News Column

Diversity Report: Top 40 Companies

September 2005, HISPANIC BUSINESS Magazine

Janet Perez


Names on the 2005 Top 40 Companies for Hispanics list come from all sectors of the U.S. economy, but their corporate cultures share one trait – an awareness of diversity throughout the organization. Unlike other "Best Company" lists, which focus on hiring or leadership, the Hispanic Business directory looks at how companies reach out to Hispanics in recruitment, promotion, procurement, philanthropy, and marketing (see table, "Best Companies by the Numbers").

"We have a three-legged stool philosophy," says J.C. González-Méndez, vice-president of supply chain management at McDonald's USA, which ranks first on the directory. "We depend on our franchisees, which are the face of McDonald's in our community, on our staff members, as well as on our suppliers. We have to keep that three-legged stool in a very good balance to make sure that the consumers get what they deserve."

Whether they call it the "three-legged stool philosophy" or not, companies that have made it onto the Top 40 have learned that just succeeding in one area of diversity won't be enough to help them gain and keep an edge over the competition.

Many corporations call diversity a long-term business strategy. "We not only want to mirror our customer base in our workforce, [but] we want to reach out to those markets, we want to give back to the community, and we want to look at diverse suppliers that will participate in our supply chain," says Maria Cruz, executive director of supplier diversity at Verizon, number 5 on the list. "We have a very strong commitment from the top."

All the companies on the Top 40 seek the same goal, but their methods vary by industry. For example, Verizon works on education initiatives to train students in technology. Wells Fargo, number 7 on the list, works to educate Hispanics on the career opportunities available in the banking and financial services industry.

"With our Hispanic scholarship fund, we donate money to and we have actual scholars that are considered Wells Fargo scholars," says Lane Ceric, corporate recruiting manager at the bank. "Not only are we helping with their tuition costs, but we reach out to them to educate them about financial services so that they will learn for themselves how to better manage their money."

A utility like PG&E, the number 13 company, prepares prospective job candidates by working with community organizations. The company has set up career centers that offer 12-week classes to prepare applicants for PG&E. "We work with a lot of community-based organizations to help provide job applicants with a better understanding of PG&E's jobs and hiring processes," says Russell M. Jackson, senior vice-president of human resources. "We have quite a variety of jobs, so it's good to get a better understanding of them. We also try to guide [applicants] through from a testing standpoint because all of our jobs, except when you get to the managerial rank, actually require tests."

SBC Communications, the telephone utility that ranks number 3 on the Top 40, points out that last year, 51 percent of its new hires were people of color. But a diverse workforce involves more than entry-level recruiting, so the company must work just as hard to retain those employees. SBC provides a leadership development program in which college graduates new to the company can rotate over a two-and-a-half-year period between two or three assignments in the company. PG&E pairs up new college graduate employees with experienced employees in mentoring partnerships. The company also puts together new employees to form a corporate "buddy system" so they can navigate their new environment together.

McDonald's promotes cultural diversity and understanding from the restaurant level on up to the corporate offices. The company has launched an education program in which Spanish-speaking employees can learn English and English-speaking employees can learn Spanish. "[A] key piece to our retention program is how we orient and how we train our people to set them up for success," says Steve Russell, senior vice-president for human resources at McDonald's USA. "Orientations are not, 'Here are the 10 ways to get fired from McDonald's.' What orientations are about is creating relationships with the people you are working with."

Many companies focus on hiring or marketing to Hispanics, but to qualify for the Top 40, a company must also work on Hispanic supplier development (see table, "Procurement Priorities"). "In the supply chain arena, we want our suppliers to reflect the communities we serve as well, and to create opportunities for participation and economic development," says Joan Kerr, executive director of supplier diversity at SBC. "By including everyone in our supply chain, we are able to get the very best talent, the best ideas. It also helps us a great deal in customer loyalty. Our customers see that we not only want them to do business with us, we want to do business with them."

Granted, regulation requires utilities to work on supplier diversity, but companies on the Top 40 go beyond the bare minimum. PG&E attends minority business events to meet suppliers, and last year the company spent about $300 million with Hispanic suppliers. Mr. Jackson says that over the last 10 years, the company has spent $2.3 billion on supplier diversity in the Hispanic community.

SBC takes full advantage of its Internet technology expertise to reach minority suppliers. CEOs can register on the SBC Communications Web site and provide a profile of their business and experience. A member of the supplier diversity team reviews company registrations to see which ones are ready to join the SBC supply chain. Last year, SBC spent 17 percent of its procurement budget with diverse suppliers, and the company is one of the original members of the Billion Dollar Roundtable, a group founded in 2001 and composed of corporations that have spent $1 billion or more a year with minority firms.

Like affirmative action on college campuses (see the "2005 Education Report" in this issue), corporate diversity continues to evolve. Boardroom diversity, minority management training programs, mentorship, and peer networking have developed in recent years. And the corporations on the Top 40 Companies for Hispanics look forward to revamping their approach in the future. "As the [Hispanic] community grows, then so do we in terms of our partnership with that community," says Ms. Cruz at Verizon, another Billion Dollar Roundtable member. "Economic growth is important to those communities because as you have economic growth, you also have job opportunities. For example, if we are able to grow one of our suppliers, that supplier is going to provide job opportunities to those communities. It really is far-reaching."

"We're always working to improve our diversity programs and initiatives," says Cecilia Orellana-Rojas, SBC associate director of workforce diversity. "I feel
that once you stop doing that as an org-anization, you have failed to commit yourself to diversity."

Burger-Side Up

McDonald's leads the Top 40 Companies for Hispanics.

Sitting at number 1 on the Top 40 Companies for Hispanics, McDonald's shows that diversity in the workforce, supply chain, and customer base isn't just a feel-good exercise. "It is an imperative of our business," says J.C. González-Méndez, vice-president of supply chain management at the fast-food giant. "It's not about brown, it's not about black. It's about green. It's about strengthening our brand with our key customer segments."
Few companies can match McDonald's comprehensive outreach. The company's television commercials set the standard for marketing to diverse consumers. Since the late 1970s, McDonald's has encouraged franchise opportunities in urban minority areas, recruited and trained a diverse pool of employees, and sought out diversity in its suppliers.

"It is a day-to-day effort across the nation," says Steve Russell, senior vice-president for human resources. "Whether it's a national tragedy or a local opportunity to support a community, McDonald's is a company with character that steps up."

As the face of the company, cashiers at McDonald's restaurants showcase a commitment to diversity recruitment. But diversity works beyond the entry-level stage. Mr. Russell points out that half of the company's middle managers started as crew at a restaurant, 40 percent of the company's top 50 executives started as crew, and 30 percent of owner-operators started working at a restaurant.

Almost 30 years ago, the company established an affirmative action department now called the Diversity Initiatives Department, and introduced a diversity education initiative. It started with seminars designed to educate all employees on the changing workforce. That was followed by career development seminars for women, African Americans, and Hispanics. Now McDonald's boasts a National Hispanic Employee Network, the McDonald's Hispanic Operator Association, the Hispanic Leadership Council, the Hispanic Steering Committee, and the National McDonald's Diversity Advisory Council.

Then there is Hamburger University. While the name may elicit chuckles, since 1961 Hamburger U has seen more than 70,000 restaurant managers from around the world come to the state-of-the-art facility for leadership training.

Suppliers also have benefited from McDonald's diversity efforts. One success is Lopez Foods, the number 12 company on the Hispanic Business 500® with revenues of $452 million. In 1992, John C. Lopez, a former McDonald's franchise owner, bought a meat packing company in Oklahoma and turned it into a major supplier of hamburger and sausage. In 2002, Mr. Lopez won the Hispanic Business magazine EOY® (Entrepreneur of the Year) Award (see December 2002 issue).

Future opportunities abound at the fast-food chain. For example, the company recently launched its Hispanic Business Vision, aimed at making the restaurants more attractive to Hispanic customers and employees. "The opportunities are here," says Mr. González-Méndez. "Whether it's in the crew room or the boardroom, you'll always find diversity on the menu at Mickey D's."


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