DIVERSITY and the bottom line
Is diversity a business imperative
Kevin L Clayton
February 1, 2007
When I think about this question, “Is diversity a business imperative or is it just compliance?” I find it very difficult to answer the question without significant thought. The term diversity and the complexity of what the word represents often incites emotional debate and is misunderstood. Twenty-six years of “diversity” experience working with communities, colleges and universities, and corporations has led me to this conclusion.
Truthfully, there is no right answer.
But there are two specific levels of understanding that must happen simultaneously in order to really define what “diversity is.” First, diversity is how you or your organization verbally defines it to be. Second, diversity is how people in your organization behave in support of the words.
Simply said: “Do they walk the talk?”
I have been fortunate to work for – as an employee – and work with – as a consultant – some of the most notable organizations in the world, including Procter & Gamble, MasterCard, Time Warner, the Federal government, PriceWaterhouseCoopers, MTV Networks, Auburn University, to name a few. Each has robust diversity statements, definitions, strategies, plans and tactics. And each can be found on somebody's “best in class” list for model diversity programs.
Yet, they all define diversity differently. This is where the complexity begins. Let's break down the question asked of us to determine if it really can be answered, “Is diversity a business imperative or is it just compliance?”
So what is diversity?
When I say diversity is complex and hard to define, the proof is in the many definitions you'll find among the “best in class” companies on the Fortune, DiversityInc or Black Enterprise Top 50 list. In the 2006 DiversityInc Top 50, there were no less than 32 totally different written definitions, and the remaining 18 had some common language.
But those were just the words. The true definition of diversity is embedded in the culture and behavior of the employees and management of those corporations. Diversity is how organizations define it and ultimately support the words with the desired behaviors.
Personally, I define diversity as, “The mixture of people, functions, processes and qualities characterized by both differences and similarities.” I'm defining it like any other noun – what is it, not what does it do, not the benefits or how it makes you feel.
Is there a real business imperative for diversity?
The question is being asked of chief diversity officers (CDO) more as a justification for the continuation of “the work.” Many corporate executives would like for diversity to go away. I am reminded by the comments of a CEO of a client who asked, “Kevin, are we done yet?”
Diversity is not a destination, it is a journey. If you truly believe there is a business imperative for diversity then the answer to that question is: “No, we aren't done yet because it is an evolutionary process just like any other business or marketplace opportunity.”
Let's examine this a little further. The dictionary defines imperative as, “Impossible to deter or evade; pressing: imperative needs. Synonymous with urgent.”
So is diversity a pressing business need? Yes. But let's break the process down to better understand how we get to yes.
First, define the “Business Motive,” “Business Imperative” and “Business Case.” Many use these terms interchangeable, as they are distinct terms with different meanings. The Business Motive is what motivates the organization to action “the opportunity.” The Business Imperative is the sense of urgency – “is it a priority?” The Business Case is the quantifiable impact – “will this make or save real dollars?” The answer can be found in the recent demographic and buying power studies.
Demographics
Recent research shows that the demographics are changing and women and people of color are the majority population. By 2050, people of color will be the majority.
Buying power
A recent study by the Selig Center for Economic Growth at the University of Georgia shows that the nation's buying power – the amount of money all of us together have left after taxes to buy things – grew from $4.3 trillion in 1990 to $7.2 trillion in 2000, and again to $9.1 trillion in 2005. The report says it will reach $11.8 trillion in 2010.
Jeffrey M. Humphreys, director of the Selig Center, estimates that in 2010, the combined buying power of African Americans, Asians and Native Americans will be $1.7 trillion – more than triple its 1990 level of $454 billion, a gain of 268 percent.
During this 21-year period, the percentage gains in minority buying power vary considerably by race, from a gain of 397 percent for Asians to 251 percent for Native Indians, to 222 percent for blacks. All these target markets will grow faster than the white market, where a 177-percent increase is expected.
The combined buying power of these groups will account for 14.1 percent of the nation's total buying power in 2010, up from 10.6 percent in 1990. This 3.5 percent gain in combined market share amounts to an additional $411 billion in buying power per year by 2010.
At the same time the Latino Hispanic economic clout will rise from its 1990 level of $222 billion to $1.08 trillion in 2010. That is a 413 percent increase – higher than any other racial group. Hispanics will account for 9.2 percent of all U.S. buying power by 2010 and study's show that they will exceed African American buying power by the end of this year – 2007.
Once you have the data, you can make the Business Case. People of color are going to be the majority population and have the highest increase in economic power, led by the Latino population. But you must do something with the information. The mistake is that many organizations stop here and espouse this data as the Business Case. The data is only the Business Motive – the call to action. The Business Case will be determined by how these numbers influence of products, services and markets. For example, if I'm selling a consumer product that's influenced by these changing demographics and economic growth numbers I can quantify the impact and make a “revenue decision” relative to my diversity and overall marketplace strategy.
The Business Imperative will be determined by how the Business Case helps me to achieve my overall corporate revenue goals. The process of stating the Business Motive, quantifying the Business Case and indentifying the Business Imperative can be used whether or not your entity is a service provider, professional service firm, professional sports organization, academic institution, retailer, consumer products manufacturer or a business that sells to other businesses.
Is diversity, compliance?
The dictionary defines compliance as “conformity: acting according to certain accepted standards: A situation in which an agency fully meets the requirements of laws, rules and regulations, and court cases which mandate non-discrimination and affirmative action.” This has been the traditional meaning of diversity. The typical questions asked in the workplace are, “Do we have our “numbers? How many people of color, women, white males and all others do we have?; Are we meeting the federal requirements? Is our Affirmative Action Plan compliant? Have we met our talent review objectives?”
While, I classified “compliance” as traditional, it is necessary, important and relevant to the success of any diversity management plan. Earlier, we asked whether or not the diversity plan made or saved organization money. Being compliant has a direct effect on the top and bottom line.
As Business to Business went to press, the California Federal Appellate Court allowed our nation's largest class action discrimination suit to proceed. Being compliant could have saved many U.S. corporations millions of dollars. During the past 10 years, U.S. corporations have paid $974 million in damages. In addition to that sum are legal fees, lost sales, lost customers, lost employees (talent) and lost value, due to declining stock prices.
Finding an answer
So is diversity a business imperative, compliance or neither?” Diversity is both. Your company cannot find true success without a robust plan that clearly defines what diversity means for the organization.There is not a U.S. or global entity that can achieve maximum success without a strategic diversity management plan that includes a thorough compliance strategy – although not as relevant outside the United States – a clearly defined business motive, imperative and case.
The final link that connects the two is behavior. Organizations must manage diversity just like any other business initiative and hold people accountable for their behavior and results. If the culture responds positively to reward and recognition then the organization should be consistent and reward people accordingly.
If the organization responds by punitive responses, then so be it. The model's essence is that managing diversity is a change management process that's success is driven by behavior and effective senior management leadership.
Kevin Clayton is president of Axxis Consulting, which specializes in developing and implementing diversity strategies. His 25-year career includes being a former Procter & Gamble executive and corporate VP of global diversity at Russell Corp. You can reach him at kevin@axxisconsulting.com
