Creating an environment for global diversity: global diversity in the workplace is not just a human resources issue, but a business strategy that embraces many elements. Here's how 10 multinationals are successfully managing the process.

It's a no-brainer for a senior executive to express that his or her company's goal is to hire and retain the best individuals from all backgrounds. But just saying so doesn't get the job done. Ideally, organizations must create relationships that respect mutual interests and maintain a culture of inclusion, expressed internally through workplace diversity and externally through partnerships.

In fact, the most successful firms are already adept at using diversity and cultural differences as tools to contribute to their bottom line rather than as obstacles.

"It's not simply learning the right way to deliver your business card at a meeting in Tokyo," says Patricia Digh, consultant, author, professor and trainer who has worked in the areas of globalization and diversity for more than 20 years.

Global diversity in the workplace is not just a human resources (HR) issue, but a business strategy that embraces many elements. It is a mix of people skills and cultures that enable a range of viewpoints to challenge traditional thinking. Indeed, the best ideas for new products emerge from innovative connections between participants from different fields and based on collaboration. The 21st century reality is that businesses are increasingly global, be it their workforce, suppliers or customers.

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There is a great deal involved in creating an environment of broader metrics that links a company's diversity program to effective business outcomes, beyond the standard HR strategies of training and educational evaluations, customer surveys, accountability assessments and the reduction of regulatory/EEOC (Equal Employment Opportunity Commission) complaints

"One of the problems with measuring intangible assets is that they are not always quantifiable or are difficult to gauge," says Digh. "Traditional measures that examine return on investment," she adds, "typically took diversity right out of the equation."

New Model Measures Intangibles

In response to the need for better measurement of diversity results, Digh notes companies have developed systems that can help to calculate the business rationale for diversity efforts and their impact on the bottom line. Within the framework of commitment from the top and a company-wide appreciation and acceptance of differences, one suggested approach is to create a new balance sheet that examines and accounts for human contributions to profitability, financial performance and productivity.

She cites the example of Skandia Corp. A financial services firm headquartered in Sweden, Skandia traces its roots to 1855 and employs approximately 5,600 people across 20 countries, including targeted markets in Latin America and Asia. Skandia realized that its traditional profit-and-loss statements reflected the past and measured tangible assets, while not addressing and measuring the future potential of its human capital.

So, the company created a new balance sheet that linked human, innovation, customer and process capital into its financial accounting system. In doing so, it creating a new metric that incorporated diversity measures into the larger context of traditional return-on-investment metrics.

Skandia arranged the intellectual capital indicators into four focus areas: customer, human development, process and renewal. Picture these focus areas as a model for a house, with renewal and development as the foundation, customer focus and process as the walls and human focus as the hearth, then adding finance as the roof. People became central in Skandia's corporate model, and any diversity measurements that showed enhancement to the hearth and foundation became integral to the bottom line.

Also, Skandia equated its intangible assets into the building blocks of the model and was able to measure how diversity impacts the value-creating process. For example, the worth of the company's relationships with its customers is affected by the corporation's reach into new products. The human capital, namely the competence and capabilities of the employees, is broadened and deepened with increased diversity and aided by cultural development and talent investment strategies.

Now, Skandia uses a process called "Navigator Insight" to identify renewal and development actions necessary to enhance the company's cultures. Business units that have run the process for three years have reported positive trends.

Global Business Imperatives

According to a recent European Commission (EU) survey conducted by The Conference Board and Focus Consultancy, 83 percent of the 900 respondents agree that diversity policies make good business sense. EU members state that removal of certain barriers in employment allows for recruitment from a wider talent pool, longer retention of better workers, improved community relations and an enhanced corporate image. Yet nearly half of all companies participating in the survey have not implemented diversity policies, particularly those in southern Europe and some new EU members.

But many organizations have stepped up to the plate some time ago and have successfully integrated diversity initiatives into their business strategies and priorities. The Global Diversity Network UK (GDN) is a consortium of 10 multinationals that are committed to global diversity best practices.

The 10 participants include Barclays Bank PLC, BP p.l.c., Cadbury Schweppes plc, Deutsche Bank AG, Dow Chemical Co., Nokia Corp., Philip Morris International, Royal Dutch Shell plc, Tyco International Ltd. and Unilever N.V. GDN was developed in 2000 from the collaboration of Schneider-Ross, a United Kingdom-based global diversity consultancy, and BP, whose CEO wanted to learn how other high-performing companies were addressing difficult diversity and inclusion issues.

Robin Schneider, who heads Schneider-Ross with his wife, Rachel Ross, believes that diversity is no longer a separate business issue but a function to be "mainstreamed" into the broad corporate agenda as an integral part of its desired cultural identity. "CFOs make informed decisions based on evidence," says Schneider. "While there are conflicting views as to whether intangible assets are quantifiable, what's important is that they need to be measured. But without serious measurement techniques diversity issues are not treated seriously."

In 2004, GDN and Schneider-Ross launched a global benchmarking tool designed to measure diversity results--and not just process--by starting with this basic question: How are we doing, and what kind of progress are we making versus our competitors? The benchmarking tool constructs the ideal organization based on 14 goals which demonstrate successful implementation of change. These goals are grouped into four areas: workforce composition, working culture, sensitivity to external stakeholders and measuring impact on business performance.

For example, a European corporation choosing an American investment banking firm to guide a European merger because of the diverse composition of its the American team realizes a tangible output for its inclusion.

"American companies have helped to place race and ethnicity on the agenda in some European countries that prefer not to think about it. Without preaching or focusing too intently on compliance matters, American multinationals can encourage corporations to look at the business rationale for workforce composition in ways not done in the past," says Schneider.

One way to link diversity and profitability for the business-to-consumer company is to examine the product market. There are many organizations in the UK that measure minority-spending power that businesses want to capture--and not ignore. Mobile phone companies found they must direct advertising to a younger and strongly ethnic minority audience. About five years ago, financial service firms discovered they had to create non-conventional mortgage products for Muslim customers that complied with Muslim religious prohibitions against charging or paying interest.

What happens when national and organizational cultures come into contact and there is a gulf between standards, such as attitudes regarding sexual orientation? "This is where an organization must illustrate its sensitivity to local issues," observes Schneider, "by balancing its core culture with enough flexibility to be in tune with other cultural sensitivities. However, a decision may ultimately hinge on choosing to be an advocate for changing social policy or simply refusing to do business in certain markets."

Making the Policies Count

Diversity policies are most successful when they are solidly integrated throughout the organization, with executive leadership, ongoing training and support and accountability as the vehicles. Many U.S. businesses have dedicated huge resources to implementing model programs that foster an inclusive and efficient workplace contributing to competitive advantage and profitability.

In its second annual International Innovation in Diversity Awards competition, Profiles in Diversity Journal recognized companies that develop and encourage diversity initiatives that align the entire company with the values of a diverse business culture. Shell International placed third on the 2005 top 10 list for its "Diversity and Inclusion Management Framework," which successfully integrated its diversity standards, established by management councils as a critical, company-wide business activity.

Entergy Corp., an electric utility company with 14,000 employees servicing the South Central U.S., won an award for creating and implementing a company-wide diversity scorecard. Capturing first place was PepsiCo Inc. for its "Celebrating Us Week," dedicated to exploring the uniqueness individuals bring to the workplace. PepsiCo also scored fourth on DiversityInc's "Top 50 Companies for Diversity" list in 2005 for its hiring, recruitment and retention policies, which impact significantly on Pepsi-Co's advancement and succession planning.

Building and sustaining a high-quality business in a global economy is filled with daunting challenges. Companies that know how to elicit the best from individual differences and incorporate them into an effective working environment find that's a smart thing to do.

Cynthia Waller Vallario, J.D. ([e-mail]), is a freelance business writer who specializes in finance and corporate governance topics.

RELATED ARTICLE: Best Practices for Valuing Cultural Diversity

Well-managed businesses adapt to stay competitive, reach new markets and maintain the highest-quality staff. Companies that value the ways cultural and workforce diversity contribute to long-term success, innovation and productivity embrace methods that enhance efficiency, save money and reduce the potential for missteps. Some recommended practices are:

Set the context for change. Link cultural diversity to the organization's goals, customers, suppliers and workforce; integrate workplace diversity throughout the entire context of the organization, not as a standalone program.

Provide ongoing communication. Include cultural diversity awareness in all organizational communications, both formal and informal and in executive speeches and communiques. Circulate information regarding success and progress to reinforce organizational commitment.

Reward effective diversity management. Include workplace diversity measures in executive scorecards and in employee evaluation systems and pay and promotion systems.

Measure results. Identify quantifiable success measures, collect data and use it to underscore successes. Caution: training initiatives frequently yield no measurable results for three years, after which there are significant changes between three and 10 years, with improvements leveling off after 10 years.

Provide Ongoing Training. Executives and employees must be provided with the necessary awareness, skills and information with which to improve performance in order to be held accountable. Cultural diversity should be considered in all workplace training programs, regardless of the topic.

Offer flexible benefits/scheduling. Make sure employee benefits and development opportunities recognize the diversity of employee needs.

Partner with employees, vendors and the community. Demonstrate that employees are valued and respected through network groups, special events, recognition programs and involvement in community volunteerism. Use employees as diversity trainers. Establish vendor and service-provider relationships with minority and women business enterprises.

Adapted from "The Business Case for Building Inclusive Workplaces" by Executive Diversity Services Inc., an organizational consulting and training company based in Seattle, Wash. (www.executivediversity.com).

RELATED ARTICLE: takeaways

* Global diversity in the workplace is more than a human issue; it's a business strategy consisting of many elements.

* Eighty-three percent of 900 respondents to a recent European Union survey agree that diversity policies make good business sense. Yet, nearly half of them have not implemented such policies.

* A global benchmarking tool designed to measure results begins by asking: "How are we doing, and what kind of progress are we making versus our competitors?"

* Diversity policies are most successful when they are solidly integrated throughout the organization with executive leadership, training, support and accountability.