't have enough women and minorities at the supervisor, managerial and executive levels. Culturally, we're going to have to turbocharge where we are today."

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Diversity is an even more intense challenge for non-U.S. companies, said Robert Westerhof, CEO of North American operations for Philips Electronics, which began setting standards for the number of women in top jobs a few years ago. "Diversity is one of the things that we're not good at in Europe, because with our history of knowing so many things about other parts of the world, we thought it was not needed," he said. "So American-based companies put more effort into diversity than European-based companies."

Paths to Progress

While the mission is clear--to foster an inclusive culture that strengthens relationships with employees, suppliers, customers and communities--methods of achieving that elusive goal continue to spark debate. For example, although many companies report success with diversity programs within HR that encompass employee affinity networks, mentoring programs and diversity training, several CEOs argued that bringing diversity out of HR as a standalone function is an essential step in building momentum.