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Corporate Diversity is Invaluable and Incomplete

• Charles Tribbett III '80

As the economic recovery continues and the corporate sector returns to a state of growth, one thing has become evident: diversity has again come to the fore, existing as a perplexing and prevailing issue that impacts the most senior leadership and management teams of the country’s largest corporations.

That this is true should not come as much of a surprise, especially to those who have followed the actions taken by the SEC and the leading stock indexes in the wake of recent corporate scandals. The new rules have increased the demands being faced by companies’ leaders, most notably their boards of directors, calling on them to not only be more attentive but also to be more knowledgeable of what is going on within the industries they serve. Sarbanes-Oxley and the regulatory actions of the past two years have diminished many CEOs’ desire to serve on multiple boards. Enter diversity, which as a result of these changes that were meant to curb scandal and promote greater corporate governance, is on a slight rise.

Interesting, however, that the degree to which diversity can penetrate a company’s board is directly correlated to the number of women and minorities serving in executive positions at Fortune 500 companies.When women and minorities accelerate through the ranks of corporate America , when they continue to pierce the veil in academia to become presidents and deans of major academic institutions, we will begin to see diversity make gains at the “C” levels of corporate America . One success leads to another, so before we can address the issue of whether diversity has become accepted at the most senior levels of corporate America , we must ask if America has embraced the value and benefits a diverse management team can bring to a company?

A BYPRODUCT OF THE BEST diversity programs is inclusivity, which strengthens organizations by allowing people of different opinions to look at a situation.

Indicators over the past 15 years suggest that the answer is yes. Companies are increasingly turning to diverse senior management teams to build their shares in markets that were either previously ignored or nonexistent. IBM, for example, has done well by targeting women and minorities for key positions.When Lou Gerstner arrived in 1993 the company was in noticeable decline. Gerstner felt a new corporate culture was needed if the company was going to rebound. He founded the transformation on diversity. His reasoning was that the markets in which IBM competed were so diverse, it was necessary for the company to employ a diverse workforce so that it could better connect with its customer base. The results speak for themselves. IBM is far healthier today than it was just prior to Gerstner’s arrival. In markets it was not competitive in 20 years ago the company is now a leader. For example, IBM is incredibly popular with businesses that are either owned or managed by women. By increasing the responsibilities given to female employees, it has been able to gain new insights into a customer base that it had not fully leveraged in the past.

What companies are gaining from variegated management teams goes far beyond the reaping of benefits from alternative markets. A byproduct of the best diversity programs is inclusivity, which strengthens organizations by allowing people of different opinions to look at a situation.When people of various talents, perspectives and backgrounds work together, they are able to look at problems from a myriad of different angles, and are able to arrive at solutions that a team representing only one point of view would have difficulty seeing. In short, a diverse management team is one that is less likely to fall victim to myopia and more likely to think outside of the box. This type of thinking is necessary given the complexities and global nature of today’s business environment.

Finally, and perhaps most importantly from a sociological perspective, companies have begun to see diversity as a way to enlarge the pool from which future leaders can be found.Women and minorities whose perspectives and talents have been historically undervalued are now given greater responsibilities and more opportunities to prove they are champions of an organization. As a result, more companies are promoting them to the most senior management positions. Kenneth Chenault, for example, took the top job of American Express after he was tasked to reposition the company’s largest business unit, the credit card group. Stanley O’Neal became the CEO and Chairman of Merrill Lynch only after successful stints as the firm’s COO and as President of Merrill’s U.S. Private Client Group.

It pleases me to see that companies are beginning to see diversity as something of value. However, I remain disappointed at the slow rate of this change. Barriers exist in today’s largest corporations that hinder the advancement of women and minorities. I agree with David Thomas of Harvard Business School when he writes that these groups have to continue to fight against prejudice in order to prove that they are not inferior; that they are still placed at a disadvantage as a result of their majority peers not feeling comfortable around them; and that they are handicapped as a result of their companies not being able to effectively identify who among them has high potential.

In light of this, in order for the benefits of diversity to be fully realized, and for a diverse workforce to be fully accepted, companies need to have certain processes in place. First, executives need to commit themselves to the task of bringing more women and minorities into an organization; a tolerant and inclusive environment can only be effectively created if the ones at the top of an organization are in full support of it. Second, minority groups both in and outside an organization must be active in promoting change. Inertia is a difficult force to overcome; people are not going to work against corporate history despite the added value a new model could bring. Third, diversity cannot be seen as merely the hiring and promoting of minorities. It must also entail functional development and the making available of senior operating positions to minority candidates. The regulations relating to Sarbanes-Oxley have presented new opportunities for those who fit the diversity profile. If companies are going to grow and be well-governed in the future, it is necessary that they prepare those who are going to be asked to captain the ship.

Charles Tribbett III is the Co-Area Manager for Russell Reynolds Associates’ Chicago office as well as the Co- Leader of the firm’s CEO and Board Services Practices. He specializes in board services assignments and also leads the firm’s Diversity Practice. Tribbett has conducted CEO and board of director searches for leading international corporations as well as significant women and diversity assignments for companies across all industries.

In addition, Tribbett is the co-author of Business Evolves, Leadership Endures. Due to go on sale in the fall of 2004, the book examines key traits to being an effective leader.

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