Benchmarking With 2 CEOs

February 9, 2011 12:00 am

By Barbara Frankel 

I recently debriefed DiversityInc’s benchmarking findings for two CEOs and executive teams of large organizations—one a publicly traded consumer-facing company, one a healthcare organization. It struck me how their personal involvement can transform an organization from a diversity-management novice, nibbling on the periphery of understanding best practices, into a real competitor.

In our 11 years of running The DiversityInc Top 50 Companies for Diversity, we have noted that companies are in four general stages of diversity, which are described at the bottom of this article. The first company I’ll describe here is between Stage One and Stage Two (they’ve started best practices that have demonstrable workplace impact, such as employee-resource groups, but they aren’t yet using them for a competitive marketplace advantage). The second company is still at Stage One—they recognize that diversity is important but have not yet implemented any realistic mechanisms to create improvements and are being hurt by competitors who are using diversity management as a business advantage.

The first company has a very cordial and warm culture. I sometimes joke to our staff that I test a company’s culture by whether they offer us water or show us the restroom before a debrief. This place had a catered lunch and the people were genuinely nice in every way. You could tell they cared about each other and what they do for a living.

This CEO is new to his job, although not new to the company. He was promoted when the last CEO retired and his elevation has received positive reaction internally and externally. What became clear to me during the debrief was that he was going to demand accountability for diversity results, the first time that had happened at this company.

Under the previous two CEOs, diversity-management was erratic: employee-resource groups were started and the company began to participate in The DiversityInc Top 50 Companies for Diversity survey and to listen to our monthly best-practice webinars and decided to buy benchmarking.

But diversity-management was not a high priority, with only director-level staffing at the helm, few resources and no diversity council or direct involvement from the top. As an example, employee-resource-group participation at this company was only 10 percent of company workers versus 24 percent for the DiversityInc Top 50 (up from 16.3 percent in 2009 and 11 percent in 2005) and 30 percent of the company’s direct competitors. As a result, this company—in a very competitive industry—was languishing behind its competitors in its human-capital demographics, especially in recruiting Latinos and Asians and promoting them into their first management jobs, and in getting women into management positions. More specifically, promotions of Blacks, Latinos and Asians into their first management job were one-third of the percentage of the workforce for Blacks, Latinos and Asians and less than half the rate of their competitors. Female promotions in management were more than 10 percent lower than those of the company’s competitors.

The gender issue really bothered the new CEO, as he explained to me during the debrief. “Our customers are mostly women and we SHOULD have the representation at the top to reflect that. We don’t, and we need to address that,” he said.

The audience for this debrief was bifurcated. The CEO’s eight direct reports including the global head of HR were all there, as were the three lower-level people who comprised the diversity department. The CEO wanted change—immediately—and he made it clear to his direct reports. He announced plans to start a diversity council, which he would chair, with all of them as members.

As I presented data to him about how his peers and DiversityInc Top 50 companies used their executive diversity councils to set company-wide goals and hold people accountable for reaching their goals—and how they linked executive compensation to achieving those goals—he received some pushback from a couple of his executives. They suggested different ways to link compensation, or waiting to do that until the company’s efforts were more developed.

He wasn’t buying it. “We are going to be competitive—for talent and customers—and you are going to be accountable for that. We are going to follow the benchmark of our peers,” he said nicely—but firmly.

This CEO clearly is going to elevate diversity at this company to a new level by being very hands-on and directly relating results to the company’s business goals, especially with his direct reports. His type of hands-on involvement is increasingly common with CEOs, even from very large organizations. We’ve seen a lot in recent months, as the number of debriefs to CEOs and their executive teams increases. Over the past few months, we’ve presented benchmarking debriefs to more than a dozen CEOs of Fortune 500 companies and major institutions. They all have different motivations for wanting to hear this information, but I notice they all zero in on the recommendations and what they need to do to take it to the next level.

The Stages of Diversity Management

DiversityInc has been studying the four stages of diversity management for more than a decade. Most companies are in the first two stages, with companies that earn spots on the upper portions of The DiversityInc Top 50 Companies for Diversity list in Stage Three. We don’t yet know any companies that are in Stage Four but a handful of very innovative companies are poised to break through to that stage.

Stage One: Celebration Focused

The company has begun to recognize the value of diversity and begins to have celebrations, such as Black History Month and Cinco de Mayo day in the cafeteria. The danger for these companies is in raising expectations with no corresponding gain in opportunities. They have a high level of regrettable loss (loss of talent, particularly from traditionally underrepresented groups) that could have been developed. They also have increasing difficulty in recruiting people from these groups and all younger people, who want a more inclusive environment, according to Pew Research reports.

Stage Two: Workforce Focused

The company has created a diversity plan—with actions, objectives and milestones. It has begun to show gains in the diversity of its workforce and has implemented employee-resource groups and, often, a structured mentoring program. The company now has a competitive advantage—with talent and reaching customers/clients—over competitors still in Stage One.

Stage Three: Marketplace Focused

The organization has metrics-driven accountability for its diversity-management efforts, often through its executive diversity council. Its human-capital and supplier-diversity metrics are well above average and it assesses and communicates clearly the value diversity management is bringing to the organization. The company exhibits cutting-edge diversity-management initiatives, such as innovative work/life programs that aid in retention and talent development, or clear linking of supplier-diversity efforts to community building. It is outpacing its competitors in reaching and developing talent and creating marketplace solutions. These companies outpace their competitors in raising cultural competency in marketing and sales efforts.

Stage Four: Out-Thinking Competition

These companies leverage diversity management to create, sponsor and nurture innovation. They provide thought-leadership and integrate cultural competency in all they do, from recruiting to customer service.