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6 Case Studies: Why Companies Rise & Fall in the DiversityInc Top 50

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By Barbara Frankel

6 Case Studies: Why Companies Rise & Fall in the DiversityInc Top 50What are the biggest differences between companies whose D&I initiatives are increasingly important to business goals and those whose efforts are not sustainable? Resources and metrics. Our analysis of six companies shows that real CEO support includes accountability for results and an empowered chief diversity officer who works effectively across the organization. Conversely, companies without the resources and commitment end up with diminished efforts and declining human-capital and supplier-diversity results.

The other critical factor is the ability to measure and assess results of D&I initiatives—especially mentoring, resource groups and multicultural philanthropy. Those who can’t measure what they’re doing—or who can’t validate what they are reporting—invariably lose momentum.

On the 2013 list:

  • 24 companies went up
  • 14 companies went down
  • 2 stayed flat
  • 6 moved to the list from 25 Noteworthy
  • 4 others earned spots on the list, including one first-time participant

Case Study No. 1: Company With Skilled Knowledge Workers That Rose

This company had been languishing in the middle of the list, while some of its industry competitors reached the top 10. The intent was there but a lack of organizational structure and resources prevented a concerted effort to use D&I to drive talent development. The upper ranks of the company remained almost entirely white and male.

With the arrival of a new CEO three years ago, the momentum changed. He quickly recognized the business value of D&I and, when the chief diversity officer retired, put a very skilled person who had successfully handled other major initiatives in the company in charge.

When negative publicity occurred, the CEO was forthright about admitting mistakes and the need to make quick changes to adhere to the company’s well-stated values. Working with the new CDO, he studied the best ways to hold executives accountable for sustainable changes to the corporate culture.

In the last year, the company has revamped its resource groups so they focus on finding talent and helping develop leaders. Resource-group participation has jumped more than 25 percent. The cross-cultural mentoring program has been formalized, with best practices and metrics established, and it has been rolled out across the organization. Specific efforts to address the flexible-work needs of talent, especially women, have been instituted.

The results? The most significant human-capital year-to-year progress we’ve seen and a move onto the top of the list. Specifically, a tripling of Latinos promoted into first management jobs, an 18 percent increase of women promoted into first management jobs, a 14 percent increase of women managers promoted, a 33 percent increase of Latino managers promoted. The most dramatic increases have been for senior women: The number of women reporting to the CEO has doubled, and the number of women in the next level is up 15 percent.

Contributing Factors

  • Involved CEO, right choice of CDO
  • Use of resource groups for talent development
  • Rollout of cross-cultural mentoring

Recommendations for This Company

  • While CEO commitment is deep, more structured involvement of next two levels would result in increased emphasis on succession planning.
  • Staffing for D&I efforts at this company remains lower than industry and other top talent competitors.

Case Study No. 2: Company With Skilled Knowledge Workers That Fell

This company is a long-time diversity leader that took its foot off the accelerator.

A lack of senior-level accountability resulted in declining human-capital demographics and ratios. A new person filling out the survey, who was less willing to be forthcoming about data, resulted in important questions being left blank.

While the company used to say it linked compensation to goals and used to provide the percentage of bonuses related to D&I, it now says it cannot provide this information. When asked why, the company responded that its compensation structure hadn’t changed, but it couldn’t specify any way diversity was actually being used to evaluate performance and drive results. The company also stated that it used to include D&I in its corporate mission statement but no longer could answer yes to this question.

We also noticed a significant year-to-year change in the responses to several important questions. Since last year, the company stopped reporting its percentage of employees in resource groups, its percentage of managers who are mentors, and both the percentage of its revenue going to philanthropy and the percentage of charitable contributions going to multicultural nonprofits.

When asked why these were left blank, we were told that a new person filling out the survey felt “uncomfortable” providing those answers and the company would rather not disclose that information.

Lack of transparency usually means lack of commitment, and that’s definitely the case. In the last year, promotions of Blacks and women into first management jobs and within management have fallen by more than 20 percent, and the company now has a 10 percent gap in female managers’ retention rates compared with that of male managers. Percentage of Tier 1 spend with Minority Business Enterprises (MBEs) and Women Business Enterprises (WBEs) also fell 10 percent.

Contributing Factors

  • De-emphasis on linking compensation
  • D&I no longer in mission statement
  • Avoids reporting key metrics

Recommendations for This Company

  • Involve CEO and senior leadership, through executive diversity council, in setting D&I goals and linking them to compensation.
  • Reassess why key metrics aren’t being reported (are they falling dramatically and, if so, why?) and their direct connection to business results.

Case Study No. 3: Hospitality Company That Rose

A company with a long history as a diversity leader, this hospitality company had been declining in recent years as competitors raised their games. A change in CEO brought renewed emphasis on resource groups and talent development for underrepresented groups, including mentoring.

For the first time, the CEO meets regularly with resource groups, and their impact, which had been diminished in recent years, has started to increase. The groups are now used for talent development and diversity training. The company has expanded the reach of its cross-cultural mentoring program, with participation rising more than 10 percent this year so that 53 percent of managers are now participating.

There has been an increase in human-capital demographics, which can be attributed to the resource groups and mentoring, and to the increased exposure of high-potentials to senior leadership. There have been increases year to year in Blacks and Latinos promoted into first management jobs (8 percent and 18 percent, respectively), and the top level of the company (CEO and direct reports) now has more racial/ethnic diversity than it did a year ago.

This company has for decades been a major contributor to building wealth and education in Black and Latino neighborhoods, and in recent years has become an LGBT champion. But its multicultural donations were woefully underreported in previous years. Working with DiversityInc’s consulting staff to understand what factors other companies include in this calculation, the company was able to almost double the percentage of philanthropy to multicultural nonprofits that it reported.

Contributing Factors

  • CEO meets with resource groups
  • Mentoring participation increased

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  • Philanthropy properly reported

Recommendations for This Company

  • Executive diversity council should set companywide goals for increasing diversity of human-capital demographics, including assessment of assignments going to high-potentials from underrepresented groups.
  • Now that resource groups are revitalized, track the engagement, retention and promotions of group members versus that of nonmembers.

Case Study No. 4: Hospitality Company That Fell

This company has never had real commitment from the top but has appeared on this list several times primarily because of strong human-capital numbers. This year, as our software to evaluate companies became more sophisticated, we were able to identify companies whose responses made them statistical outliers and better scrutinize whether their responses were accurate.

In reaching out to this company, we learned that some of the responses, such as the CEO’s having a diversity quote on the website, the CEO’s including diversity in the corporate vision statement and the CEO’s chairing the board of a multicultural nonprofit, could not be substantiated.

We also have noted that this company does not have the commitment to D&I its competitors do, as evidenced by its lack of a chief diversity officer or a senior person overseeing D&I. The diversity staff at this company consists of one low-level person who does not communicate regularly with the CEO and senior executives. Consequently, D&I’s contribution to business results is not correlated.

The company has an ineffective diversity council that is not chaired by the CEO and does not set goals or measure the impact of D&I. Resource-group participation is low, and efforts to use resource groups and mentoring for a measurable impact on talent development are scattered and ineffective.

The lack of effort and senior direction has resulted in diminished human-capital results. For example, in the last year the company’s percentage of women in the level below the CEO’s direct reports dropped by 24 percent, and both women promoted into first management jobs and women managers receiving promotions dropped by 10 percent.

Contributing Factors

  • Lack of CEO involvement
  • No chief diversity officer
  • Ineffective diversity council

Recommendations for This Company

  • Immediately hire a senior-level chief diversity officer, one who understands the business and has the resources to make an impact.
  • Structure resource groups to create senior-level involvement (as sponsors) and to report metrics assessing a group’s contribution to talent development and community relationships.

Case Study No. 5: Consumer-Packaged-Goods Company That Rose

This company’s diversity efforts were revitalized two years ago, when a new CEO took over and decided to chair the executive diversity council (the previous CEO had not). This CEO was particularly interested in getting more management and senior-executive talent to reflect its consumer base, especially women. Working with DiversityInc, he did a thorough benchmarking of how other CPGs link executive compensation to diversity goals and implemented a structured compensation system, including companywide goals for the council and personal goals for executives.

The CEO also hired an effective chief diversity officer, who understands the corporate culture as well as external factors that impact D&I success, such as relationships with professional organizations. Under this CEO and CDO, the resource groups have increased their participation, and this year, the company added rotational positions on the executive diversity council for resource-group members. Formal mentoring has been introduced and is expanding each year—and is now offered at all the company’s U.S. locations.

Working with DiversityInc, the company was able to figure out a system of tracking its corporate philanthropic contributions to multicultural nonprofits. This was complicated because the company funnels most of its donations through its foundation.

The company’s human-capital demographics have been steadily improving. This year, there were significant jumps for Latinos promoted into management (almost 40 percent) and for promotions for women managers (18 percent). In addition, the racial/ethnic diversity of the top level (CEO and direct reports) has been consistently improving.

Contributing Factors

  • Strong CEO involvement
  • Linking compensation to results
  • Ability to track multicultural philanthropy

Recommendations for This Company

  • Accelerate diversity of pipeline to senior management by requiring all executives in top three levels to be cross-cultural mentors.
  • Create special programs to expose high-potentials from underrepresented groups to senior management on a regular basis.
  • Hold annual event for resource-group leaders and community leaders with CEO and senior executives.

Case Study No. 6: Consumer-Packaged-Goods Company That Fell

This company, which has had a longtime presence on the list, has been focusing on its global diversity efforts while limiting its U.S. efforts. At other CPGs rising on the list, we see both global and U.S. efforts increasing simultaneously.

The company has very low (4 percent) participation of managers in its U.S. mentoring program, while the percentage of managers who participate in mentoring programs at all of its CPG competitors on this list is in double digits. Its mentoring program has no measurable goals, no formal follow-up and no cultural-awareness training for mentors.

The company reported a very high percentage of employees participating in resource groups, but upon questioning could not substantiate the validity of that percentage. In addition, the company was unable to provide details of the percentage of executive compensation it ties to diversity results.

This CPG’s human-capital and supplier-diversity numbers showed some real declines this year, at a time when others in its industry were increasing their efforts and results. For example, Black managers promoted declined by 86 percent, women managers promoted fell by 49 percent, and the racial/ethnic and gender composition of the top level (CEO and direct reports) was not as diverse as that of its competitors.

Supplier diversity has never been a strength of this company, but this year it fell dramatically. The percentage of Tier I suppliers (direct contractors) who were MBEs dropped 75 percent, while the percentage who were WBEs declined 25 percent.

Contributing Factors

  • Lack of U.S. focus
  • Inadequate mentoring program
  • Difficulty substantiating data

Recommendations for This Company

  • Compare your U.S. efforts against the efforts of other CPGs to understand their areas of emphasis and their successes, including a thorough analysis of supplier diversity.
  • Enhance mentoring program by making participation part of performance reviews and by measuring retention, engagement and promotion of mentees.
  • Mandate cultural-competence training for mentors.
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