Jun 9, 2011

Few companies use diversity management to meet business needs: Study

Top 3 challenges are demographics, gender and nationality

Major European organizations display little diversity in the ranks of their top management, according to an analysis of 40 companies by the Boston Consulting Group (BCG). On average, 93 per cent of the executive directors were male, 86 per cent were native Europeans and 49 per cent were between the ages of 51 and 60 years old.

By contrast, the market demands on these same companies are far less homogeneous, said BCG, as the purchasing power of women is steadily increasing, the companies generate, on average, 40 per cent of their revenues outside of Europe and their customers are growing older.

"Diversity must be seen as a strategic response to major business trends such as globalization, demographic shifts and the talent shortage," said Rainer Strack, senior partner at BCG and co-author of the report Hard-Wiring Diversity into Your Business. The study analyzed how 444 executives responded to challenges in diversity management, in partnership with the European Association for People Management (EAPM).

Business risk caused by demographic change (aging) was cited as the greatest diversity challenge by 48 per cent of the survey respondents. Rounding out the top three challenges were gender (29 per cent) and nationality (18 per cent).

Thanks largely to recent debate in Europe about quotas for women and the immigration of foreign talent, the topic of diversity management appears to be a focus at most companies, found the report. Eighty per cent of respondents said their company had implemented at least three measures to enhance employee diversity, such as flexible working-time models and parental leave.

"Our research has shown that the business case for diversity is clear and that HR needs to integrate such measures into its broader people policies. A modern workplace must represent its customer base in order to be truly effective and to deliver products and services that drive it to the competitive edge in a global environment," said Stephanie Bird, co-author of the report and director of HR capability at the Chartered Institute of Personnel and Development (CIPD).

In addition, there are considerable differences in how various groups of employees view the effectiveness of diversity initiatives, found the report. For example, older workers rate measures for promoting age diversity as less effective than their younger colleagues.

"In order for diversity to be successful, top management must visibly support the objectives and the entire workforce must be integrated in the development and execution of the programs," said Jean-Michel Caye, senior partner at BCG and co-author of the report.

The BCG/EAPM report explained how employee diversity can be increased to advance business imperatives through several steps:

Create transparency: The foundation of all strategic HR work is strategic workforce planning — the quantitative and qualitative analysis of workforce supply and demand and of the individual capabilities of workers. Workforce demand should reflect overall business trends as well as a company's business strategy.

Redefine recruiting: Tailored recruiting campaigns expand the existing talent pool by targeting underrepresented groups, such as female engineers. In addition, the employment of HR officers from outside Europe enables more efficient recruiting of international talent.

Promote diversity: It is equally relevant to promote diversity within the company's existing workforce and among new hires. Evaluations of employee performance and potential, as well as career moves by managers, should be assessed for how permeable they make the company for new talent groups. The sooner the promotion of diverse talent is achieved at the lower levels in a company's hierarchy, the better the chance the organization's internal diversity can be tapped and enhanced.

Build leaders for the 21st century: At many companies, a 2x2x2+5 development program has proved successful. In such a program, aspiring managers are exposed to two business units, two countries, two functions and at least five different projects.

Retain employees: New groups of employees are presenting employers with new challenges. Financial incentives alone are losing their attractiveness — the ability to reconcile one's job with one's family is growing in importance. Modern incentive programs involve family members, for example, by providing health care for spouses or scholarships for employees' children.

Make progress visible: Performance indicators for diversity must be anchored in a company's HR controlling function, so that proven progress can be quickly established. The HR department is responsible for setting the parameters of the framework -- such as additional resources for department heads -- to promote a corporate culture that is based on diversity.

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