News Column

Making Best Practices Even Better

January/February 2005, HISPANIC BUSINESS Magazine
Ana Duarte McCarthy
Ana Duarte McCarthy

Propelled by the pressures of rapidly changing consumer and workforce demographics, a new stage of corporate diversity is under way that increasingly seeks to broaden efforts and more closely integrate programs with core company values and accountability measures.

Long-held best practices for corporate diversity such as college minority recruitment efforts, targeted career development programs, numerical and percentage diversity targets for workforce and supplier programs no longer are seen as adequate for keeping pace with a changing global market. New best practices now include skill-based diversity training, technological innovations to identify and nurture job candidates and suppliers, and higher levels of cost and return on investment accountability.

But the slowly shifting paradigms on corporate diversity also come amid signs of slowing progress. While it is estimated that more than 80 percent of major American companies focus on diversity as a strategic advantage and business leverage and many of the country's largest companies are at the forefront of diversity best practices increases in Hispanics and other underrepresented groups among the executive ranks, boardrooms, and supply chains of Corporate America remain slow and not broad based.

"I think the field of diversity is at a crossroads," says R. Roosevelt Thomas Jr., president and founder of the American Institute for Managing Diversity, whose Diversity Leadership Academy in Atlanta was launched with a $1.5 million grant from the Coca-Cola Co. "We tend to think that if we got rid of all the '-isms' everything would be OK. That hasn't happened."  Story continues below >>

Measuring ROI

While corporate diversity programs have long been considered "soft" programs, driven historically by Equal Employment Opportunity and affirmative-action plan numbers, a growing number of companies are seeking to quantify their success by tying efforts to return on investment in human capital.

For years, Prudential Financial, for example, had assessed the effectiveness of its diversity programs by the numbers: the number of such things as diversity job fairs, college minority recruitment trips, or diversity recognition events in which it participated. But with a change in management in 1998 came the decision to concentrate on numbers that counted bottom line results.

The Newark, New Jersey-based company hired California consultant Edward Hubbard to apply more scientific measurements to its diversity efforts. In his analysis model, Mr. Hubbard collected broad data on diversity contributions to the company including the number of new hires resulting from recruiting trips, retention and promotion rates, and whether a job satisfaction gap between men and women or between diverse employees appeared to be closing.

The study converted the data to financial values and calculated a "diversity return on investment" and benefit-to-cost ratio by using the resulting net initiative benefits and costs. While Prudential declined to release specific results, the benefit-to-cost ratio was "significant" for its diversity-related activities in 2000, says Ignace Conic, Prudential's vice-president for diversity.

Prudential continues to gather the data and provide twice-yearly updates to CEO Art Ryan. The compensation of senior management is tied to the company's progress on diversity, which Ms. Conic says is closely integrated into the operations of each business unit.

A recent study by the National Urban League, for example, found that fewer than a third of American workers surveyed said they believe their companies have effective diversity programs; fully one-quarter of Hispanics in the survey said their employers could do better. And while sheer demographics are propelling a growing number of Hispanics into the workforce, progress remains slower at executive levels.

While Hispanics account for 11.4 percent of the U.S. labor force, they make up 9.4 percent of the total managerial-professional class, according to Census data. Hispanics in "managerial and professional specialty occupations" surged 74 percent to an estimated 4 million between 1992 and 2002, but Hispanic representation on corporate boards at Fortune 1000 companies rose just 8 percent from 1999 to 2004, according to a report by Microquest, a Novato, California, research firm that helps companies identify diversity candidates for top positions.

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