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Making Diversity Count

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by Peter Galuszka

Making Diversity Count
Chief diversity officers are taking their place at the highest levels of corporate America, which is having an impact on business school curriculums.

By Peter Galuszka

In mid-January, corporate America sent another signal that it is paying more attention to diversity issues, and business educators are taking notice.

American International Group Inc., one of the nation’s largest insurers, announced the appointment of its first chief diversity officer, Terri D. Austin. The lawyer and 17-year veteran of AIG will oversee  diversity initiatives within the company and advise the company’s top brass of situations among its suppliers, vendors and customers.

While AIG’s announcement was decidedly low key, the naming of another CDO at a powerful U.S. company suggests that diversity is becoming more of a factor in the corner offices of corporate America. Marquee firms like Food Lion, Ford, IBM and Merck now have CDOs.

As a result, diversity issues are becoming a hotter topic in business schools. “Most definitely, the symbolism has been bridged,” says William T. Lewis, director of the Office of Diversity Initiatives at Indiana University’s Kelley School of Business. “Its been important for companies to communicate to their internal and external constituents that they are committed to diversity.”

Bea Y. Perdue, the executive director of Bennett College’s Johnnetta B. Cole Global Diversity & Inclusion Institute, says ignoring minorities could be a big mistake. As the U.S. labor force shrinks over the next 50 years, she says companies will increasingly need to hire and retain minorities to keep pace with global competition.

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Corporate executives agree. Focusing on diversity “helps us reduce turnover and improve retention,” says Pat Harris, who was named global CDO at McDonald’s earlier this year. “It really reflects who we are and what we stand for.”

Harris points to the hierarchical placement of CDOs as evidence that diversity is being taken seriously. Today’s diversity specialists are often placed at the highest level of the corporate command structure, along side the chief financial officer and other “C” level executives. Diversity officers were usually placed at lower levels in the 1970s and ’80s and often dealt primarily with issues of affirmative action compliance.

As corporations have become more global and reach out to more complex markets, diversity has become more of a central issue. Harris compares the ascension of CDOs to the rise of chief information officers and chief technology officers in the 1980s and ’90s. As information technology became more critical, those positions moved higher in the corporate executive structure.

As a “C” level executive, Harris works a short distance away from McDonald’s chief executive and chief operating officers at the company’s Oak Brook, Ill. headquarters. Instead of having her views funneled through the company bureaucracy, she is in regular contact with the top executives. McDonald’s focus on diversity has led to some positive results. Currently, about 17 percent of the company’s officers and 20 percent of all its employees in the United States are Black. About 9 percent of the company’s officers and 10 percent of its overall work force are Hispanic.

As global CDO, Harris, who has been involved in some aspect of diversity at McDonald’s since the 1980s, must address problems affecting the 119 countries where McDonald’s has restaurants. “I’m still in the process of learning. What we do in the United States will be very different from what we do in Europe, Latin America or Asia,” she says.

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Business schools across the country are working to revise their curriculums to take advantage of the diversity-conscious work place. Some programs are tailored for students intending to go into human resources, while others offer a civil rights focus. Marketing students can use diversity-focused techniques to reach minority populations in the United States and overseas.

Perdue’s program at Bennett College has been especially effective, Harris says. Named after Dr. Johnnetta B. Cole, the outgoing president of the college, the institute has “done a great job, and they get CEOs in on a regular basis to teach,” Harris says.

The institute grew out of a March 2004 forum for CDOs. After the forum, a number of the participating CDOs approached Cole with the idea of starting an institute and promised to help with the funding. The institute now holds workshops and offers research into business diversity issues. Its next CDO Forum is being held this month in Greensboro, N.C.

“There’s been a tremendous increase in the number of CDOs in the past five to eight years,” says Perdue. “Companies realize that the position is as critical as the chief financial officer.” Universities have also introduced their versions of CDOs, and U.S. Secretary of State Condoleezza Rice has instituted a CDO at the State Department.

Bennett’s institute has received a $1.5 million donation from Food Lion, which is also based in NorthCarolina.

Diversity Inc. and the mortgage company Fannie Mae have each pledged $500,000. The college has also added a certificate in business diversity issues and plans to add an undergraduate degree in the near future.

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