Diversity as a Business Strategy and Stakeholder Issues

1. Diversity as a Business Strategyand Stakeholder Issues Part 4

2. Objectives • To examine the potential links between diversity and business success. • To describe a developmental model for organizational diversity and strategy. • To identify two sets of stakeholder interests and outcomes related to diverse organizations (suppliers & customers..

3. Is there a link between Diversity & Business Success ? Firms w/ Diverse Boards reap greater market returns Firms w/ Diverse Boards are less risky for investors; make better decisions about workforce mgt. Firms offering career advancement cast a wider recruiting net Hallmark of successful diversity programs is diverse company leadership. Better candidates shop for firms that offer career advancement Better performing firms attract the best diverse talent Kuczynski, S.  If Diversity, Then Higher Profits?HR Magazine. Dec 99.

4. Modeling Organizational Diversity 1: Law & Order 3: Business Reasons 5: Strategic Imperative Equitable Systems 1 2 3 4 5 2:Altruism & Access 4: Transitions

5. Models for Organizational Diversity People View Corporate View 5 Strategic Imperative 4 Transition 3 Business Reasons 2 Altruism & Access 1 Law & Order

6. Assumes a direct link between #s of employees who “look, act, & sound like” and consumers. Employees are front-line “tools” or “Ghettoized” in niche depts. Firms may have aggressive recruitment plans, but the infrastructure to support diverse employees is developing. Values a potential link to creativity, innovation & solving out-of the ordinary problems. Top mgt. & leaders direct cultural change; diversity permeates the mainstream Multifaceted Infrastructure driven by networks, task-forces that define agenda to support employee development and advancement Aren’t “Business Reasons” and “Strategic Imperatives” the same? Business Reasons Strategic Imperatives

7. Questions? • What key components of IBM’s Diversity Program contributed to its success? (Keith H. Hammonds. Difference Is PowerFast Company, July 2000.) • Is Diversity Management a Formula for Success? (Is Diversity in Management a Formula for Success?Business Week Mar 29, 1999.)

8. Stakeholder Focus: Suppliers Misperceptions about M/WBEs • Have less buying power (that’s changing) • Suppliers are too small (physical capacity) • May be under-capitalized (that’s changing) • Perceived as strictly new companies lacking a track record (a number are well established)

9. Suppliers: What contributes to M/WBE Success? • Need to know what is expected – communicate performance criteria (for example, price can be negotiated, but not quality.) • Help w/ Physical growth (control rate of growth as key to financial health; don’t go after the Wal*Marts of your industry; find customers that match their capabilities.) • Help w/ Financial Sourcing (more banks issue loans; manufacturers extend credit) • Help w/ Managerial growth (help with maintaining a competitive position in terms of innovation, quality, price, and on-time delivery)

10. Most common problems for M/WBEs are . . . • Trend toward supply base reduction. • Purchasing depts. are smaller & need to work with fewer suppliers. • Firms are entering into long-term alliances w/ in areas outside their core competency – outsourcing business that required their suppliers.

11. Most common problems for M/WBEs- - - BANKS - - - • Banks aren’t interested in lending until suppliers have contracts • Banks seem unwilling to lend to companies in capital-intensive industries or non-traditional ethnic or gender-based industries. • National Minority Business Council Certification seems to help.

12. Most common problems for M/WBEs - - - SBA Definition - - - • SBA’s 51% controlling interest for Minority ownership limits company’s ability to go public. • SBA & Big 3 automakers signed a pilot program to broaden definition of an MBE to include publicly owned suppliers. • Maintaining 51% minority ownership percentage has been a disincentive for banks to approve loans.

13. Tier 1 and Tier 2 Suppliers • Tier 1 suppliers are direct customers of major corporations. • Tier 1 suppliers to industry must report their minority purchasing expenditures from Tier 2 companies to Auto Industry on a quarterly basis. • Indirect suppliers (Tier 2) often provide Tier 1 with products or services unrelated to core business (such as Computer, accounting or other services.

14. Consumers and Diversity • Corporate America often has misunderstood or underestimated minority markets. ($700 billion) Stavraka, C. The Urban Market Is Mostly White Although Its Tastes Are Multicultural, DiversityInc.Com Jan. 12, 2001.

15. Prof. Service Firms & Customers • Serving diverse constituencies requires a diverse workforce, which in turn brings in new clients with similarly varied backgrounds. • Full-service and varied services under one roof addresses multifaceted needs of clients. • Smaller firms develop around the interests of employees; this also attracts employees who seek to gain a broader range of skills. • Pro-bono work (no fee to client) expands employee opportunity for growth. Carlozzi, C. L. Diversity is good for business.  J. of Accountancy Sept, 99

16. Consumer Industries Questions about Career Moves • Did Karen Francis, new boss at GM’s Oldsmobile division make a smart career move? • Do you think it matters that restructuring at GM removed responsibility for the brands’ salesforces from the job? • How much of an advance was made by placing women in charge of Saturn (Cynthia Trudell), Pontiac-GMC (Lynn Myers) and Oldsmobile (Karen Francis)? Jones, T. Y. Gender Motors Forbes Global, May 17, 1999