Diversity Makes Business Sense
By Mark Taylor | Yahoo! Small Business Advisor – Friday, September 12, 2014
By 2050, racial minorities will become the majority in what demographers are calling the “tanning of America.” But diversity in hiring and contracting processes, marketing, purchasing and representation in the C suite aren’t just the right things to do in a nation of growing racial and ethnic populations, they make economic sense as well, according to small businesses, large corporations and minority business associations.
“Corporations are not people,” explained Joset Wright-Lacy, president of the National Minority Supplier Development Council, “In spite of what the Supreme Court said. Corporations have no soul or conscience and their sole purpose to exist is bottom line results, the returns they provide to shareholders and owners. Diversity is about doing the economic right thing.”
Wright-Lacy said, “to build an economic base, you have to empower those individuals to participate in the economy through training and education. If you‘re looking at national full employment within minorities, our largest demographic, then you have to start creating that market now.”
She said America should have learned its lesson during the most recent recession.
“The recovery has taken much longer because nobody had any money to buy anything,” she said. “We have to create opportunities for businesses to create jobs and grow the economy. We can’t abandon large segments of the population and expect them to be successful.”
Jorge Plasencia, CEO, Chairman and co-founder of the Miami-based media firm, Republica, said much of his job involves educating mainstream American corporations why they should embrace diversity and multi-cultural America. “There are 55 million Hispanic Americans whose buying power is $1.5 trillion annually,” said Plasencia. “If you’re not advertising and marketing to them in their language and culture, then you’re not reaching them and your message goes unnoticed.”
He said more large corporations are connecting to Hispanics and other minorities, but noted that some lag behind. “I don’t think it’s overt discrimination, but I think they just don’t know how to do it or think they’re already reaching our community through their traditional general marketing.
“But what a lot of CEOs don’t realize is that they’re losing an opportunity. Hispanics are very brand loyal and will pay dividends to companies who reach out to them. Toyota is number one among Latinos because they made a commitment years ago. Procter & Gamble (makers of Pampers diapers) also enjoys high brand loyalty among Hispanics. Latinos are very family-oriented and brands that understand that and connect with us get our loyalty and brands that don’t are missing that chance.”
He noted that the top 10 media markets in the United States all boast sizable Hispanic populations. “So if you’re advertising in any of those markets and not targeting Latinos, you’re missing a huge chunk of the market and that audience isn’t getting exposed to your brand.”
He said Republica, which is a full service agency that offers advertising, public relations, ad buys, digital and social media consulting, also helps corporations plan diversity strategy.
Plasencia said Republica, which has leaped from the 49th largest Hispanic advertising agency to the 15th biggest in five years, often opens the door to businesses as an agency that can connect companies to Hispanic audiences.
“That’s the message,” he explained. “If brands aren’t doing diversity today, they’re missing an opportunity.”
John Robinson, president and CEO of the National Minority Business Council, a business and trade organization that advocates for small, minority and women’s businesses, cited its relationship with Pepsico as an example for how corporations can benefit from diversity.
“Early on Pepsi committed to diversity in employment, procurement and its global business to grow its business. Pepsi hired African American and Hispanic professionals at high corporate levels and obtained an advantage over competitors.”
Robinson said corporate diversity is important because the U.S. minority population will become the majority in a matter of decades.
“All forms of diversity will be important and will become more important as the numbers switch over. That’s why major corporations are on the bandwagon now because they know numbers are switching and in some markets, have already switched. That’s the driving force,” he said. “Nobody is doing this because it feels good. Economics dictate that if you don’t have a strong diversity component, you’ll be in trouble.”
William Burgess, III, owner, founder and president of The Burgess Group, an executive search and recruitment firm based in New York City, said corporations should embrace diversity because America is a diverse nation of many different ethnic, racial and religious groups.
“It’s common sense to think that the company is representative and reflective of the people it serves. Every company should have a policy of supporting diversity, not only in people they hire, but in the services and products they purchase. Without that, they can’t stay in business. We are not only a diverse country, but we’re dealing with a diverse global marketplace and we should be able to work with, produce and serve all kinds of people. You have to be global and diverse if you want to compete in this modern world.”
Burgess said that diversity should also be reflected in the company’s board of directors.
“It makes no sense to have a board of directors who are not representative of the customers they serve. How would they know whether the products and services are compatible with all people they serve if they don’t consider diversity?”
He said sometimes corporate boards of directors reflect the friendships of top management. “There is little diversity and it becomes a kind of an old boy’s network. You want diversity to expand that board’s thinking and direction to elicit the best and broadest advice possible to make your products more global.”
Burgess said companies that do not commit to diversity, but just pay lip service, are eventually uncovered.
“You have to walk the walk and not just talk the talk.”
Burgess said some companies take the path of least resistance when it comes to diversity.
“But it takes education and training to get companies to see the value of other voices brought into the company. We viewed our company as a melting pot. But it’s really more like a salad: you need more healthy ingredients and it better for you than just eating like you did in the past.”
Burgess’s firm conducts diversity training for companies large and small.
“Initially, companies need to understand and analyze the culture that exists now. Then understand what’s happening in their industry and how that company is performing and how and where they have positioned their products. Then you have to look at areas where they lack diversity. It has to start at the top. Leadership has to look at what they hope to achieve in the marketplace. Maybe women don’t pass through the glass ceiling- the company needs to train senior management to see what women and minorities bring to company.”
Carlos Fuentes, vice president of corporate and governmental affairs for InterChez Logistics Systems, a global logistics, translation and consulting firm, said when his Stow, Ohio-based employer goes to market, “We always go on our skills, on our ability to perform, and by the way, we happen to be a minority company.”
He said the mid-size company belongs to numerous groups and organizations that support diversity, from their purchasing and supply chain initiatives to developing educational and training programs in minority communities in the Cleveland area.
The firm supports a scholarship program at Kent State University.
“Diversity drives innovation,” he said. “Innovation comes from drawing in different perspectives in tackling age-old problems in new ways that drive down costs and improve quality.”
Fuentes said by choosing not to do business with minorities, companies risk marginalizing the demographics of their consumer base.
“If you want people to buy your goods and services, you need to empower them economically to participate in our economy,” he said. “At its root, diversity is in the self-interest of a company.”
John Harmon, president and CEO of the African American Chamber of Commerce of New Jersey, founded the business organization in 2007. Harmon said prior to its establishment, African Americans were the only ethnic group that did not have a statewide business presence.
“On issues of economic opportunity, diversity and workforce issues, we didn’t have an advocate. That’s why we exist.”
He said the AACCNJ’s ultimate goal is to improve the economic conditions for all New Jersey residents. “And by improving the economic health of the African-American business community, we are improving the economy of the state.”
Harmon said the chamber helps corporations to achieve diversity commitments by introducing qualified firms to help corporations participate in their supply chains, delivering more innovation and competitiveness and to build better products and deliver greater value.
“From a hiring perspective, it’s important that if a large consumer base is patronizing these corporations, then their work force should reflect that.
“This is not a charity plea. It’s about improving the economic outcomes for all citizens,” he said. “Diversity is a part of who we are, and why this conversation is still relevant in 2014 when we have a black president.”
He said for diversity to take root within a company, it requires a willingness to engage in open and honest conversation.
“All people have perceptions. But when you sit down and dialogue, those perceptions start to subside and you begin to see people for their worth,” he said. “The real value is when an organization like ours can produce folks who can deliver the goods and services needed to these large corporations.”
He cited one of the state’s biggest employers, consumer products firm Johnson & Johnson, who forged a relationship with the chamber to increase spending with African American firms.
“Johnson & Johnson was selected in 2010 because it spent $106 million with African American businesses in the state,” Harmon said, a 45% increase over 2009. J & J describes diversity as a “central part of the cultures” across the Johnson & Johnson family of companies.
“It’s a key to our people’s passion for improving the health and well-being of people the world over,” the company said in a statement. “We recognize that differences in age, race, gender, nationality, sexual orientation, physical ability, thinking style and background bring richness to our work environments. Such differences help us connect better with the health needs of people in communities around the world.”
Dominic Caruso, the company’s vice president of finance and chief financial officer, said by doing business with diverse suppliers, “we directly contribute to the creation of jobs in our local communities and beyond. This also helps strengthen ties to all those who benefit from our products and services − the one billion lives we touch every day around the world.”