Diversity watch: two companies' diversity efforts are screened and evaluated by the experts.

LAST FEBRUARY, WE published a special report, "Are Diversity Programs Benefiting African Americans?" The report revealed that while these programs are effective at removing the subtle barriers to advancement, they do so only when companies place diversity at the top of their organizational goals. In the year since, we've wanted to see what kind of progress corporate America has made. What we've found is that while there is headway, it's not time to celebrate yet.

There has been a steady increase in the number of companies with diversity initiatives over the past year, according to Michelle Smead, vice president of executive search consulting at A.T. Kearney in Chicago. Author of a 1996 study by the search firm on corporate diversity efforts, Smead found 74% of Fortune 500 companies reported having a diversity program in place, with 62% of those programs having been developed in the previous five years.

"As diversity becomes a major strategic issue for companies, more managers are being compensated based on their support of those initiatives, including hiring goals." Smead believes the increase in minority searches is evidence that senior managers are starting to take diversity seriously.

To wit, according to the Labor Department, blacks compiled 10.7% of the U.S. workforce, 7.1% of which were employed in executive, managerial and administrative positions in 1996. By comparison, in 1997, those numbers increased slightly to 10.8% of the workforce and 7.4% of management positions.

Sadly, the good news appears to be confined to large companies. "While some smaller organizations can be pretty progressive, most of them don't feel the same pressure (from shareholders or existing employees) to pursue diversity initiatives," according to Michael Wheeler, author of the Conference Board report, "Corporate Practices in Diversity Measurement."

Elsie Y. Cross, president of Philadelphia-based Elsie Y. Cross Associates Inc., agrees. "In general, larger companies understand that solid diversity initiatives cannot only help attract and retain talented employees, but help the company market its products to a diverse consumer base," she explains. Some consultants believe the increased interest in diversity is due to a robust U.S. economy. But as the economy slows, so will diversity's momentum. "When times are tight, diversity is out," says Wheeler, "no matter how large the company is."

To more closely examine the diversity work being done by corporations, BLACK ENTERPRISE asked Chicago-based Allstate Insurance Co., and the California utility, Pacific Gas & Electric Co., to submit detailed information about their diversity initiatives. These companies agreed to have their efforts analyzed by diversity experts as a means of gaining objective feedback about their programs' strengths and weaknesses.

Allstate NORTHBROOK, ILLINOIS

ALLSTATE INSURANCE CO. IS THE nation's second largest personal insurance carrier, insuring one of every eight homes and automobiles in the country. Of its 50,000 employees, 52.2% are women and 24.7% are minorities--14.3% of whom are African American. Allstate boasts a minority representation among executives and managers of 21%, with 66% of that number being African American.

Allstate's effort was officially launched in 1993 when its president and CEO backed diversity as a "strategic imperative." The effort centers around two goals: 1) expanding career and advancement opportunities for women and minorities; and 2) fostering greater customer growth, retention and satisfaction. The latter is especially important since Allstate is one of the country's largest insurers of African Americans and Hispanics.

To meet the objectives, the company emphasizes diversity education. By the end of 1998, all Allstate employees will have received training, an investment of at least 540,000 hours of classroom time. These sessions focus on skill-based education that provides practical advice to enable employees to interact more effectively with customers and each other. The topics covered include conflict management, managing differences and the negative impact of stereotyping. Six months after training, employees go through a feedback process to determine if they are practicing what they've learned.

The company's diversity effort also includes career development and succession planning to ensure that a diverse slate of qualified candidates is identified and developed for key positions. Managers are required to list a diverse group of candidates for each key position.

Allstate's progress toward workplace diversity is consistently measured throughout the organization twice a year via its "Diversity Index." The index is an online employee feedback system that measures employee perceptions. To increase management accountability, performance on this index determines 25% of a manager's merit bonus.

There are several components to Allstate's diversity efforts. These include the company's representation of African Americans in the executive and managerial categories; the accountability for success of its diversity initiative through performance reviews and merit pay; the commitment and track record of the president and CEO to incorporate diversity as a "business success" factor; the use of employee data from an internal diversity index to measure progress; and the company's ability to provide tailored diversity education with a six-month follow-up.

Another distinguishing factor is that Allstate has determined that employees who participate in diversity training report higher levels of overall job satisfaction than those who do not receive training. Evidence of Allstate's customer-driven business focus includes changes in organizational structure, language and programs to meet the unique needs of its diverse customers. Unfortunately, examples of workplace activities that support employee success and development are less evident.

For example, Allstate does not evaluate the impact of diversity initiatives on diverse employee populations. This is crucial in determining whether the program is successful in meeting its overall objectives. Both groups require customized, detailed attention to understand the dynamics at work.

Between the Diversity Index and the company's succession planning process, Allstate may already have useful data about similarities and differences in employee experience by race. Understanding these differences may help to accelerate change. This can only be done by soliciting feedback from employees and understanding the differences in their perceptions.

If Allstate can go beyond generalizations and understand the individual day-to-day dynamics of race in the workplace, it will continue to achieve its diversity and business goals.

ANALYSIS

Kate Kirkham is associate professor of the Department of Leadership and Organizational Strategy at the Marriott School of Management at Brigham Young University in Provo, Utah, and consultant to Elsie Cross Assoc.

Pacific Gas and Electric Company SAN FRANCISCO 

PACIFIC GAS AND ELECTRIC CO. IS ONE of the country's largest investor-owned energy utilities, providing electric service to 4.4 million households and businesses in 48 counties in northern and central California. To produce and deliver power, the company uses one of America's most diversified mix of energy resources, including natural gas, hydropower, geothermal and nuclear energy, and purchased power from other utilities.

Of its 21,000 employees, 17.8% of top management are minorities. African Americans represent 3.4% of all top management positions, with Hispanics representing 4.3% and Asians 9.8%. When looking at PG&E management overall, African Americans represent 5% of all positions, a 17% increase since 1987.

The company held its first diversity awareness training for its officers in 1989. A year later, its CEO appointed a multicultural task force to develop short- and long-term recommendations in three areas: customer service, community involvement and human resources.

Since then, more than 23,000 employees have received day-long diversity training (the company has since downsized). It has also increased its minority recruitment efforts, and formed several partnerships with community organizations that promote education, employment and business opportunities for women and minorities.

Of the $944 million PG&E spent on company goods and services, 23%, or $217.1 million, went to firms owned by women, minorities and disabled individuals. Of that, African American businesses garnered $33 million in business.

While the company does not hold managers financially accountable for developing and supporting diversity initiatives, PG&E does evaluate managers on their ability to "manage diversity." In addition, top officers review the company's affirmative action plans quarterly.

PG&E was one of only a few corporations that officially opposed Proposition 209, the California law banning affirmative action in state-run agencies.

PG&E has a very impressive affirmative action program that is being sold as a diversity effort. While the words "diversity" and "minorities" appear throughout the company's responses, there is no mention of how PG&E manages its diverse workforce, no corporate vision statement relating to diversity, no strategic diversity agenda, and no accountability for management actions related to diversity. These are the activities that distinguish a true diversity initiative from a dressed-up affirmative action program.

The evaluation of PO&E's diversity effort was divided into two categories:

The driving forces are:

* The company's public opposition to California's Proposition 209. Its vice presidents made public statements immediately following its passage which demonstrate the kind of leadership needed to maintain employee morale and position as an employer of choice;

* The company's 10-year partnership with the Greenlining Institute, an advocacy organization engaged in the development of inner cities and rural areas

* Efforts such as supplier diversity; worklife benefits designed around diverse employee needs; minority recruitment, education and scholarships; minority career development; an extensive corporate contributions program and diversity awareness building are good examples of the kind of work companies need to do to become an employer of choice.

The restraining forces are:

* While the company is doing a good job in its effort to value differences through sensitivity and awareness training, it falls short in its efforts to manage diversity. If PG&E were truly managing diversity, it would be managing the diverse needs of all employees on an ongoing basis, not addressing the needs of a few in a one-day training program.

* Finally, there was no indication that managers and supervisors were held accountable for contributing to the diversity change process. Accountability is absolutely necessary if employees are to take diversity work seriously.

ANALYSIS

Ben Harrison, Ph.D., president of Ben Harrison Associates, an Oakland, California-based human resources and organizational development firm, specializes in issues of workplace diversity.