The Bottom Line on Diversity
by Paula Santonocito
Companies are discovering that employing a diverse workforce makes good business sense, and it can mean more dollars on the bottom line. So says a study by the Society for Human Resource Management (SHRM) and Fortune magazine called Impact of Diversity Initiatives on the Bottom Line, which is based on the responses of human resource professionals at 121 Fortune 1,000 companies.
According to the report, diversity initiatives bolster the bottom line in a number of ways. Respondents indicate that diversity improves:
- Corporate culture.
- Recruitment of new employees.
- Client relations.
In addition, diversity results in:
- Higher retention of employees.
- Decreased complaints and litigation.
- The organization's improved ability to move into emerging markets.
At Fannie Mae, corporate initiatives have resulted in a more diverse workforce. More than 43 percent of the company's employees are minorities, as are five of the 18 members of its board of directors. These statistics, as well as the fact that a large percentage of minorities hold executive and managerial positions, earned the nation's largest home mortgage reseller the top spot on Fortune's "Best Companies for Minorities" list this year.
Although the company appreciates the recognition, Maria Johnson, Fannie Mae's vice president of diversity, health and work-life initiatives, says corporate diversity initiatives are not focused on getting awards. "At the end of the day, we are all here to produce results, and we take a two-tiered approach," she says. "The internal program helps with recruitment, retention and quality-of-life issues, and the other part is to add value to our external customers. Both enhance our bottom line."
According to Johnson, diversity initiatives at Fannie Mae have reduced turnover. In addition, she says, as a best-practices company, Fannie Mae has increased access to capital and investors. "We've had numerous calls from investors inquiring about our human resource and staffing practices. We think it's an element among investors."
Fannie Mae has been so successful in building a diverse workforce that it's now offering training to its lender partners. The program is part of the company's overall emerging markets initiative. "It's very unusual for HR internal processes to actually touch the customer," says Johnson. "We're very excited that we're part of touching our Fannie Mae customers directly."
Hank Clemons, president of The HLC Group, a firm specializing in customized courses and programs that include a diversity series, agrees that diversity initiatives make good financial sense.
"Having a diverse workforce helps the organization as well as the public. It demonstrates social responsibility and social awareness," he says, pointing out that these components, in turn, contribute to customer attraction and customer retention. "If I'm already buying a product, and I'm finding one company is ahead [in terms of social responsibility], I'm going to spend my money where it shows."
Diversity practices can also enhance a company's ability to compete abroad. "In a global economy, companies that are diverse in terms of employee ethnic, gender and racial backgrounds have a better chance of tapping into emerging markets," he says.
Moreover, a company doesn't have to just assume that diversity programs work. Clemons says there are concrete ways in which it can measure the success of its initiatives. He gives the example of an organization that has a problem with absenteeism and finds, upon talking to its employees, that single parents are taking whole days off to attend their children's school functions. The company then implements flextime and subsequently can look at the impact of the family-friendly benefit in terms of dollars in order to measure results. Among things it considers is the lost work time of absent employees, and time spent by managers and supervisors trying to replace people.
Clemons says diversity initiatives can be measured by developing a matrix. When implemented properly, diversity initiatives can provide tangible, measurable results.
Nevertheless, what about the company that still thinks diversity doesn't pay? Clemons says he tells skeptics to keep doing what they're doing -- and meanwhile see what their competition does. He says sooner or later, that will usually show them whether or not diversity pays.
