Diversity watch: two companies' diversity efforts are screened and evaluated by the experts

Shari Caudron

Two companies' diversity efforts are screened and evaluated by the experts

DIVERSITY INITIATIVES continue to make inroads in American corporations. According to a 1998 study by the Society for Human Resource Management in Alexandria, Virginia, three out of four Fortune 500 companies have formal diversity programs in place, over half of which (58%) have staff members dedicated to these issues.

But while 80% of executives at these companies believe diversity is important, only 26% consider it "very important." Furthermore, 8% of executives don't consider diversity important to the bottom line at all.

Despite what might be perceived as less than enthusiastic support for these initiatives, they appear to be having an impact. A 1998 study by Korn/Ferry International in Los Angeles, the country's largest executive search firm, reveals that women and minorities continue to make strong advances in the boardrooms of corporate America. Ethnic minorities moved up the most dramatically last year and now sit on 55% of all corporate boards, an increase from 51% in 1996. African Americans represent the largest number of minority directors and are now on 37% of all major boards vs. 35% last year. Still, there is room for improvement, since just 3% of directors at major U.S. companies are African American.

"The companies that appoint minorities to the boards typically have diversity efforts in place," explains Madeleine Condit, a vice president in Korn/Ferry's Chicago office. "In Fact, the largest companies--the Fortune 100--have the largest number of minority directors and are typically some of the leaders in the diversity movement."

When you look below the board level, the news is also encouraging. Condit says there has been a definite increase in minority searches over the past year at the staff management level. While companies formerly would recruit upper-level minority executives from other companies, today they are recruiting for lower-level positions and developing those people internally. "Companies are beginning to understand the need to have their own pipeline filled with a diverse workforce, as opposed to recruiting people from other companies," she explains.

In an effort to more closely examine the corporate diversity work that is making these changes possible, BLACK ENTERPRISE invited Fannie Mae and Ford Motor Co. to submit answers to detailed questions about their diversity initiatives. These companies agreed to have their efforts analyzed by diversity experts as a means of gaining objective feedback about their programs' strengths and weaknesses.

Fannie Mae WASHINGTON, D.C.

FANNIE MAE, FORMERLY KNOWN AS the Federal National Mortgage Association, is the nation's largest source of home mortgage funds. As a shareholder-owned corporation since 1938, the company provides financial products and services that increase the availability and affordability of housing for low- to middle-income Americans.

Of the company's 3,700 employees, 22.5% of its top managers are minorities. African Americans represent 15.5% of its management group and 26.5% of all employees; Hispanics represent 3.3% of managers and 3.8% of employees; and Asians/Pacific Islanders represent 3.4% of managers and 8.7% of employees. Additionally, 22% of Fannie Mae's 18-member board of directors are minorities, or double the average for similar companies.

Fannie Mae launched its diversity initiative in 1992 with the creation of the company's Office of Diversity. Since then, the ethnic employee population has increased at every level of the organization. On January 1, 1999, Franklin Raines, currently White House budget director, will assume the position of Fannie Mae CEO, making him the first African American to lead a Fortune 500 company.

The organization's diversity effort began with mandatory diversity awareness training for all managers and employees. Since then, all employees have attended daylong seminars to help them understand the importance of diversity to the business.

Other diversity efforts include minority recruitment, mentoring, employee support groups and special programs to heighten awareness of such things as black history. The company also has made a concerted effort to do more business with women- and minority-owned financial services firms. These firms did $13.2 billion in debt issues through December 1996, compared with $5.1 billion in 1993. Furthermore $52.2 million, or 18.5%, of the company's discretionary expenditures went to minority-and women-owned businesses, up 15% from 1993.

Fannie Mae's commitment to diversity is illustrated by its directive that diversity is a corporate goal and core value that is reviewed quarterly. Furthermore, diversity is part of performance objectives for all company officers, directors and managers including bonuses, merit increases and promotions.

Clearly, Fannie Mae is one of the most forward-thinking companies in America. The organization has taken the call to incorporate diversity all the way to the top and must be applauded for designating Franklin D. Raines as the first African American CEO of a Fortune 500 company.

As a quasi-government agency, Fannie Mae must comply with EEOC and affirmative action mandates. Yet, the company has a true desire to go beyond legal requirements and numeric parity to implement inclusive business strategies.

Several components of Fannie Mae's culture contribute to its success:

* The company takes a holistic and long-term approach to behavior change. As a result, the company has been able to work with all segments of its population, including employees, suppliers and customers, on issues related to diversity.

* The corporate mentoring program offers a variety of opportunities for minority and women employees throughout the company.

* Fannie Mae's diversity advisory council serves as a conduit and resource network on diversity efforts in each region. The officers and managers who serve on this council are held accountable for their internal diversity efforts.

While Fannie Mae is a diversity leader, there are some things the company can do to be even better.

* Although the structure of its mentoring program appears beneficial, Fannie Mae lacks measurements to show the success of the mentoring effort. This evaluation would give Fannie Mae greater insight into areas of behavior change that occur--or don't occur--over time.

* While officers and managers are involved on the diversity advisory council, it doesn't appear they are directly involved as mentors to employees. To have the biggest impact, managers should not just manage the process of diversity but become actively involved with other employees.

* As a leader in the mortgage industry, the company should be helping other mortgage corporations and financial institutions improve their practices in the area of diversity and inclusion.

With these additions, Fannie Mae will remain a diversity leader well into the 21st century.

ANALYSIS

Letty Hardy is president and COO of Inclusion Systems Inc., based in Southfield, Michigan. Hers is the first company to create a cross-company, group-centered mentoring system designed to address workplace diversity issues.

Ford Motor Company DEARBORN, MICHIGAN

FORD MOTOR CO. IS ONE OF THE nation's largest companies and automobile manufacturers, employing more than 363,000 people worldwide. Ford launched its global diversity initiative in 1994 to improve diversity and work life throughout the company. The company's effort is led by CEO Alex Trotman, who also chairs Ford's Executive Council on Diversity.

Of its 157,000 U.S. employees, 12.8% of Officials and managers are minorities. African Americans represent 8.7% of all top management posts and 17.3% of the workforce overall. These percentages have changed very little in the four years since the initiative began because change in a corporation the size of Ford takes time.

Ford says that accountability is the key to making change happen. To this end, senior executive bonuses are tied to diversity management, along with traditional performance measures. The company is managing diversity in a number of ways:

[right arrow] By establishing aggressive goals for hiring professional women and minorities.

[right arrow] By developing external mentoring programs that match minorities who aspire to senior management with top-level minority executives from other companies.

[right arrow] By establishing employee resource groups to identify barriers, provide information and develop minority employees.

[right arrow] By providing mandatory diversity awareness training for all salaried and hourly employees. Ford's entire global workforce will have completed this training by year-end.

[right arrow] By sponsoring the Ford Academy of Manufacturing Science, a school-to-work program that helps young people acquire valuable work skills.

Ford's diversity effort also involves suppliers. The company is the first U.S. corporation to achieve minority purchases worth $2 billion, and its goal is to reach $2.5 billion by 2000. Ford also has a strong minority automobile dealer program, providing specialized training, consulting and financial support. Ford's 333 minority leaderships represent 44% of all U.S. minority dealers.

To evaluate its progress, Ford measures representation of women and people of color at all salary levels quarterly. Ford senior executives also conduct face-to-face diversity focus groups worldwide.

* Ford's CEO is chair of its Executive Council on Diversity, which identifies and manages corporate diversity initiatives. The council members report directly to the CEO and conduct yearly focus groups to hear employee concerns firsthand. Furthermore, all members of the council are held accountable for diversity through a performance measurement system.

* Other senior managers are involved in diversity as on-site representatives for universities that are key to its recruitment strategy.

* Ford believes the demographic makeup of its professional workforce should reflect the demographics in the market across all salary groups.

* To measure the success of its diversity effort, the company conducts employee attitude surveys and uses demographic control variables to analyze survey data. Ford views the data as necessary to creating an equitable work environment.

* The company assists women and minorities to rise through the ranks with the help of its external mentoring programs and the Ford Academy of Manufacturing Science (FAMS).

* Ford is ahead of most companies in procuring minority supplier contracts, and is ahead of its competition in minority dealerships.

Although Ford is more progressive than many large companies, there are opportunities for improvement. Ford should begin to view its diversity initiatives as a holistic business strategy that impacts not only its workforce, but its customers and stakeholders.

* All diversity efforts and business plans should focus on employees, customers and stakeholders. For instance, the company should begin to segment its markets by race and gender.

* Ford should increase everyone's accountability, from its board of directors to front-line workers, to create a productive, equitable environment.

* Ford should strive to increase the share of women and people of color among its customers, and should influence suppliers and dealers to develop holistic diversity strategies.

ANALYSIS

John Fernandez is president of Advanced Research Management Consultants, a Philadelphia-based consulting firm specializing in human resources and marketing. He is the author of nine books on human resources and diversity issues.

COPYRIGHT 1998 Earl G. Graves Publishing Co., Inc.
COPYRIGHT 2008 Gale, Cengage Learning