Most American companies lack diversity in their leadership roles. According to a 2012 study by the Center for American Progress, nearly 96 percent of Fortune 500 CEOs are white. This isn’t a surprising statistic, but it becomes more surprising when you learn that — across companies of all sizes and workers of all skill levels — minorities make up one-third of the American workforce.Why aren’t these minority employees becoming company leaders?
Chicago United, an advocacy organization that focuses on building sustainable diversity business leadership, conducts a bi-annual study, “The Chicago United Corporate Diversity Profile,”to drill down into this very question. In 2014, the company documented a lack of diversity in the leadership ranks: 76 percent of all executives in their study were white. When you move up the ladder and look exclusively at C-suite executives, the percentage of whites climbs to 82 percent.
The root of this problem is a limited talent pool. According to the Current Population Survey, in 2013, approximately 40percentof whites between the ages of 25 and 49 had a college degree, while only 20percentof African Americans, 15percentof Latinos and 58percentof Asian Americans in the same age bracket had earned a degree. It’s easy — too easy, perhaps — for companies to chalk up their lack of diversity to this ongoing challenge. Why should they try to solve a problem that seems so pervasive?
Simply, it makes business sense. Diversity, especially in leadership roles, has real, tangible business benefits. Diversity within a company leads to better performance in a number of ways:
- Connection with your customer. To understand your customer, you need to understand their needs, particularly their purchasing triggers. And without a variety of perspectives within your leadership, you’ll be unable to fully engage and understand your customers’ habits.
- Employee innovation. A work environment open to diversity is more flexible and favorable to employee creativity.
- Continuous quality improvement. An environment where employee viewpoints are valued will help your company continually improve the quality of work.
Further, building diversity is a proven strategy for attracting top talent. According to Glassdoor’s 2014 Diversity Hiring Survey, two-thirds of people consider diversity important when deciding where to work, and most of them believe that leadership is responsible for increasing diversity.
Additionally, diversity attracts diversity. Minority groups value diversity even more than other job seekers, with 89 percent of African American respondents and 70 percent of Latino respondents reporting that diversity is an important factor for them when evaluating job offers.
Lastly, diversity is profitable. According to the Center for Talent Innovation’s 2014 study, “How Diversity Drives Innovation: A Compendium of Best Practice,” diverse companies are 45 percent more likely than nondiverse companies to have expanded market share in the last year. Companies with more women in senior management outperformed companies with fewer women in leadership positions. And in 2012, McKinsey & Co. researchers Thomas Barta, Markus Kleiner and Tilo Neumann found that companies with diverse boards were generating a return on equity that was 53 percent higher on average than their nondiverse counterparts. There is no shortage of studies that demonstrate the effect of diversity on a business’s bottom line.
So how can companies make themselves magnets for talented, diverse employees?
Embed diversity companywide. Diversity can’t just be a number that your business tries to hit. Companies must embed diversity throughout the organization: among leadership, suppliers and vendors, HR, internship programs — diversity must be a permanent pillar of your culture.
Partner with community organizations. Companies would also be wise to partner with local service organizations, nonprofits, universities, community colleges and trade schools to begin building pipelines of diverse talent. AT&T Inc., for example, has successfully partnered with the Society of Professional Engineers and historically black colleges and universities to build diversity in its workforce. According to the employment statistics published on company’s website, 39 percent of their managers are minorities (compared with the national average of 22 percent). The company also reports that its2013 retention rate was 86percentfor women and 88percentfor minorities.
Create clear career paths for all employees. Companies that want to both attract and retain diverse talent must create a culture of professional development. It’s important that all of your employees can see the company as a place to grow, not a stepping-stone to something bigger and better.
Identify and groom high potential talent before there is a need. Diverse leadership attracts diverse talent at all levels. So when a midlevel employee demonstrates the potential to enter the leadership ranks, begin the grooming process even if there’s not an immediate need. This can be done through professional development or through mentorship — particularly relationship building between midlevel employees and C-level leaders.
Address unconscious bias. Sometimes a company can be its own worst enemy in its efforts to attract diverse talent. It may be hard for those in the position to hire to understand that their own unconscious biases are affecting their hiring decisions. Google in particular, after its highly publicized diversity disclosures, has implemented a program designed to help employees uncover and overcome their unconscious biases.
Incorporate diversity into your brand. A number of major brands have integrated diversity into their brand messaging and seen tremendous results. For example, Coca-Cola, a company that famously settled the largest racial discrimination lawsuit in history just 15 years ago, has now aligned their advertisements with their commitment to inclusiveness. Its 2014 Super Bowl ad solidified the company’s efforts. Further, branding efforts are backed up with internal practices, including diversity training and a diversity speaker series.
American companies and their leadership must resist the urge to throw up their hands and chalk their lack of diversity up to dismal education statistics. It’s no longer an option, or a smart business decision, to assume that diversity will build organically over time. The companies that implement these proactive strategies now will be the ones that exceed their growth goals and performance expectations over the next several years.