The Business Case for Diversity: raceAhead

October 28, 2019, 6:35 PM UTC

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The Wall Street Journal has published a must-read piece that affirms what people who run in raceAhead circles already know: Diverse and inclusive companies make more money.

The Journal’s research analysts have just completed their first-ever ranking of individual companies in the S&P 500 index. Turns out, they’ve found the receipts.

Each firm in the S&P 500 was given a diversity and inclusion score from 0 to 100. The score analyzed 10 metrics including board makeup, the age and race/ethnicity of the company’s workforce, the adoption of diversity and inclusion programs, and the percentage of women in leadership roles. (Check out the full methodology, here.)

The results are fascinating. 

Progressive Corp (with a score of 85) and JPMorgan Chase (80) took the two top spots, but were in excellent company—Anthem, Citigroup, Omnicom Group, Starbucks, and Visa all scored 75, and GM, Kroger, Marriott International, and Procter & Gamble were part of an impressive cohort who all scored 70. 

The average score of the entire S&P 500 was only 44.2, a quick snapshot of the lack of diversity that persists within the index cohort.

For the high scorers, the financial benefits are clear. 

The shares of the 20 most-diverse companies had an average annual return of 10% over five years, compared to 4.2% for the 20 of their lowest rank peers. The top 20 also report an average operating profit margin of 12%, compared with 8% for the lowest-ranking companies. 

David Taylor, the CEO, president and chairman of P&G, told the Wall Street Journal that their own strong financial results (5% growth in organic sales) were a clear reflection of their diversity gains. “A diverse team supported by an inclusive environment that values each individual will outperform a homogenous team every time,” says Taylor.

I salute the analysts who constructed the study. It takes a lot of digging to do this work well. Some 28, or barely 1% of companies in the S&P 500, publicly share their racial diversity in senior management, and only 17 companies publicly report racial diversity at the board level. The public diversity numbers in the Fortune 500 cohort are equally grim. 

But it also takes a lot of work to do diversity well, which is the subject of a new book, also a must-read. 

Diversity, Inc.: The Failed Promise of a Billion Dollar Business by journalist and New York University journalism professor Pamela Newkirk, is a well-sourced and succinctly written report that addresses the overall lack of progress in three key sectors: academia, corporate America, and the Hollywood entertainment establishment. Each sector has been struggling with diversity, often quite publicly, for decades. 

The book is valuable for many reasons, not the least of which is the context Newkirk provides. 

She begins in earnest in 1968, which is the genesis of the modern diversity conversation. The Johnson administration (via the Kerner Commission) laid the blame for the impoverished state of Black communities at the feet of white-controlled institutions, and made the business and moral case for the inclusion of African Americans in the mainstream of business, education, and financial life. Inclusion was, at its core, a necessary corrective from slavery and Jim Crow. 

This comprises the central tension of the quest for workplace diversity.

The work was initially compelled by a hodgepodge of public policy and legal initiatives, and as a result, has evolved to have nothing in the way of a central operating principle or universal agreement on, well, anything. “Diversity has become a catchall term that encompasses everything from race, gender, sexual orientation, and body size, to mental and physical capacity and eye color, and there’s little agreement on the definition or institutional goals across and/or even within sectors.”

For Newkirk, understanding how this conversation has or has not changed over the fifty years is essential to understanding its chronically disappointing results now.

But to understand is to know hope:

“Perhaps most surprising is that many of the fields that are considered the most progressive, such as arts and entertainment, are the least diverse and that corporate America—despite remaining challenges—has in many instances made far greater strides toward employing and promoting racial minorities,” she says.

That the entertainment industry has been such a disappointment is more than just a missed financial opportunity, she says. 

“If diversity is to flower, it cannot be hermetically sealed off from the cultural ecosystem in which it is implanted.” There are few industries that can correct the record of our history and begin to reset our fraught relationships with each other than Hollywood. “[Diversity] must be rooted in a mutual understanding of our past and its profound legacy. Viewing America through rose-colored lenses has prevented most White Americans from coming to terms with the myriad ways in which race continues to pervert national ideals and undermine justice. Without truthful encounters with the past, racial reconciliation is doubtful and diversity will remain little more than a hollow abstraction.”

Taken together, the report and Newkirk’s book are an affirmation of what four years of life on the race beat has taught me: A diverse workforce will yield clear financial benefits, but the journey to get there will yield enormous human ones.

Oh, and Hollywood? We could use some help here. 

Ellen McGirt

On Point

The faithful, mourners, and allies mark the one-year anniversary of the Tree of Life synagogue shooting in Pittsburgh The day was marked with projects and service, and hundreds of people of all faiths working together at Jewish Family and Community Services, making blankets for refugees and packing goody bags for undocumented children. It was an image designed to heal the world and the spirit, and defy the hate that made the day of memorial necessary. “We are here and we are not scared,” Laura Horowitz told the New York Times. Horowitz is a member of one of the three congregations who were attacked by an anti-Semitic gunman specifically for their concern with immigrants and refugees. "Maybe we are scared," she said. "But we’re here anyway."
New York Times

'Climate justice' cannot be separated from 'criminal justice' Considering the overwhelming impact environmental issues has on communities of color, the two issues are interlinked, says climate activist Naomi Hollard. Mashable spoke with climate activists to collect suggestions on how to ensure climate change action accounts for the blatant racial element. A first step would be to acknowledge that the "work of climate justice is fundamentally incomplete without incorporating broader social justice goals." And from there, look beyond the obvious—say, avoiding, plastic straws—and study how climate change is impacting people at this moment. Much of the conversation is around how climate change will harm future generations, says Andrew Manning, but that "ignores the fact that many marginalized communities have been living with the effects of climate change for years." Read through for tips on how to stay engaged, and how to "use your own privilege to lift up others."

John Conyers Jr., dies at 90 Conyers was the longest-serving African American in Congress, and many of his once radical ideas—from single-payer health care, to police reform and reparations—are now mainstream conversations. He was also a founder of the Congressional Black Caucus. The end of his career was marked with controversy, he resigned after credible accusations of sexual misconduct. But he also lived a history well worth remembering: When Rosa Parks left the South and moved to Detroit he gave her a job in his office, which she kept until she retired.
New York Times

On Background

The most consequential ‘hip-hop business moves’ of the 2010s According to Trapital podcast and website founder Dan Runcie, these decisions either established a new “trajectory” for those involved, or impacted other artists “by changing the landscape.” Stand out decisions that made it on the list: Dr. Dre’s decision to sell Beats to Apple (2014), the Adidas and Kanye West partnership (2013), and Rihanna’s Fenty Beauty launch (2017). But which moment, according to Runcie, is worthy of "the most influential hip-hop business move of the decade"? Beyoncé’s surprise self-titled visual album drop in 2013.  

Why is it so hard to get ahead in a non-profit career? An unwillingness to take risks, an aversion to innovation, flat hierarchies, and limited training budgets are all mentioned in this piece, but perhaps the most insidious element is the founders themselves. When a passionate founder has been in place for the life of a philanthropic effort, they’ve stacked the leadership deck with cronies who fail to hold the organization accountable. If founder chief executives try to manage their trustees, says one expert, "that makes it quite difficult for staff to rise through the ranks, because the charity’s run like their fiefdom."
The Guardian

When the rise in hate re-connects you with your faith Writer Britni de la Cretaz recalls the moment when reclaiming her Jewish faith became essential. As a non-practicing Jew, she enjoyed the cultural side of Judaism, but did not feel the meaning behind the stories in the Torah. Having children spurred her to search for a spiritual home, but never fully followed through. And then the Jewish Community Center near her home in Massachusetts was evacuated due to a bomb threat, just three days before inauguration day 2017. "Suddenly, the relative safety and privilege that I grew up with as a white American Jew has cracked wide open, revealing the rotten underbelly that’s always been here, the one I have chosen not to see."

Tamara El-Waylly helps write and produce raceAhead.

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“William Paley said something I’ll never forget and is why I built a studio. He said ‘What is your propaganda?’ This is a man who created TV Network news, who gave Walter Cronkite his job, and he’s asking me what’s my propaganda… if he’s telling me there’s power in the images, then I’d better listen and understand… Culture has been in the hands of a very small group of people and that’s not helpful to the culture of Black America.”

—Actor and producer Tim Reid to Pamela Newkirk in Diversity Inc.

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