Diversity Finds Its Place

More organizations are dedicating senior-level executives to drive diversity initiatives for bottom-line effect.

The role of the leader of diversity efforts has certainly changed—and not just in a change of title to chief diversity officer (CDO). Today, the need for a big-picture thinker on diversity issues is greater than ever, driven by such factors as demographic changes in the U.S. workforce and the extension of benefits to workers’ significant others regardless of marital status.

But certainly the biggest driver for higher-level diversity strategy is the need to tap the creative, cultural and communicative skills of a variety of employees and to use those skills to improve company policies, products and customer experiences.

One company did just that: The Latino Employee Network at Frito-Lay, the snack food division of PepsiCo, proved invaluable during the development of Doritos Guacamole Flavored Tortilla Chips. Members of the network, called Adelante, provided feedback on the taste and packaging to help ensure that the product would be regarded as authentic in the Latino community. The Adelante members’ insight helped make the guacamole-flavored Doritos one of the most successful new-product launches in the company’s history, generating more than $100 million in sales in its first year alone.

“The fact that one of our diverse employee groups helped to make this product so successful is one example of just how we leverage diversity to drive business results,” says Amy George, vice president of global diversity and inclusion at PepsiCo, the convenience-food and beverage company based in Purchase, N.Y.

To gain such bottom-line business advantages from diversity initiatives, many organizations are employing methods of understanding and relationship-building that encourage all employees to be heard. And those organizations are relying heavily on a new breed of diversity leader who can develop strategies to achieve those goals.

“Part of a top diversity executive’s role in any organization is to integrate diversity into every aspect of a business, including the workforce, customers, suppliers, products, services and even into the community a business serves,” says Raymond Arroyo, chief diversity officer at Aetna, a diversified health care benefits provider based in Hartford, Conn.

Thus, the changes in the top diversity job reflect new demands and expectations not only of this one position, but also of the entire diversity function.

The Bottom Line

Most organizations have come to realize that diversity efforts can affect the bottom line, but few take action. In the 2005 Society for Human Resource Management Workplace Diversity Practices Survey Report, nearly three out of four organizations said they ensure that diversity is a consideration in every business initiative and policy, but only 21 percent had staff dedicated exclusively to promote workplace diversity practices.

By demonstrating an impact on the bottom line, top diversity executives can raise the profile of the effort. “Until recently, the commitment many companies had to diversity was fundamentally based on moral, ethical and compliance reasons,” says Rudy Mendez, vice president of diversity and inclusion at McDonald’s Corp., the global food service retailer based in Oak Brook, Ill. “But now that we can add business impact, diversity executives are being given a much bigger role.”

An indication that diversity executives are getting a bigger role is the fact that many are gaining the “chief” title, although they usually still report to the chief HR executive. When looking for someone to fill the role of diversity leader, HR must find someone who is first a good business executive. That characteristic is needed to connect the dots from diversity initiative to business strategy to higher profits, according to Edwin Garcia, vice president of corporate diversity and inclusion at Kimberly-Clark, a global health and hygiene products manufacturer based in Roswell, Ga. “You can’t be a true business partner if you don’t have solid business acumen,” he says.

Monica Emerson, executive director of diversity at DaimlerChrysler Corp., the automobile company based in Auburn Hills, Mich., says: “As a diversity executive, I not only have to have solid business capabilities, I need to be very knowledgeable of the different businesses in my organization to align diversity initiatives to support the needs of the businesses. You won’t be respected or have credibility if you don’t understand the business issues of the organization.”

But business skills alone are not enough. Diversity executives should be skilled in multiple areas of professional effectiveness. CDOs must possess strong influencing skills because they often push diversity initiatives across a large organization and need to persuade others to support their efforts, George says. She adds, “If a company’s diversity program is driven by only one person, that diversity program is bound to fail.”

Listening skills are also critical for diversity executives because they are exposed to a variety of viewpoints on key issues. In addition, diversity executives cite the importance of having an open mind because the job requires them to get out of their comfort zone and experience things they may not be familiar with or be naturally drawn to.

Measuring Impact

CDOs today are taking diversity measurement beyond common diversity metrics such as turnover, workforce representation year-to-year and employee satisfaction scores. “Diversity is no longer about counting heads; it’s about making heads count,” George says.

For example, Aetna tracks the percentage of employees who are multilingual and encourages employees to learn a second or a third language. Aetna’s employee networks offer language classes during lunchtime for all those employees who are interested in learning a second or third language.

“It is critical for our employees to speak the language of our customers, literally,” Arroyo adds. “If we see certain functional segments that would benefit from employees knowing more than one language, we target our recruiting efforts to identify individuals who can speak more than one language for those roles.”

The diversity office at Aetna also measures the company’s community involvement and its impact on the marketplace. By helping to support diversity-related community programs, such as funding a cultural competency program at an Atlanta hospital, and having volunteers in key areas, Aetna maintains, the company increases its presence and brand reputation in key markets, resulting in more business opportunities. “Now, when a sales representative is working with a potential client in a specific area, he can leverage our positive diversity reputation in the community, and this helps our business,” says Arroyo, who measures such marketplace items as part of Aetna’s diversity scorecard.

Kimberly-Clark uses indexes and benchmarking data to determine its success in competing within its industry for top diverse talent. The index, produced and shared quarterly, allows Kimberly-Clark to compare its demographic profile with competitors’ data on a number of levels, according to Garcia. The data are presented as a function of recruitment rates, promotion rates and attrition. The tool also shows the distribution by gender and race through five broad bands of compensation.

Diversity Office Structure

How CDOs add value often depends on their diversity organization’s structure.

A centralized diversity staff is critical for tracking diversity metrics, managing diversity vendors that provide training or recruiting, and communicating the diversity message. But a corporate structure with no connection to the business units does not help the diversity message permeate to the rest of the organization, says Garcia. Thus, a matrixed structure seems to be the structure of choice for CDOs.

DaimlerChrysler, for example, has a small, centralized diversity staff. But the staff is also aligned with the company’s diversity council, made up of members of the organization’s executive committee and representing various business units, suppliers and dealers. Such a matrix approach helps with the alignment of DaimlerChrysler diversity programs with both internal and external stakeholders, Emerson says, and facilitates communication among all groups.

Similarly, PepsiCo has a centralized diversity staff that develops an overarching diversity strategy; that strategy is executed locally by each of its divisions. PepsiCo’s Diversity and Inclusion Governance Council, made up of executives from all divisions and functional areas, provides input into the diversity strategy, raising the executives’ sense of ownership of the strategy. “Our Diversity and Inclusion Council also provides a means for sharing best practices [in diversity efforts] and ensuring consistency,” George says.

CDOs agree that business communication is critical to an effective diversity program.

Garcia finds a market-segment approach beneficial to communicating his diversity vision to others at Kimberly-Clark.

“When I talk about diversity to our finance leaders, I focus on rates of return from people investments,” he explains. “When I talk about diversity talent to engineers, I use [engineering] terms as if diversity were a reaction with inputs [recruitment] and outflows [attrition]. With marketing, I talk about employment branding as a means to access an emerging market for diverse talent.”

Similarly, Mendez helps to connect with constituents at McDonald’s by using business rationale. When he sets forth his diversity strategy with franchise owners, he reminds them of the impact that diversity can have on their consumer marketing opportunities. “I frame the conversation around what diversity means in terms of increased breakfast sales or increased salad sales,” he says.

PepsiCo uses a variety of communication methods to get its diversity message out to a large, dispersed organization. This includes the companywide daily e-newsletter and executive speeches in addition to the typical diversity celebration that highlights employees’ uniqueness, diversity speakers, and food and entertainment from around the world.

Aetna’s diversity staff creates a detailed annual diversity report for employees and the public. The 24-page 2005 Aetna Diversity Annual Report includes a description of diversity programs; descriptions of the company’s diversity affiliations, partnerships and philanthropic efforts; its diversity-related recognitions; and information on its investments in funds managed by women and minority-group members.

Arroyo at Aetna adds, “Our annual report allows us to share our diversity story by highlighting our diversity-related successes in the marketplace, the community, our workplace and among our suppliers.”

Current and Emerging Issues for CDOs

Diversity and inclusion are constantly changing and evolving, so diversity executives must stay on top of current trends and topics.

Today, CDOs are especially interested in demographic shifts, particularly the country’s growing Latino population. “Every week we get calls from top diversity executives at Fortune 500 firms who want to more effectively recruit top Latino talent so their organizations can successfully tap into the $700 billion purchasing power Latinos have in the United States,” says Abe Tomas Hughes, CEO of the Chicago-based nonprofit organization Hispanic Alliance for Career Enhancement. (To learn more about Latino recruitment programs, see “Tapping the Hispanic Labor Pool” in the April 2004 issue of HR Magazine.)

CDOs also want their affinity groups to play a larger role in the business. Affinity groups at DaimlerChrysler, for example, help shape company strategies related to multicultural marketing and diversity recruiting. The groups also provide translation services and help with professional development programs.

George at PepsiCo adds: “The diversity hot topics of today go beyond the visible diversity dimensions of ethnicity, age and gender. For example, faith and religion in the workplace is an emerging issue that organizations must address as part of their inclusion strategy.”

A broader global perspective also will affect the CDO role. For example, diversity executives need to be well versed on how immigration issues in the United States affect the domestic workforce, but they also need to know other countries’ immigration issues and how those issues can impact the company’s global operations.

The CDO’s Future

A looming talent shortage, demographic shifts and an increasingly global workforce indicate that top diversity executives will be in high demand. CDOs feel that in the future, as diversity becomes a bigger part of an organization’s business strategy, more of them will report directly to the CEO, instead of to the HR director.

Diversity executives also believe that the alignment of diversity with business strategy will increase demand for diversity executives who hold MBA degrees and have line experience. “I anticipate we’ll see a larger percentage of folks in top diversity roles coming from line positions like finance and marketing,” Garcia says.

George, who has an MBA and spent eight years in sales and marketing roles, agrees. “Diversity executives need to be able to relate to the demands placed on line management so they can craft winning diversity programs.”

What’s more, Mendez says, diversity executives can expect to collaborate more with colleagues in allied specialties. “The demand for diversity education and the desire to enhance career development of historically underrepresented groups will most definitely cause us to partner more with the learning and development function,” he says.

The enhanced role for CDOs promises to play a key part in the success of many organizations. But real success requires diversity executives to convince every employee that he or she owns the commitment to diversity.

“The future journey for top diversity executives is still uncharted,” Arroyo says, but it’s a journey that “we must continue to make, for the continued success of our companies depends on it.”

Robert Rodriguez, Ph.D., is a faculty chair in the School of Business & Technology at Capella University and also serves as board chairman for the Hispanic Alliance for Career Enhancement, a nonprofit that helps companies attract, develop and retain Latino talent.