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Diversity Finds Its Place

More organizations are dedicating senior-level executives to drive diversity
initiatives for bottom-line effect.

By Robert Rodriguez

August 2006
Vol. 51, No. 8

The role of the leader of diversity efforts has certainly changed—

SHRM report: 2005
Workplace Diversity
Practices Survey Report
and not just in a change of title to chief diversity officer (CDO).
Today, the need for a big-picture thinker on diversity issues is
greater than ever, driven by such factors as demographic
changes in the U.S. workforce and the extension of benefits to
workers’ significant others regardless of marital status.

SHRM article: Tapping the
Hispanic Labor Pool (HR
Magazine)
Report: 2005 Diversity
Annual Report (Aetna)
Web site: The Association
of Diversity Councils
SHRM book excerpt:
Diverse Teams at Work:
Capitalizing on the Power of
Diversity
But certainly the biggest driver for higher-level diversity strategy
is the need to tap the creative, cultural and communicative skills
of a variety of employees and to use those skills to improve
company policies, products and customer experiences.
One company did just that: The Latino Employee Network at
Frito-Lay, the snack food division of PepsiCo, proved invaluable
during the development of Doritos Guacamole Flavored Tortilla
Chips. Members of the network, called Adelante, provided
feedback on the taste and packaging to help ensure that the
product would be regarded as authentic in the Latino community.
The Adelante members’ insight helped make the guacamole-
flavored Doritos one of the most successful new-product
launches in the company’s history, generating more than $100
million in sales in its first year alone.

“The fact that one of our diverse employee groups helped to make this product so successful is one
example of just how we leverage diversity to drive business results,” says Amy George, vice president of
global diversity and inclusion at PepsiCo, the convenience-food and beverage company based in
Purchase, N.Y.

To gain such bottom-line business advantages from diversity initiatives, many organizations are
employing methods of understanding and relationship-building that encourage all employees to be
heard. And those organizations are relying heavily on a new breed of diversity leader who can develop
strategies to achieve those goals.

“Part of a top diversity executive’s role in any organization is to integrate diversity into every aspect of a
business, including the workforce, customers, suppliers, products, services and even into the community
a business serves,” says Raymond Arroyo, chief diversity officer at Aetna, a diversified health care
benefits provider based in Hartford, Conn.

Thus, the changes in the top diversity job reflect new demands and expectations not only of this one
position, but also of the entire diversity function.

The Bottom Line

Most organizations have come to realize that diversity efforts can affect the bottom line, but few take
action. In the 2005 Society for Human Resource Management Workplace Diversity Practices Survey
Report, nearly three out of four organizations said they ensure that diversity is a consideration in every
business initiative and policy, but only 21 percent had staff dedicated exclusively to promote workplace

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diversity practices.

By demonstrating an impact on the bottom line, top diversity executives can raise the profile of the
effort. “Until recently, the commitment many companies had to diversity was fundamentally based on
moral, ethical and compliance reasons,” says Rudy Mendez, vice president of diversity and inclusion at
McDonald’s Corp., the global food service retailer based in Oak Brook, Ill. “But now that we can add
business impact, diversity executives are being given a much bigger role.”

An indication that diversity executives are

getting a bigger role is the fact that many
are gaining the “chief” title, although they
usually still report to the chief HR
executive. When looking for someone to
fill the role of diversity leader, HR must
find someone who is first a good business
executive. That characteristic is needed to
connect the dots from diversity initiative
to business strategy to higher profits,
according to Edwin Garcia, vice president
of corporate diversity and inclusion at
Kimberly-Clark, a global health and
hygiene products manufacturer based in
Roswell, Ga. “You can’t be a true business
partner if you don’t have solid business
acumen,” he says.
Monica Emerson, executive director of
diversity at DaimlerChrysler Corp., the
automobile company based in Auburn
Hills, Mich., says: “As a diversity
executive, I not only have to have solid
business capabilities, I need to be very
knowledgeable of the different businesses
in my organization to align diversity
initiatives to support the needs of the
businesses. You won’t be respected or
have credibility if you don’t understand
the business issues of the organization.”
But business skills alone are not enough.
Diversity executives should be skilled in
multiple areas of professional
effectiveness. CDOs must possess strong
influencing skills because they often push
diversity initiatives across a large
organization and need to persuade others
to support their efforts, George says. She
adds, “If a company’s diversity program is driven by only one person, that diversity program is bound to
fail.”
Executive Commitment at PepsiCo
Diversity programs cannot succeed without
commitment from the organization’s top executives.
PepsiCo’s executives demonstrate their commitment
to diversity by holding themselves accountable.
Each of the CEO’s direct reports is responsible for
the growth and development of a different group of
employees. One executive partners with black
employees, for example, another one with women,
yet another with Latinos, and one with gay, lesbian,
bisexual and transgender employees. To help create
a truly inclusive work environment for everyone,
Larry D. Thompson, who is PepsiCo’s general
counsel and happens to be black, is assigned to
PepsiCo’s white male community.
These executives hold themselves accountable for
understanding the workplace issues the diverse
employee populations face. They work to identify
the key talented individuals in the groups and often
serve as their “voice” to the rest of the executive
committee and the CEO. Every year all of the
executives share with the rest of the committee the
biggest concerns of their groups, identify the
support needed by the groups, and articulate their
plans to address the concerns faced by these
diverse groups.
Adds Amy George, vice president of diversity and
inclusion at PepsiCo: “This sort of executive
commitment and accountability ensures that no
group of employees is left behind and that everyone
is being equally represented at the executive table.”

Listening skills are also critical for diversity executives because they are exposed to a variety of
viewpoints on key issues. In addition, diversity executives cite the importance of having an open mind
because the job requires them to get out of their comfort zone and experience things they may not be
familiar with or be naturally drawn to.

Measuring Impact

CDOs today are taking diversity measurement beyond common diversity metrics such as turnover,
workforce representation year-to-year and employee satisfaction scores. “Diversity is no longer about
counting heads; it’s about making heads count,” George says.

For example, Aetna tracks the percentage of employees who are multilingual and encourages employees
to learn a second or a third language. Aetna’s employee networks offer language classes during
lunchtime for all those employees who are interested in learning a second or third language.

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“It is critical for our employees to speak the language of our customers, literally,” Arroyo adds. “If we
see certain functional segments that would benefit from employees knowing more than one language,
we target our recruiting efforts to identify individuals who can speak more than one language for those
roles.”

The diversity office at Aetna also measures the company’s community involvement and its impact on the
marketplace. By helping to support diversity-related community programs, such as funding a cultural
competency program at an Atlanta hospital, and having volunteers in key areas, Aetna maintains, the
company increases its presence and brand reputation in key markets, resulting in more business
opportunities. “Now, when a sales representative is working with a potential client in a specific area, he
can leverage our positive diversity reputation in the community, and this helps our business,” says
Arroyo, who measures such marketplace items as part of Aetna’s diversity scorecard.

Kimberly-Clark uses indexes and benchmarking data to determine its success in competing within its
industry for top diverse talent. The index, produced and shared quarterly, allows Kimberly-Clark to
compare its demographic profile with competitors’ data on a number of levels, according to Garcia. The
data are presented as a function of recruitment rates, promotion rates and attrition. The tool also shows
the distribution by gender and race through five broad bands of compensation.

Diversity Office Structure

How CDOs add value often depends on their diversity organization’s structure.

A centralized diversity staff is critical for tracking diversity metrics, managing diversity vendors that
provide training or recruiting, and communicating the diversity message. But a corporate structure with
no connection to the business units does not help the diversity message permeate to the rest of the
organization, says Garcia. Thus, a matrixed structure seems to be the structure of choice for CDOs.

DaimlerChrysler, for example, has a small, centralized diversity staff. But the staff is also aligned with
the company’s diversity council, made up of members of the organization’s executive committee and
representing various business units, suppliers and dealers. Such a matrix approach helps with the
alignment of DaimlerChrysler diversity programs with both internal and external stakeholders, Emerson
says, and facilitates communication among all groups.

Similarly, PepsiCo has a centralized diversity staff that develops an overarching diversity strategy; that
strategy is executed locally by each of its divisions. PepsiCo’s Diversity and Inclusion Governance
Council, made up of executives from all divisions and functional areas, provides input into the diversity
strategy, raising the executives’ sense of ownership of the strategy. “Our Diversity and Inclusion Council
also provides a means for sharing best practices [in diversity efforts] and ensuring consistency,” George
says.

Top 5 Diversity Challenges
Diversity executives often operate in an
environment full of obstacles. Their success
depends on their ability to overcome these five
challenges:
z Challenge 1: The difficulty of communicating
effectively when diversity-related data
include sensitive information such as age,
gender, ethnicity, religion and sexual
orientation.
z Challenge 2: The slowness of change and
progress brought about through diversity
initiatives, which is especially difficult in fast-
paced cultures that want to see immediate
results.
z Challenge 3: Obstacles to ensuring the
consistent and rigorous implementation of
diversity programs across large, dispersed
organizations.
A Crucial Ingredient
CDOs agree that business communication
is critical to an effective diversity
program.
Garcia finds a market-segment approach
beneficial to communicating his diversity
vision to others at Kimberly-Clark.
“When I talk about diversity to our
finance leaders, I focus on rates of return
from people investments,” he explains.
“When I talk about diversity talent to
engineers, I use [engineering] terms as if
diversity were a reaction with inputs
[recruitment] and outflows [attrition].
With marketing, I talk about employment
branding as a means to access an
emerging market for diverse talent.”
Similarly, Mendez helps to connect with
constituents at McDonald’s by using

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business rationale. When he sets forth his

z Challenge 4: “Diversity fatigue,” which
occurs when employees become desensitized
to the many diversity messages they receive
through diversity training, recruitment
programs and outreach projects.
z Challenge 5: Keeping white males from
feeling overlooked in diversity programs.
diversity strategy with franchise owners,
he reminds them of the impact that
diversity can have on their consumer
marketing opportunities. “I frame the
conversation around what diversity
means in terms of increased breakfast
sales or increased salad sales,” he says.

PepsiCo uses a variety of communication methods to get its diversity message out to a large, dispersed
organization. This includes the companywide daily e-newsletter and executive speeches in addition to the
typical diversity celebration that highlights employees’ uniqueness, diversity speakers, and food and
entertainment from around the world.

Aetna’s diversity staff creates a detailed annual diversity report for employees and the public. The 24-
page 2005 Aetna Diversity Annual Report includes a description of diversity programs; descriptions of
the company’s diversity affiliations, partnerships and philanthropic efforts; its diversity-related
recognitions; and information on its investments in funds managed by women and minority-group
members.

Arroyo at Aetna adds, “Our annual report allows us to share our diversity story by highlighting our
diversity-related successes in the marketplace, the community, our workplace and among our suppliers.”

Current and Emerging Issues for CDOs

Diversity and inclusion are constantly changing and evolving, so diversity executives must stay on top of
current trends and topics.

Today, CDOs are especially interested in demographic shifts, particularly the country’s growing Latino
population. “Every week we get calls from top diversity executives at Fortune 500 firms who want to
more effectively recruit top Latino talent so their organizations can successfully tap into the $700 billion
purchasing power Latinos have in the United States,” says Abe Tomas Hughes, CEO of the Chicago-
based nonprofit organization Hispanic Alliance for Career Enhancement. (To learn more about Latino
recruitment programs, see “Tapping the Hispanic Labor Pool” in the April 2004 issue of HR Magazine.)

CDOs also want their affinity groups to play a larger role in the business. Affinity groups at
DaimlerChrysler, for example, help shape company strategies related to multicultural marketing and
diversity recruiting. The groups also provide translation services and help with professional development
programs.

George at PepsiCo adds: “The diversity hot topics of today go beyond the visible diversity dimensions of
ethnicity, age and gender. For example, faith and religion in the workplace is an emerging issue that
organizations must address as part of their inclusion strategy.”

A broader global perspective also will affect the CDO role. For example, diversity executives need to be
well versed on how immigration issues in the United States affect the domestic workforce, but they also
need to know other countries’ immigration issues and how those issues can impact the company’s global
operations.

The CDO’s Future

A looming talent shortage, demographic shifts and an increasingly global workforce indicate that top
diversity executives will be in high demand. CDOs feel that in the future, as diversity becomes a bigger
part of an organization’s business strategy, more of them will report directly to the CEO, instead of to
the HR director.

Diversity executives also believe that the alignment of diversity with business strategy will increase
demand for diversity executives who hold MBA degrees and have line experience. “I anticipate we’ll see
a larger percentage of folks in top diversity roles coming from line positions like finance and marketing,”
Garcia says.

George, who has an MBA and spent eight years in sales and marketing roles, agrees. “Diversity
executives need to be able to relate to the demands placed on line management so they can craft

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winning diversity programs.”

What’s more, Mendez says, diversity executives can expect to collaborate more with colleagues in allied
specialties. “The demand for diversity education and the desire to enhance career development of
historically underrepresented groups will most definitely cause us to partner more with the learning and
development function,” he says.

The enhanced role for CDOs promises to play a key part in the success of many organizations. But real
success requires diversity executives to convince every employee that he or she owns the commitment
to diversity.

“The future journey for top diversity executives is still uncharted,” Arroyo says, but it’s a journey that
“we must continue to make, for the continued success of our companies depends on it.”

Robert Rodriguez, Ph.D., is a faculty chair in the School of Business & Technology at
Capella University and also serves as board chairman for the Hispanic Alliance for Career
Enhancement, a nonprofit that helps companies attract, develop and retain Latino talent.

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