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Diversity in the C-Suite

Though some efforts to diversify top corporate ranks have been successful, progress overall has been sluggish -- something HR must address more aggressively in the face of global expansion.

Monday, June 16, 2008
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To climb the ladder in corporate America, minorities have always had to learn to shift between two worlds -- that of the mostly white-male business culture, and their own.

Minority business leaders and diversity experts say this fluid back-and-forth movement allows minorities to think outside their cultural norms and more clearly understand how others see the world.

And in an ironic turn, they say, this ability -- born of necessity -- could be the key to an elusive goal for minorities -- finally breaking the corporate glass ceiling, especially in the upper ranks.

In the global economy, companies are increasingly looking for leaders who can manage and communicate across cultures, who can shift from one world view to another. And as this skill set becomes more highly valued, greater numbers of minority executives -- many of whom have this skill -- could be promoted to the highest corporate levels, business leaders and diversity experts say.

But, they warn, corporate leaders -- particularly HR executives -- will need to help make this happen -- through mentoring, succession planning and an overall climate that welcomes and values minority leaders.

Most importantly, HR needs to make the business case for diversity in the C-suite.

"Businesses are here for shareholder return," says Stephanie Smith, senior vice president of human resources at Northfield, Ill.-based Kraft North America, and an African-American. "HR's role is to ensure that managers understand that diversity should be the equivalent of other revenue-generating ideas."

There is a wide consensus among minority business leaders and diversity experts that, despite years of hammering away, the glass ceiling for minorities still exists.

"It's clear the diversity that came in at the bottom has not made it to the top in all but a select few organizations," says David Thomas, a senior associate dean and professor at the Harvard Business School, and author of Breaking Through: The Making of Minority Executives in Corporate America.

Although the glass ceiling is "no longer impenetrable," says Thomas, "talent being equal, the probability of making it to the C-suite is still less if you are a person of color than if you are a white male."

"We're standing still," says Toni Riccardi, senior vice president and chief diversity officer for The Conference Board, a New York-based business think tank. "The numbers are fairly low. There's not a lot of advancement."

 

Progress' Ebbs and Flows

Even so, some progress has been made since the mid-1980s, when diversity efforts picked up steam in corporate America. Two decades ago, less than 40 African-Americans were CEOs or within three levels of that rank at Fortune 500 companies and "global equivalents," says Damon Williams, a spokesman for the Alexandria, Va.-based Executive Leadership Council, a networking and leadership organization for black executives.

By 1998, that number had risen to about 150, and jumped nearly fourfold over the following five years, to about 575.

But in the last few years, that pace has cooled considerably, and the figure now stands at about 720.

Business leaders and diversity experts place much of the blame on the economic slowdown that began in 2001, and on the tidal wave of mergers, acquisitions and consolidations -- all of which have limited the number of senior management positions available for the taking.

Says Carl Brooks, president of the Executive Leadership Council, "The numbers are increasing, but at a slower rate."

In 2007, there were seven black CEOs at Fortune 500 companies, the most ever, according to Williams. Since then, three of those executives have retired.

The number of Latinos in the top ranks is also low. Last year, Hispanic Business magazine sent surveys to Fortune 500 companies asking for diversity data. Only 70 responded, and of those, the magazine picked the "Top 60 Companies for Hispanics."

But even those results are dismal, says Juan B. Solana, the chief economist for Hispanic Business Inc., the magazine's research arm.

Of those "Top 60" companies, 63 percent had no Hispanics among their 10 highest-paid executives, and another 33 percent had just one. About half the companies had two or fewer Hispanics among their 50 highest-paid employees.

The numbers at the vast majority of companies that didn't respond to the survey are likely to be even worse, says Solana. "They tend to respond when they're sensitive to diversity," he notes.

No research on Asian-American executives has been done since 1990, when a Korn/Ferry survey found that only three of every 1,000 vice presidents at Fortune 500 companies were Asian, according to Kurt Takamine, a professor of organizational leadership at Chapman University in Manhattan Beach, Calif. While the numbers have increased some since then, he says, Asian-American executives generally have not made great strides into the top ranks.

Jane Hyun, a leadership coach and author of Breaking the Bamboo Ceiling: Career Strategies for Asians, says, "It's pretty minimal, the number of Asians who have broken through."

Asian-Americans face particular challenges in reaching the C-suite such as cultural attitudes that often make them appear less forceful (see sidebar on page 21.) But all minority groups have been hard-hit by corporate America's belt-tightening, the experts say.

 

Behind the Struggle

David Tulin, a Philadelphia-based principal with Global Lead, a consulting firm that specializes in diversity and inclusion at Fortune 500 companies, says that, over the years, corporate diversity efforts have focused too much on awareness programs, and policy and practice changes -- and not enough on how diversity can help the bottom line.

As a result, he says, "With many companies, diversity has not been integrated into the business cell structure. It's not in their DNA." And so when cutbacks were needed, many companies lost their enthusiasm for advancing minority executives.

The business imperative for diversity, says Tulin, "was an idea that never took. It stayed in the head and never made it to the heart."

The current economic downturn is likely to make things only worse, experts fear. The attitude of many companies, says Tulin, is "Race and gender -- what good does that do us? It's nice but it's a luxury in good times. We can't afford to be nice when our survival is on the line."

But even in good times, the path to the C-suite for minorities has never been easy. Experts cite a host of reasons, ranging from a profound shortage of mentors to a lack of experience in positions of financial oversight.

"A lot of minorities have been in staff functions, but not positions with P&L responsibility," says Madelyn P. Jennings, a principal of the Bedminster, N.J.-based Cabot Advisory Group and member of the Defense Business Board. Jennings led a study for the Pentagon on diversity in the upper ranks.

"Unless early in your career you get moving on a track with P&L responsibility," she says, "you're not going to get into the C-suite."

Another oft-cited obstacle is a lack of commitment on the part of two groups that can help advance minorities into the upper corporate ranks -- executive-search firms and boards of directors.

Victor Arias, a Dallas-based managing director at the executive search firm Korn/Ferry International, says recruiters aren't always sensitive to the need for minorities among the lists of candidates they present to companies. Arias, who is now helping Korn/Ferry assemble its diversity practice, says sometimes, when firms do bring in minorities, "it's more out of internal compliance than to effect change."

Part of that lack of sensitivity has to do with the makeup of executive recruiters, he says. "There are very few Latinos in the search business -- you can count them on one hand," says Arias, who is Latino. "There are more African-Americans -- but you can probably count them on two hands. This business has in some ways been a white man's club."

Joseph Daniel McCool, author of Deciding Who Leads, a candid look at executive recruiters, says most search firms are not in touch with diverse pools of talent.

"At a lot of firms, there's not a single minority or woman on the staff, so they tend to circulate in a 'good ole boy' network," he says. "Nine times out of 10, the short list of candidates is going to be white and male."

Arias and others believe minorities are also hampered by boards of directors, which, they say, tend to pick CEOs who look like them. This is a common theme among those who study diversity -- that minorities often have difficulty advancing in the corporate world because white males simply feel more comfortable around other white males.

"Human beings tend to focus on what makes them comfortable," says Thomas of the Harvard Business School. "People are more likely to assume they'll be more comfortable with people who look like them."

People rarely think of it in these terms -- it's usually subconscious, he says. They "create a story" in their own minds about why they don't want to promote or hire a minority.

Thomas often sees this at the companies he visits, where executives "swear they're a meritocracy," and insist their organizations' lack of diversity in the upper ranks isn't their fault. "I talk to CEOs, they believe they're getting the wrong minorities and they're getting the wrong women," he says.

 

Global Possibilities

If minorities are to break the glass ceiling, all of these obstacles will have to be overcome. And minority business leaders, academics and diversity experts agree that won't happen until corporate America is truly convinced that minorities in the C-suite are not only important -- but essential -- to the bottom line.

There is hope on the horizon. And it goes by the name of globalization.

Companies are becoming increasingly aware that their leaders need to have a special ability to understand and relate to various cultures -- to feel comfortable moving from one to another, and not be hamstrung by traditional and limited preconceptions.

This is where minorities may have a real edge, many diversity experts say. Because minorities have had to move back and forth between cultures in America, they've developed a skill set that can be translated to the international stage when dealing with customers, employees, business partners and others.

Minorities are generally more attuned to cultural nuances, says Brooks of the Executive Leadership Council. He calls this "an increased cultural sensitivity -- you've seen the world through a different lens."

Kim Nelson, a senior vice president at Minneapolis-based General Mills and an African-American, says that "in America, we tend to think of diversity in ethnic and racial terms, but globally, it becomes cultural."

And as large companies globalize, she says, they need leaders who can "lead outside their cultural norms. It's not so much black and white -- it has become more of a business imperative that goes beyond race. You master that skill set."

Says Nelson, who is also president of the company's Snacks Unlimited Division, "I think it's the ability to understand people and not get sidetracked by your assumptions of whatever group they're in. And it's the ability to meet people where they are. When you stay in your comfort zone, you require people to come to you."

Nelson believes companies are gaining more appreciation for this as more white-male executives are given overseas assignments, and are returning with a new understanding of the kind of leadership needed in a global economy.

"There was a time when these executives didn't have to travel overseas themselves; they didn't have to think about their employee groups," she says. "But there's probably now a generation of white-male executives who have spent some time overseas, out of their comfort zones.

"They're experiencing what it's like to be out of your element, what it's like to be a fish out of water. I would argue that, for a lot of women and people of color, that's what it feels like in the United States."

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What companies are realizing, Nelson says, is "it's going to limit an organization if you have a bunch of people who aren't very good at leading outside their comfort zone."

As a result, companies may be more likely to turn to minorities -- though, she adds, "I don't know whether they make the direct link. It's more subconscious -- it's seeing people who are not like you having spectacular results."

Making a Business Case

Minority business leaders and diversity experts say even without the globalization angle, there is a strong business case for minorities in the C-suite. Tulin says minority leaders can strengthen a company in four essential ways:

* Markets: Minorities often have a better understanding of domestic and even global ethnic market niches, and so can provide strategic guidance.

* Talent: In the war for top executive talent, companies limit themselves if they overlook minorities. In addition, companies that want to be the best places for minorities to work need minorities at the top to show they "walk the talk."

* Reputation: If the public is aware that a corporate leader is a minority, it can help foster good will in the community.

* Innovation: Research has shown, says Tulin, that when organizations have more people in decision-making positions who are from diverse backgrounds, more new ideas are generated.

For organizations to be convinced of these advantages, HR needs to play a strong role. But some diversity experts say HR simply hasn't done enough to advance minority executives.

Says the Harvard Business School's Thomas: "Ninety-five percent of HR chiefs don't have the knowledge, the skill or the will to provide leadership to their chief executives in this domain." HR leaders need to think as deeply about diversity at the top "as CFOs think deeply about return on assets," he says.

Thomas believes the problem hinges on the fact that "it's very rare to find a chief human resource officer who has any time being responsible" for the diversity function. "It's not valued as a place to put high-potentials in HR -- it's not considered an essential skill set."

Kraft's Smith agrees with other minority business leaders that "in America in general, there is not the awareness and commitment to diversity there once was."

Some companies do a good job, including Kraft, she says, where HR plays an active role in helping minority executives reach the top. Currently, there are 25 minorities in top-level positions -- vice president and above -- at Kraft.

One key, Smith says, is to keep talented minorities from leaving. "Your challenge is the retention of talent long enough to enable them to climb the corporate ladder."

 

Keeping Them On

Many business leaders and diversity experts say that, all too often, minority managers become frustrated at their lack of advancement and leave large companies to start businesses of their own.

Smith says she believes HR needs to make an extra effort to keep minorities from giving up. One way to do that is through a solid development plan that says, "Here's where you are and here's where we think you can go. How do we get you there?"

HR, says Smith, "needs to put them into jobs where they can grow and learn."

To advance into the highest corporate levels, all leaders need mentors -- but minority executives tend to have fewer of them than whites, says Smith. One reason is that there are fewer minorities at the top, though mentors don't have to be minorities themselves.

Unfortunately, "many leaders don't feel that's a role they should play," she says. "We're more comfortable with people who are like us -- they're easier to relate to."

She adds, "We need to do a better job, as companies, of getting leaders to understand the value of developing minorities."

Kraft actively promotes mentoring, says Smith. One way is through the succession-planning process for the vice president level.

When minorities are identified during the process as high-potential, Kraft executives are encouraged to mentor them to help them along, she says.

Succession planning also helps HR make sure there are enough minorities in the pipeline, she says.

The first step is to identify whether the candidates for vice president for a particular function, such as finance, include minorities.

If there are none, then HR will look for minority candidates in other functions, and may also turn to an outside executive recruitment firm, says Smith.

HR leaders can also help with another issue. At some companies, she says, minority leaders are given the same kinds of jobs again and again before they are promoted.

"It takes minorities longer than their white counterparts to get up to a certain level. They have to prove themselves once, and then prove themselves another time."

Executives at Kraft are cognizant of this problem, and work to make sure it doesn't happen at the company -- and that the playing field is leveled, says Smith.

Just as crucial to retention, says Smith, is "a climate of inclusiveness, and making people feel like they belong." Among the ways this can be done is by encouraging the existence of diversity councils and affinity groups.

Smith says she believes that, in helping minorities advance to the top corporate ranks, HR should make an extra effort within its own function and hiring practices, to set an example and lead the way.

"HR needs to hold itself to the principles upon which it guides and holds others accountable," she says. "This certainly includes diversity and inclusion."

Of course, ultimately, Smith adds, minority executives need to stand on their own. Smith, who has spent 18 years at Kraft -- all in HR -- says, "I don't believe I could have gotten to where I am if I couldn't have delivered against the stated goals and delivered value for Kraft."

But it goes beyond that, she says.

"There are people who are very good performers who don't get recognized," says Smith.

"The question of whether you get ahead has to do with your potential and who sees that potential, and who is willing to invest in developing that potential." 

 

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