40 best companies for diversity: in our third annual survey, we focus on supplier diversity and senior management representation--how much companies spend with black suppliers and who they let into the corporate suite.

Author:Alleyne, Sonia
Position:SPECIAL REPORT - Cover story
 
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CORPORATIONS HAVE COME A LONG way from posing questions about the relevance of diversity. Studies and statistics about emerging demographics, minority spending power, and the globalization of the marketplace have moved the discussions well past whether or not a corporation should embrace diversity to how it can make inclusion part of its corporate fabric. There have also been numerous examples of the bottom-line benefits of diversity. In 2006, several of the 500 largest publicly traded companies headed by women outperformed the Standard & Poor's 500 index. African American senior executives including Merrill Lynch & Co. Chairman and CEO Stanley O'Neal, Aetna Chairman and CEO Ronald A. Williams, and Time Warner Chairman and CEO Richard D. Parsons have also significantly driven stockholder value in companies that were struggling before they took the helm.

But despite forecasts of continually changing demographics and a variety of success stories, many corporations still struggle with actually making diversity work It doesn't, however, prevent many of these companies from waving a diversity banner. Since diversity has become one of the biggest corporate trends in recent times, companies have been offering intentions of support but not quite committing to policies, resources, and strategies for effective implementation.

Although BLACK ENTERPRISE has been covering diversity practices for 36 years--long before it was labeled as such--we have been statistically tracking corporate behavior in this area for three years through surveys sent to the top 1,000 publicly traded companies and 50 leading global companies with significant U.S. operations. These surveys judge diversity performance based on the representation of African Americans and other ethnic minorities in four key areas: corporate boards, total workforce, senior management, and corporate procurement. For the past two years, all four areas had been equally weighted to develop a list of the Best Companies for Diversity. This year, however, as BE reveals its list, we decided to draw a more definitive line in examining the commitment that companies say they have made to diversity by weighing more heavily on two of the four categories: procurement and senior management.

Experts agree that although all four areas are important in determining a company's commitment to diversity and inclusion, it is easier to measure that commitment in the categories of procurement and senior management. "Those two areas are high-impact areas, and you can have high impact immediately as well as tremendous influence," explains Marlon Cousin, managing partner of the Marquin Group, a diverse executive recruiting firm based in Atlanta.

"You can measure senior leadership and its impact on policies and programs that affect minority issues such as mentorship and talent management or the understanding of new, emerging markets. You can measure the outreach effect that supplier diversity has on communities in creating jobs and opportunities. When a minority supplier employs 25 more people because of a contract with a large corporation, that creates economic stability and educational growth within families," he continues. "It's important, but it's hard to measure the effect of board participation or a workforce where employees are more involved in the blocking and tackling of frontline responsibilities."

Corporate commitment to those two areas also requires a significant adjustment in how companies view diverse ideas and people, comments Janet B. Reid, a principal partner of Global Lead Management Consulting and co-author of The Phoenix Principles: Leveraging Inclusion to Transform Your Company (New Village Publishing; $22.95).

"The higher up you go, the less your advancement is predicated on technical skills. Those in the C-suite have to be familiar with, comfortable with, and trusting of you to let you in the club," she explains. "That's where the C-suite has to be willing to build a bridge to [develop a business relationship]. It's the same with supplier diversity. It's about building familiarity, comfort, and trust."

For some companies, the heavier weighting on senior management and procurement made a difference in making the list. This year we saw a 19% increase in survey participation and several newcomers: WGL Holdings Inc., TIAA-CREF, Starbucks Coffee Co., Johnson Controls Inc., Ryder System Inc., Comcast, Texas Instruments, State Farm Insurance, Exelon Corp., Eli Lilly and Co., and General Mills. Several of the 40 Best Companies for Diversity employ executives from our 75 Most Powerful African Americans in Corporate America list and have procurement contracts with a variety of BE 100s companies, including Bridgewater Interiors L.L.C., ACT-1 Group, Simeus Foods International Inc., Manufacturers Industrial Group, and World Wide Technology Inc.

"The best way a company can show its customers that it values their business is by doing business with them," states Harriet R. Michel, president of the National Minority Supplier Development Council Inc. in New York City. "This is an economy that functions on the exchange of business, so it's not enough to have money coming into a minority organization from a majority company; there has to be an economic exchange with that same community."

Unfortunately, at many companies there's the assumption that minority suppliers cannot match the quality and national or international distribution mechanisms of current majority suppliers, stresses Reid. "The problem is there is rarely ever enough effort in developing the network or tapping into the resources that would help you find the best suppliers."

Those companies who are the best at diversity and inclusion understand that challenge and have created the programs, systems, and tracking to make it an integral part of how they do business. "Not only is it part of their culture," explains Reid, "they drive the culture of their majority suppliers--encouraging them to use minority suppliers." Diversity, when it works, is developed and financed with programs for training and outreach mechanisms to grow contacts and networks. "Once corporations understand it, they support it with initiatives and tactical plans and then people," explains Cousins. There are many who have good intentions, he offers, but for diversity to be successful, companies have to be willing to change their business approach. "Those who do it right do it consistently, and it's a part of their go-to strategy. They track it, measure it, and commit to being the best in class."

HOW WE CHOSE THE 40 BEST COMPANIES FOR DIVERSITY

THE 2007 BLACK ENTERPRISE 40 BEST COMPANIES for Diversity were determined by analyzing the responses to a survey of major corporations to determine investments in key diversity activities. BE engaged in a comprehensive outreach effort to the CEOs and diversity executives of the top 1,000 publicly traded companies and the diversity executives for the 50 leading global companies with strong U.S. operations. Following initial contact, additional rounds of contact were undertaken to ensure that all companies were apprised of the opportunity to participate in this year's survey.

The companies that made the list outperformed other corporations in their peer group in four key categories:

SUPPLIER DIVERSITY: The percentage of total procurement dollars spent with companies owned by African Americans and members of other ethnic minority groups

SENIOR MANAGEMENT: The percentage of senior management positions held by African Americans and members of other ethnic minority groups

BOARD OF DIRECTORS: The percentage of African Americans and members of other ethnic minority groups represented on their corporate boards

EMPLOYEE BASE: The percentage of African Americans and members of other ethnic minority groups represented in the total workforce of the company

Moreover, the companies that made the list were far more likely than most corporations to have the mechanisms in place to strategically plan and implement diversity activities and to accumulate and monitor quantitative and qualitative data on the result of those activities. Thus, these companies were able to measure the effectiveness of their programs and participate meaningfully in our corporate diversity survey.

BE'S corporate diversity survey focused primarily on activities related to the participation of African Americans and members of other ethnic minority groups. According to the U.S. Census Bureau, the term "ethnic minority" applies to people from the following backgrounds: black, Native American/Alaska Native, Asian/Pacific Islander, and Hispanic/Latino. Information provided by companies on diversity efforts on behalf of other groups, such as women, gays/lesbians/transsexuals, and the disabled, was used as secondary, supporting criteria for inclusion on the list.

The first primary survey category, supplier diversity, focuses on the percentage of total procurement spending allocated to African Americans and other ethnic groups. The second primary category, senior management diversity, assesses minority executive representation as a percentage of all senior management positions, including the corporate officers of each company. The third primary category, board representation, examines the diversity of the board of directors, while the fourth primary category, workforce, assesses the percentage of minority employees in an organization as a percentage of all employees.

Upon receipt of all surveys, BE performed a quantitative assessment of all corporate respondents in each survey category. Based on the analysis, each company was provided a score per category, which was compiled into a final survey score. Previous rankings of the BE Best Companies for Diversity weighted scores in all four categories equally. This year, a heavier weighting was given to scores in the supplier diversity and senior management diversity categories. (This change was made at the suggestion...

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