Dividends of Diversity
By John Bank, Lecturer in Human Resource Management
When a major British company with a global car import business inquired into why it was
not attracting female managers, a few days’ research into the company produced a profile
that – not surprisingly – failed to interest women managers. The profile showed the
managers to be male, English, public school educated with military experience and a
proclivity to play golf.
By contrast, companies that have invested in a truly diverse employee base are already
reaping rich dividends from proactive policies on diversity. Those who haven’t are losing
competitive advantage and may never catch up.
The benefits of employee diversity include marketing advantages. If a company excludes
most of the population from its decision-making processes, by having an exclusively
male, mono-culture senior management team, it denies itself the advantages that come
from a more direct understanding of the markets it is selling into and a better fix on the
customer’s requirements. A more diverse workforce provides a deeper pool of talented
employees, where everyone can contribute to their fullest, without glass ceilings and other
artificial barriers to their contributions and advancement. Service industries in particular
must reflect a pluralistic, multi-racial, multi-cultural client base in their own managerial
structures if they are to thrive in the 21st century.
Scarce resource
The demographic argument still holds. In Europe recruitment beyond 2010 will continue
to be difficult (all countries, except Finland have a negative birth rate). According to the
Commission of the European Communities, Directorate General for Employment,
Industrial Relations & Social Affairs, the latest demographic projections show that the
Community’s population of working age will grow slowly, if at all, in the period up to
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2010. If there is a significant slow-down in the rate of inward migration then there is a
real possibility of an absolute fall in the population of working age from this point. (This
contrasts with continuous growth over the past 20 years of just under 1% a year.)
As talent and skills become scarce, companies will have to cast their recruitment net
wider for the skilled employees they require. They should not be surprised to find
potential new recruits sceptical of their offers if they have no proven track record in
employee diversity policies and practices. By contrast, companies that have a decade of
development in dealing with diversity will enjoy a competitive advantage amongst
recruits who can see role models from their gender, race, ethnic background, sexual
orientation, physical handicap or age group already at work in the recruiting company.
What is Diversity?
In James Dicky’s famous film ‘Deliverance’ a group of four white, male managers from
Atlanta, Georgia decide one weekend to go canoeing instead of playing golf. They drive
into the Appalachian Mountains and are at first mistaken by the mountain folk for
engineers from a construction company engaged in building a dam. The tension between
the ‘city boys’ and the mountain folk is immediate. The managers do not recognise the
values of the Appalachian culture and their arrogance is met with suspicion by the
mountain people. Suspicions erupt into the full-blown hostility that provides the central
conflict of the film.
Diversity is simply otherness or those human qualities present in other individuals and
groups that are different from our own and outside the groups to which we belong. The
managers from Atlanta are too caught up in their own white middle-class values to
appreciate the values of the Appalachian people and their communities.
From a managerial perspective, diversity is also a value placed by the organisation on
utilising contributions from a diverse workforce at all levels as a vital resource.
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Cultural diversity
By the year 2010 the American workforce will be only 45% white male. Women, Blacks,
Hispanics, Immigrants will swell the labour force of USA firms. Since 1970, the number
of women as a percentage of the labour force has doubled. In 1990, they made up 46% of
the American workforce. How will these new employees be managed? How will
companies up until now determined to stamp their corporate culture on their employees –
deal with the cultural diversities these same employees bring to the work place?
Dimensions of Diversity
By dimensions of diversity I mean the properties and characteristics that constitute the
whole person. There are primary and secondary dimensions of diversity.
Primary dimensions of diversity are those immutable human differences that are inborn
and/or that exert an important impact on a person’s socialisation and an impact on them
throughout their lives. There are six of them:

age

ethnicity

gender

physical abilities/qualities (disabilities)

race

sexual/affectional orientation
Gender, for instance, is critical in the UK workforce imbalance. Out of 20,000 directors
of UK public companies, according to the Arthur Andersen Corporate Register, there
were only 234 women directors holding between them 113 executive directorships and
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155 non-executive posts. Age is another critical diversity dimension. A third of all men
between the ages of 50 and 65 are currently unemployed.
Is the future female?
Women earn one-third of the MBAs according to the US Department of Education 1996
Digest of Education Statistics. In addition, virtually half of all new business, law and
doctorate degrees are awarded to women. Half of all undergraduate degrees in business
and management, accounting and mathematics go to women as well which helps the case
that the future is female. What new management styles will women managers evolve?
What will the boardroom of a truly diverse company look like?
Secondary dimensions of diversity are those that can be changed – the mutable
differences we acquire, discard and/or modify throughout our lives. Some examples
include:

educational background

geographic location

income levels

marital status

military status

parental status

religious beliefs

work experience
The ‘old boy’ network is a good example of how secondary dimensions of diversity play
a major part in job allocation. An Oxbridge education can be an unspoken but necessary
qualification for certain jobs in particular institutions in the City. Some city companies
prefer their employees to have an army background. The novelist Anthony Burgess
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always maintained that coming from catholic schools in Manchester and Manchester
University made his career as a novelist doubly difficult as most British novelists, critics
and publishers were all friends and colleagues from Oxford University. Being married is
an expectation for most male senior managers in business, whereas for a woman it can
seriously limit her rise to senior management in certain companies.
To become a truly global player in today's global market a company's top team simply
cannot remain mono-cultural and be effective. At the centre of the strategy to downsize,
driven by recession and increased global competition, is the requirement for a company to
have the right mix of employees in terms of gender and other dimensions of diversity.
Trouble at Texaco
In the difficult task of diversity there is no room for hypocrisy. In November 1996, while
Texaco was hard at work rolling out an employee diversity policy in Britain that
contained all the right aspirations, the transcript of a meeting between senior officials of
Texaco Inc. in the US, appeared on the front page of the New York Times.
According to the transcript from a hidden tape recorder, the executives openly discussed
shredding minutes of meetings and other documents that were sought by black employees
in order to bolster their charges that Texaco discriminates against minorities in promotion
and fosters a racially hostile company culture. What is more, the tone and substance of
the discussion were racially offensive.
In a damage limitation exercise, with Jesse Jackson calling for a global boycott of
Texaco, chairman Peter I. Bijur spent $176 million to end the lawsuits filed by black
employees. It was the biggest settlement ever of a US discrimination case.
The Texaco settlement (see box) if implemented whole-heartedly could transform the
company to a leading-edge role model for global firms not just for American companies.
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TEXACO’S DIVERSITY PAY OUT

$115 million in cash to about 1,400 current and former Afro-American workers.

$26.1 million in pay rises over five years for Afro-American employees.

$45 million for diversity training.

The creation of equality and tolerance task force composed of three members selected
by the company, three members named by plaintiffs in the lawsuits that sparked the
issue, and a chairperson agreed on by both sides to make:
1. Changes in employment policy.
2. Reports twice yearly to the Board.
3. Judgements from information available from company records.
Ford falters
Even companies which have a diverse workforce can get it wrong. Recently, Ford had its
own negative publicity over an advertising farce that insulted its already diverse
workforce in the UK. A photo was taken of employees at its Dagenham plant, which
included five members of ethnic minorities. When the same photo reappeared several
years later their faces had been replaced by white ones. This greatly offended all five of
the people – four of whom were still working at the plant.
Ford management apologised to the offended workers and gave them each a cheque for
£1,500 in compensation for their hurt feelings. But not before the union at the plant
staged an angry walkout over the issue that cost the company an estimated £2.8 million in
lost production. The fault Ford said, lay with its advertising agency, who redid the photo
for promotional use in Poland because the original photo ‘did not portray the ethnic mix
in Eastern Europe’.
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The pluralistic leader
The demand for diversity, which flows from a business case as well as the ethical
principles of a level playing field for all and good corporate citizenship, requires a new
leadership style. The pluralistic leader:

has vision and values that recognise and support diversity within the firm;

demonstrates ethical commitment to fairness and the elimination of all types of
workplace discrimination;

possesses a broad knowledge and awareness regarding primary and secondary
dimensions of diversity and multicultural issues;

is open to change based on diverse inputs and feedback about his/her personal filters
and blind spots;

is a mentor and empowerer of diverse employees;

remains an ongoing catalyst and model for individual and organisational change.
Nearly 90 years after Israel Zangwill first wrote of the American ‘melting pot’, referring
to the European immigration experience in the US, the myth of homogenisation is dead.
Some of the best American and European companies are now creating a new rainbow
workforce where diverse cultures are cultivated and managed rather than absorbed and
assimilated. The ‘cookie cutter’ concept of company culture, where firms like IBM
created employees in their own peculiar image, is gone forever. In its place is employee
diversity where divergent and diverse contributions are welcomed.
.
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The dangers of group think
The disastrous launch of the Space Shuttle challenger on January 28, 1986 is attributed, in
part, to the homogeneous company culture of the decision-makers – male engineers with
identical engineering backgrounds and similar personality profiles. The NASA managers
were so hell-bent on reaching their objectives that they ignored safety warnings from
outside contractors Rockwells (about ice on the launch pad) and from Morton Thiokol
(about the cold temperature and rubber O-rings) and their own engineers who opposed the
launch.
Because these NASA managers were too similar in type and background
(WASPS), they easily developed a “group think” mentality and a management style that
let programme objectives override good judgement. Since research indicates that
individuals cannot be made to change their management profile drastically in the long
run, the way to change the aggregate profile of NASA managers is to bring in a small but
significant number of managers from outside the agency who are not in the NASA mould
and who would add the desired diversity to the team.
Best Practice
From July 1998 to March 1999, BT ran a ‘Freedom to Work’ initiative in its Cardiff and
Swindon Software Engineering Centre (CSEC), part of the company’s Networks and
Information Services Division.
Delivering and supporting information technology products and services is a rapidly
expanding industry where there are national skills shortages. So it is in BT’s interest to
keep its employees. The ‘Freedom to Work’ pilot project allowed some of the 600
employees of CSEC -- 20% of whom are women -- to design their own working patterns
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to achieve a better balance between work and home-life. Some 18 employees and a
number of senior managers participated in the experiment.
Volunteers were invited to be radical and creative in their proposals for changes in their
working patterns. The changes included homeworking, working full-time but only over
four days, and working a combination of long and short days. As a direct result of the
scheme, three participants who say they would otherwise have left, stayed with CSEC. In
another case, a male employee with two disabled children was able to design his working
day so that he could share the school-run, allowing his previously unemployed wife to
take on part-time translation work. Women employees participating in the scheme said
they no longer felt guilty about the balancing act of work and home needs. Two maternity
leavers in the scheme returned to full-time rather than part-time work.
The dividends to the company in addition to retention of skilled staff (labour turnover fell
to 5% compared to 15% in similar centres) included improved productivity among some
participants, the attraction of new employees to the company, a cut in overtime costs, and
greater customer satisfaction. The scheme was so successful, it has now been
recommended to the BT board that it be integrated into mainstream company policy.
Such initiatives are not only of internal benefit to the company, they win favourable
publicity. Organisations such as Opportunity 2000 are quick to award best practice
companies. Last year Fortune magazine (August 3, 1998) published for the first time
‘The 50 best companies for Asians, Blacks and Hispanics’ under the banner ‘companies
that actually do something about diversity’.
At these 50 best companies, the CEO leads the diversity mantra and he does more than
merely encourage his executives to build a diverse workforce: he makes part of their
bonuses depend on it. ‘What gets measured gets done,’ explained Jim Adamson, CEO of
Advantico, which came second from the top of the list. Employees at these companies are
encouraged to discuss and debate sensitive race issues in the workplace without fear of
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damaging their careers. Lucent Technologies, ranked number 16, goes as far as giving
financial support to groups representing Asian, Black and Hispanic workers as well as to
gay, lesbian and disabled groups. These employee groups have national conventions and
each has its own website.
How well do these companies with proven track records in employee diversity deliver to
their shareholders? ‘The average return to investors for the publicly traded companies on
our list walloped the S & P 500 over the past three – and five – year periods: 125.4% to
112.2% and 200.8% to 171.2%, respectively,’ Fortune reported. ‘No one can say that
companies striving for – and in most cases, investing heavily in – ethnic inclusion at
every level are doing so at the expense of profits.’
Commit to the cause
In the past diversity was driven by social justice considerations. These concerns for
fairness are still with us today and form the basis of ethical commitment to diversity. But
on these moral foundations the managers of the 21st century are challenged to begin
building the business case for diversity to gain great dividends. The words of Goethe
come into play in meeting the challenge and committing oneself to the cause of diversity:
Whatever you can do,
Or dream you can, begin it.
Boldness has genius,
Power and magic in it
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