The Corporate Diversity Charade

The dirty little secret of corporate America and the practice of diversity is that 25 years after establishing "diversity" offices, most companies have not developed a mature understanding of how diversity can contribute to their bottom lines.
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The dirty little secret of corporate America and the practice of diversity is that 25 years after establishing "diversity" offices, most companies have not developed a mature understanding of how diversity can contribute to their bottom lines. Diversity management has a complicated history arising, as it does, from a sequence of discrimination lawsuits that unsettled corporate America in the early 1990s. As the list of individual and class action lawsuits grew, led by Texaco's race discrimination case and First Union's age discrimination lawsuit, both in 1994, a public relations backlash against the companies created a crisis of confidence among shareholders.

CEOs sought to address the problem by hiring what they considered to be a "safe pair of hands," usually a minority or a woman, as head of their efforts to counter public perceptions that they discriminated in hiring by systemically denying employment to classes of workers. Led mainly by the CEOs themselves and mission-driven diversity practitioners who held the CEOs accountable, along with federal monitors, these companies went about defining hiring goals to increase their minority employee head-counts.

In the mid-2000s, corporations began to open up their purchasing to minority suppliers, hired Chief Diversity Officers, and developed "employee resource groups" to give minority employees a voice in the companies. From these occurrences developed both the work and professionalization of "diversity." And, in many companies, that is where the story ends. Indeed, although the field of "diversity and inclusion" exists and nearly three-quarters of large American corporations have diversity offices, corporations have shown little interest in diversity as a strategic business tool.

To these companies, "diversity" is limited to counting the number of minorities and women in categories of employment, avoiding legal liability, and buying good public relations for the price of table sponsorship at community, civic and social functions. They spend billions of dollars each year to produce results that do not move their businesses forward materially, and remain silent on issues of diversity's business applications in generating revenue, containing cost, and structuring change.

Their diversity strategies are stuck in an "affirmative action" matrix of guilt, fear, conflict avoidance, and head-counts packaged as "diversity management." They hire Chief Diversity Officers who are untrained and disengaged, give them no power or resources, treat them as appendages to senior management, and decouple diversity management from business strategy. For their part, many Chief Diversity Officers are happy not to press the boundaries of their corporations' awareness of higher levels of diversity management because they too are stuck in old paradigms and afraid of being held accountable to new standards. These corporations and executives give the allusion of racing toward diversity when in fact they are on a treadmill to nowhere. Visible here is a dual complicity of ignorance and trepidation that devalues diversity in large corporations.

Leading-edge CEOs are practicing "strategic diversity" to harness business value. They recognize that diversity is not just about people; it is about every complex situation, decision, task, and perspective that imbues their companies. They know that their companies' effectiveness is predicated on interlocking systems of diversity mixtures, and that diversity is evident in everything their companies do. Strategic diversity is not about advancing the numbers of minority groups and women per se, but rather leveraging diversity mixtures to support corporate business strategy, solve business problems, and contribute to business growth. In a newly released study on the evolution of diversity management that includes a dozen Fortune 500 businesses and national sports organizations, I found that only 25 percent of the organizations have achieved a level of diversity maturity that can be called "strategic." The others are engaged in a charade, pretending to add business value when in fact they can point to little objective evidence of return on investment.

The forward-leaning CEOs who keep strategic diversity in mind are as concerned about diversity's business value as they are about diversity's social value. They structure their organizations around a different set of diversity expectations built on advancing core business concerns. They have reframed their understandings of diversity away from human differences to an idea of integrative excellence that can permeate their organizations from top to bottom. Not only can everyone be part of integrative excellence, it can be developed to render tangible results because it is structured around business strategy rather than human resources.

While the possibilities of strategic diversity management are immense, CEOs must re-imagine diversity and be unafraid to hold their diversity offices to the same standards they do their business units. Chief Diversity Officers who are unprepared to lead the way forward must be jettisoned. Operational leaders and managers must adopt a new diversity mindset, and be skilled at identifying and integrating excellence in new ways and from unlikely sources.

Can such a paradigm advance us as a more inclusive nation? Perhaps not, but it can ensure that by linking diversity management with business strategy, companies are practicing the most advanced form of business inclusion possible and generating maximum value for their shareholders. Although we have not entered a post-racial period in our nation, and a need for socially-constructed diversity paradigms certainly remains, there is much more value that a re-conceptualization of diversity can bring to corporate strategy and operations. Every CEO should know what that value is for his or her company.

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