The business case for diversity: Financial Executives Research Foundation (FERF) finds a four-pronged approach is driving diversity initiatives across Corporate America.

AuthorOrenstein, Edith G.
PositionDiversity

The business case for diversity in the workplace--of race, gender, age, ethnicity and more--has been examined and debated over the years. Despite its promotion by governments and social engineers, the benefits aren't always readily apparent or directly measurable.

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Based on interviews with executives at public and private companies and others in the human resources field, Financial Executives Research Foundation (FERF) found the business case for diversity consists of diversity's contribution to one or more of four factors.

The four are: increasing revenue or gross margin; enhancing compliance or reducing litigation risk; enhancing corporate goodwill (to become the "employer of choice);" and as part of tone at the top, when corporate leadership believes diversity is "the right thing to do."

Executives were also found to take a holistic approach to diversity, making it part of their extended role in leading professional and community organizations.

One such executive is Mary Jo Green, senior vice president and treasurer for Sony Corp. of America. When Green began her term as chairman of Financial Executives International (FEI), she identified "enhancing diversity" as one of the organization's priorities for fiscal year 2004-2005. Under her leadership, FEI is working toward this goal on a variety of fronts.

Green explains the rationale behind the diversity initiative, saying that every organization must welcome diversity in order to be successful. "The business world today is made up of a diverse population, and by having a diverse membership, we bring additional viewpoints and talents to the organization, which are more reflective of the world in which we operate," she comments.

As treasurer of a U.S. company--which is a subsidiary of a Japanese company that operates globally and is led by a Welsh-born CEO who maintains U.S. and British citizenship--Green's views about the importance of diversity resonate as being representative of best practices in today's global business environment.

But this concept, better rooted at some companies than others, is still an ongoing process.

"Executives are not always so sure there is a concrete, absolute case for diversity, if they are looking for a quid pro quo from a narrow standpoint," says Johnny Taylor, chairman of the Society for Human Resources Management (SHRM) and president of McGuireWoods HR Strategies LLC, the human resources consulting subsidiary of law firm McGuire Woods LLP.

Taylor says in some cases it is easier than others to see why diversity makes good business sense--to tap into certain markets and generate the broadest range of ideas. However, even in the absence of an obvious case, there are other reasons to launch a diversity program.

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The four factors highlighted in this article largely reflect Taylor's observations at the helm of SHRM, as well as his experience as an attorney in a variety of corporate settings, including senior legal and HR positions at Blockbuster Entertainment Group/Viacom, Alamo Rent-A-Car Inc. and Paramount Parks Inc. Taylor's firm was recently named by Multicultural Lawyer magazine as one of the Top 100 Law Firms for Diversity, and he notes that the legal profession promotes diversity in part to mirror its clients' initiatives.

Increasing Revenue/Gross Margin

One of the first things a company will try to do in making a business case for any initiative is to assess the impact on the bottom line. A study in 2001 by Roy Adler, Women in the Executive Suite Correlate to High...

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