31-Jul-12 Published in: Small Business Monthly Author: Julia Paulus Ogilvie
Often when the importance of incorporating diversity into business is discussed, the direct link to the company's finances isn't made. In the following Q&A, Dr. Benjamin Ola Akande, professor of economics, dean of the George Herbert Walker School of Business and Technology, and chief of the Office of Corporate Partnerships at Webster University, explains why he believes embracing a well-thought-out diversity plan will contribute to your bottom line through what he calls "return on diversity."
Please explain what you mean by "return on diversity."
Pursuing diversity as a strategic intent should not be confused as a philanthropic quest to help others or to bring people of different backgrounds together. Return on diversity (ROD) is the ability to demonstrate that your action is measurable and that it effectively contributes to the bottom line. Return on diversity is when an organization is focused on issues of importance and urgency to your customers. You don't want to be known as being an expert on what used to work. There is absolutely no future in that type of strategy. My proposition is that a well-thought-out, effectively delivered diversity plan can make business sense and a lot of dollars and cents.
How can diversity be a competitive advantage for small business?
My definition of "competitive advantage" is what you do that nobody else can do even if they wanted to. So a well-honed diversity strategy keeps you a couple of steps ahead of your competition. The competition are those with the singular intent of taking your customers and encroaching on your market shares. One example that comes to mind is a simple one. If you are a small business selling any item that can be purchased at Wal-Mart or Walgreens and you are in close proximity to these retail giants, you are not going to be around for long unless you have a clear distinction that convinces the customer that they need to come to you and not go to them.
So, what does this have to do with diversity?
Well, your diversity strategy may entail appealing to a diverse generation of customers - say, the iPoders, who use social media as an effective tool to communicate. You may provide a forum for them to offer ideas on what they are looking for that they can't find elsewhere. To do so, you will need to embrace the iPod generation as critical members of your workforce, engaged on your leadership team; you need to listen to them and have the courage to take their advice. I look at Blockbuster video as a living example of a wonderful idea that effectively succeeded for a long time in relative terms, but they became unaware or chose to ignore the changing dynamics around them. Technology and new products neutralized their delivery methods, which was having the customer come to them instead of being accessible to the customer at all times. Blockbuster missed the opportunity to make some strategic acquisitions, to recruit a whole new generation of talent (generational diversity) and thereby extend their life cycle. They chose instead to stick to their original well-tested, tried-and-true business plan, coupled with a strong dose of denial, discounting the phenomenon called Netflix, iTunes, etc. Well, you may still find Blockbuster in a few places in America today, but they are not the Blockbuster they were. Blockbuster would have benefited from a diversity strategy.
How can the bottom line of small and midsized business improve from diversity?
Organizations can improve when they successfully execute a strategy anchored on the critical balance based on intellect, generations and a crucible of experience, which will drive business change and deliver economic advantage. Another term for this strategy is "inclusive excellence," where you give access to a broader scope of perspective and enable employees to test ideas by bringing different filters to issues and questioning current practices. These are simple propositions that organizations tend to ignore because they don't see the value of diverse perspective. A good diversity strategy is utilizing the diverse perspective you already have within your organization to explore new customer opportunities and to better utilize the existing relationships you already have with your customers.
Why should every company, large and small, have a diversity plan?
The future belongs to only organizations that can see around corners. A diversity plan will give you a peek of what the future looks like. The challenge is that some organizations are in a state of hospice, living on past glory, coasting on past successes with absolutely no strategic direction. Their strategy is based on hope.
What are the steps to creating a diversity plan?
I will tell you where most organizations go wrong when it comes to developing a diversity plan. There is a lack of ambitious initiatives, there are way too many goals, it lacks urgency, there is no timeline to keep them honest and their plan is the "all things to all people" plan.
What are the top benefits of a well-executed diversity plan?
The entire employee base will become engaged, there will be support from leadership, management practices will be integrated and aligned with the plan, and compensation and promotions will be tied to its success.
How can it be measured each year just like ROI?
Ask: Does your plan increase your customer base and your bottom line? Does it help retain your best talents?
Why do diversity plans fail? How can business owners avoid these pitfalls?
A plan without measurements is a slogan. The plan should be led from the top and not be handed to the HR department. What I notice is that most diversity initiatives are parked in HR. Diversity initiatives should be led from the top of the organization. IBM is a classic example of an organization that has reinvented itself by implementing a diversity strategy that enabled them to capture new markets - a case in point, their multicultural and women-owned niche business for minorities. It's a strategy that contributed to their bottom line. Return on diversity is the true measure of any organization’s real commitment to a diversity strategy that makes cents.