s p e c i a l a d v e r t i s i n g s e c t i o n

By linking diversity initiatives to core strategy,many business leaders are able to dramaticallyimprove their companies’ productivity, negotiat-ing power, and problem solving; increase salesand profits; foster innovation; reduce costs; sus-tain competitiveness; and ultimately improveshareholder value.

What Is Diversity? The term diversity describes the global economicvillage of myriad cultures, languages, races, eth-nicities, and world views. For business, diversityrepresents the inexorably intertwined global

marketplace, talent pool, vendors, and suppliers;the countries in which we operate; the govern-ments with which we negotiate; and thecommunities in which we live. It is reflected inour laws and our values.

Corporate diversity initiatives are the proac-tive (and sometimes reactive) strategies andtactics developed to meet the challenges, addressthe issues, and, ideally, leverage diversity as acompetitive advantage and opportunity.

Over the last 40 years, history has played alarge role in helping corporations recognize andleverage diversity. The civil rights movement

nce written off by some as the latest corporate fad, diversity may, infact, prove to be the single most important performance factor of the21st century. Diversity’s emergence as a critical performance factor is

evidenced in new research; the growing number of corporate success stories;the increasing commitment of corporations, including the introduction of aCDO (Chief Diversity Officer) or similarly titled senior executive charged withoverseeing diversity efforts; greater accountability measures; and new per-formance models. The reason is simple: The diversity of our global populationaffects every facet of business and society.

S1 COPYRIGHT © 2005 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION DIVERSITY / MARCH 2005

OIllustrated by Chris Murray

by Michael L. Wheeler

3069 ad924 Aurora 2/10/05 1:38 PM Page 1

s p e c i a l a d v e r t i s i n g s e c t i o n

and key legislative acts such as Equal EmploymentOpportunity, Affirmative Action, and, more recently,Sarbanes-Oxley, have continually raised the bar foraccountability. In best practice companies, though,diversity is a move from mere compliance to proactiveengagement of the world’s greatest natural resource:people. Drivers may change, but the basic premiseremains the same—the full engagement of talent andrespect for all.

Business Opportunity, Not Business CaseIn his MIT Sloan School of Management research report,The Effects of Diversity on Business Performance: Report of theDiversity Research Network, Thomas Kochen concludes:“There is little point in continuing to askwhether diversity’s impact is naturally goodor bad. Instead, managers and researchersalike should recognize that diversity hasbecome an inescapable social fact and figureout how to maximize its benefits whileminimizing its negative effects.”

Diversity is creating a sheer force ofinescapable change for corporations. Acompany’s ability to align, integrate, andleverage diversity initiatives will deter-mine its success in the 21st century.Kochen explains: “Organizations thatinvest their resources in taking advantage of the oppor-tunities that diversity offers should outperform thosethat fail to make such investments…. The literaturesuggests that diversity, if unattended, is likely to have anadverse effect on group processes, such as communica-tions, conflict, and cohesion…. To be successful inworking with and gaining value from this diversityrequires a sustained, systemic approach and long-termcommitment.” A company’s overall market perform-ance is directly linked to its ability or inability to createstrategies and tactics that leverage the Diversity Perfor-mance Factor.

The Diversity Performance Factor: The “SoftStuff” Is the Hard Stuff The Diversity Performance Factor is the nexus, the con-vergence, the intersection, at which diversity can be anenabler or inhibitor—an advantage or disadvantage—toachieving business success (see exhibit).

The Diversity Performance Factor includes manyvariables: race, gender, ethnicity, culture, language, reli-gion, sexual orientation, and class, socioeconomic, andeven functional differences within an organization. Itcomes in the form of systemic racism, sexism, xenopho-bia, and homophobia, and systems that are misalignedwith current business reality. It also includes issues thatarise due to differences and systemic bias, such as adverseeffect on group processes, breakdowns in communica-tion, conflict, and poor morale. It encompasses differentworld views, new ideas, different ways of doing things,unique perspectives and skills, talents, and abilities. Itoccurs at any point where exclusion or inclusion is basedupon some typically subjective factor.

Intersections and Convergence: When differencesconverge, or create what Frans Johansson, author of TheMedici Effect (HBS Press, 2004) calls an “intersection,” itpotentially creates “a place where ideas from differentfields and cultures meet and collide, ultimately ignitingan explosion of extraordinary new discoveries.” Johans-son explains: “Innovators change the world by steppinginto the intersection.”

Some people thrive in the intersection, but for many,intersections are frightening and disconcerting—morelike stepping into the great unknown. Without aware-ness, skills, openness, and a real competence formaximizing opportunities, these intersections becomeculture clashes, breakdowns in communication, and mis-understandings. The result: missed opportunities, lowerproductivity, turnover, and direct and indirect costs. Thecosts can be devastating: a failed marketing campaign, alost contract, class-action lawsuits, or a tarnished public

S3 DIVERSITY / MARCH 2005

“From our work globally, we have observed the wide rangeof strategies that organizations have been using to competitively market their employer brands and to recruitdiverse talent. We have also witnessed the diligent waysthat employees are now researching potential employers.Market leaders will be organizations that will competitivelyharness where diverse populations will want to work,spend, and invest.”

Dr Glenda Stone, CEO, Aurora

YE

LM

AG

CYA

NB

LA

CK

s p e c i a l a d v e r t i s i n g s e c t i o n

image. More often than not, it is the intangibles—whatsome call the “soft stuff ”—that have the greatest impacton business performance. Instituting a comprehensivediversity strategy helps create a process that allows forthese intersections to be effective—and in the organiza-tional sense, be the point of opportunity.

The Diversity Performance Factor model demon-strates how these factors come into play and howspecific interventions can turn a challenge into anopportunity for performance enhancement. In his Sep-tember 2004 HBR article, “Diversity as Strategy,”David Thomas writes about IBM’s ability to expandminority markets dramatically by promoting diversityin its own workforce: “The result: a virtuous circle ofgrowth and progress.”

Diversity as StrategyAccording to a 2001 Conference Board research report,The Diversity Executive, there are threekey drivers behind diversity as strategy:the marketplace, talent, and organiza-tional effectiveness. These threecomponents are interdependent. IBM’sTed Childs captures the logic: “Diversityis the bridge between the workplace andthe marketplace.” Diversity as strategyinvolves the creation, retention, anddevelopment of a globally diverse work-force and then using this diversity as astrategic advantage in the marketplace.

Organizations like IBM, Safeco,Haynes and Boone LLP, and Texas Instru-ments understand how viewing diversityas strategy makes a difference.

• At Safeco, “valuing diversity” is a universal compe-tency for success. Safeco’s Kevin Carter, leader,corporate diversity initiatives, explains: “Safecowants to sell insurance to as many people as possible,and we know America is becoming increasinglydiverse. We’re better off considering differing ideasand perspectives because inclusion of others oftenleads to better ideas and business results.”

• When Haynes and Boone bid for a contract withShell Oil, diversity was one of the requirements thathelped them win the bid. Robert Wilson, managing

partner at Haynes and Boone, explains: “We wouldnot be a successful law firm without having recog-nized long ago that diversity is one of the keydifferentiators between a good firm and a great firm.Diversity at Haynes and Boone goes well beyond anycoordinated effort; it’s part of our culture.”

• In 2004, the Texas Instruments Diversity Network(TIDN) asked a cross-section of diverse TI employ-ees to join in an unusual and particularly dauntingpilot project: to apply their unique knowledge andabilities to a significant problem-solving effortinvolving crucial cross-cultural communications. Theeffort galvanized this very diverse group and yieldedan excellent business outcome. TI began to envisioncontributions TIDN might bring to other opera-tions, such as TI’s worldwide purchasing group, itssales and marketing operations, and its quality teams.

These companies apply both strategic and tacticalapproaches to enhance their business success and to real-ize the full potential of their diversity initiatives.

Next Practices for Performance Enhancementand Unleashing PotentialThere are four critical steps to building competenceand unleashing the potential of a diverse workforce: 1)understanding and overcoming barriers; 2) establishinga strong foundation; 3) recognizing universal themesabout human and organizational behavior; and 4) cre-ating real intersections to leverage diversity andenhance performance.

DIVERSITY / MARCH 2005 S4

“Diversity is a key corporate strategy and a guiding principle behind the way we do business. New York Lifecontinually strives to build a diverse workforce, and toensure that all employees are given equal and ampleopportunities to maximize their potential and establishsuccessful careers. Diversity enables us to better serveour customers. It strengthens the workforce by broaden-ing the pool of talent, which results in more innovativeproducts and services.”

Angela Coleman, vice president, human resources

New York Life Insurance Company

s p e c i a l a d v e r t i s i n g s e c t i o n

Overcoming the Barriers: Several barriers exist thatprevent companies from fully engaging diversity as away to maximize performance. Systemic barriers includeracism, sexism, xenophobia, and homophobia. Issuesfacing women and people of color and other marginal-ized groups are not validated or seen as significant. Thediversity executive may not have the real power or influ-ence needed to do his job. Programmatic barriersinclude initiatives where diversity isretrofitted into current or archaic busi-ness processes and practices. White malesare often left out of the diversity equa-tion. At times, the implications of race,gender, and ethnicity are oversimplified,reinforcing stereotypes. People in chargeof diversity initiatives may not have theskills and qualifications to be effective.Political correctness, too, is a barrier:Prejudice and bias go underground andare not seen as blatant discrimination.The biggest barrier is the failure toaddress issues honestly and with a realcommitment to change and inclusion.

Building a Strong Foundation: The diversity execu-tive plays a critical role in integrating diversity as aperformance factor for success. Their objectives are:

• Strategic direction—aligning diversity with businessgoals and objectives.

• Integration of diversity into key business and humanresources practices, initiatives, and objectives—ensur-ing that diversity is a consideration in every businessinitiative and policy; building a diverse workforcetop down; ensuring an inclusive work environment;and leveraging diversity.

• External relations—providing a link between the cor-poration and communities, educational institutions,advocacy organizations, and the government.

• Communication—keeping the organization informed,and making sure that issues and progress are con-stantly on managers’ and employees’ radar screens.

• Consulting and executive coaching—helping leadersunderstand diversity issues and offering guidance onhow to effectively handle them.

• Relationship building—as a catalyst, the diversityleader depends upon others to reach the entireorganization and to drive change.

• Metrics and accountability—maintaining workforcebalance, work environment, and instilling perform-ance and leadership accountability measures asintegrated performance measures. The CEO and topmanagement team must lead the charge.

Universal Themes: Understanding the psychosocialimplications of change and differences and recognizingcommonalities among those differences will greatlyenhance a company’s ability to leverage diversity as adriver of performance. Here are critical and universal fac-tors to consider:

1 We all crave respect.

2 People want to be heard and validated for who they are.

3 We all have a world view.

4 People like to be with people who are like themselvesbut can learn to value differences.

5 It is as important to consider the majority as it is the minority.

6 The workplace is unique. Corporations have atremendous opportunity to be learning labs that canpositively influence society by providing examples ofbehavior that supports inclusion.

7 Exposure to difference is critical.

S5 DIVERSITY / MARCH 2005

“Agilent stands at the edge of a global business erain which our ability to innovate and commit toexcellent results are key to our success. Every stepwe take to leve rage our g loba l d ive rs i t y as a competitive advantage is a step toward this goal.Our current global diversity and inclusion strategyensures that global leaders are confident workingacross cultures and are inspiring breakthroughinnovation within their teams.”

Alma Vigo-Morales, director, global diversity

Agilent Technologies

3069 ad919 New York Life 2/11/05 9:28 AM Page 1

s p e c i a l a d v e r t i s i n g s e c t i o n

S7 DIVERSITY / MARCH 2005

8 We all need to be a voice for any marginalized group.

9 We all have much more in common than we realize.

10 There are some things we can never understandbecause we are not someone else.

11 Just because something is not measured does notmean it is not important.

12 Discrimination can come from anyone.

13 The best ideas might come from the least expected place.

Creating Intersections: The intersection, accordingto Johansson, is “unknown territory where past knowl-edge and experiences are poor guides…. [it] is a placewhere we must leave many of our preconceived notionsbehind.” He concludes: “The advantage goes to thosewith an open mind and the willingness to reach beyondtheir field of expertise. It goes to people who can breakdown barriers and stay motivated through failures.”

Breaking down barriers “requires authentic, honest,and candid dialogue about the issues that get in the wayof our ability to be great,” says Karen DeCuir-DiNicola,manager of diversity, General Motors. It starts withmeeting people who are different, who have differentskills and perspectives, continues with conversation, and

grows through relationship and teamwork. TerryHoward III, diversity director for Texas Instruments,adds: “It’s important to understand that the benefit isn’t‘just’ the specific solutions developed. These efforts canspark full engagement among the diverse employees whoparticipate. The individuals are valued precisely becausethey are being themselves… identifying with their con-stituent groups; and also, in the process, they arebuilding personal relationships across other groups.”

The late Santiago Rodriguez, former diversity execu-tive for Microsoft, posed the question: “How doesdifference or absence of difference affect our design ofproducts, our marketing of services, and our customersatisfaction?” Take this question, get a diverse group ofpeople together, and begin the conversation!

Michael Wheeler is a strategic management consultant and

author specializing in workforce diversity. He is also a program

director at The Conference Board, where he was instrumental

in establishing their diversity councils, conference, and

research. Wheeler has worked extensively with Fortune 500

companies and has published numerous research reports and

articles for more than a decade. He can be reached at:

michael.wheeler@oestrategiesinc.com.

• Expand market share

• Foster innovation

• Improve productivity

• Reduce costs

• Employee engagement

• More diverse workforce

• Expand global presence

• Utilization of affinity andnetworking groups

• Cross-cultural competencydevelopment

• Accountability for diversity• Inclusive work environments• Diversity-related metrics• Integration of diversity into

business processes• CEO commitment• Vendor-supplier relation-

ships• Recruitment and retention

initiatives

• Greater market share

• Innovation

• Improved productivity

• Greater problem-solving

• Cost savings

• More efficient processes

• Fewer lawsuits

• Better teamwork

• Less turnover

• Fewer complaints

• Primary dimensions of diver-sity (e.g., race, gender, etc.)

• Systemic barriers (e.g., racism,sexism, xenophobia, andhomophobia)

• Exclusion• Breakdown in communication• Conflict• Complaints• Low morale• Fresh ideas• Different point of view• Different way of doing things• Different world view• Unique skills• Special talents• Inclusion

The Diversity Performance Factor

DiversityIt’s not an obligation—it’s an opportunity.

© 2005 Morgan Stanley

To make a difference, a company must keep its eyes

open to different ways of thinking.

That’s why we take diversity seriously in all aspects

of our business—from our employees, to our

customers, to the companies that supply us with the

goods and services that enable us to do business.

At Morgan Stanley, we understand that diversity is

not an obligation—it’s an opportunity.

www.morganstanley.com/about/diversity/

3069 MORGAN AD 2/10/05 1:41 PM Page 1