TheLoop21.com

By: Raechal Leone (Add to your loop)
Wed, 01/07/2009 - 01:00

When the recession hit businesses, was diversity the first to go?

Just like you, companies are looking to cut spending any way they can in the new year. Besides laying off workers, they're cutting out 401(k) matches, freezing salaries, and forcing employees to take unpaid time off.

Diversity is likely to be another victim of the recession. Don't look for companies to admit it, though. They may not even realize it's happening.

Financially-strapped companies are desperate to be efficient, so they often go with what's easy and familiar. Steve L. Robbins, a consultant who's worked with many large companies, including Pepsi and Toyota, on inclusion, has seen it firsthand.

"They're going to go to the suppliers that they're always gone to, they're not going to go to other suppliers," said Robbins, who's based in Grand Rapids, Mich. "They may care a great deal about (diversity), but in these tough times, other things take priority."

Diversity also may not seem like a major problem at a time when many Americans point to the election of Barack Obama to the presidency as proof we live in a post-racial society. But the reality is we don't.

The latest edition of the National Urban League's annual report on black America showed three times as many blacks as whites had an income of less than $20,000 for a family of four. It also confirmed that the unemployment rate for blacks is generally twice as high as the rate for whites, and that blacks lag in other areas, such as housing, income and education.

R. Roosevelt Thomas Jr., a consultant and the author of several books about companies and diversity, said it's important to acknowledge that progress has been made when it comes to diversity in business. More companies are striving for a workforce with demographics that better reflect the country's population. The problem is that the minorities are often "being clustered toward the bottom of the pyramid," and not rising up the ranks.

So, again, managers may not see the harm in slashing programs aimed at recruiting and maintaining a diverse staff.

"Some people believe we've already done this," said Thomas, who runs a consulting firm in Decatur, Ga. "We've been talking about it about 30, 40 years. Truth be told, we may have been talking about it, but there's still a lot to be done, even in representation."

Companies that have yet to make diversity a priority are unlikely to do it now. That's bad news not only for would-be employees, but for companies.

Ask Cedric Herring, a professor at the University of Illinois at Chicago, who studied about 1,000 companies of all sizes and industries to see whether diversity pays. His answer was an unequivocal yes.

In his research, Herring examined the ethnicity and gender of employees, along with each company's actual earnings, market share, profitability and other factors. What he found is that the most diverse companies tended to have the most profit, while the least diverse companies tended to have the least profit. He then took into consideration a few other factors, including each company's industry and the number of years it had been in business. "The effect of diversity was still there once I controlled for those things," he said.

"I know that (in a recession) the temptation would be for companies to rely on those same kinds of patterns they've relied on historically, which would be to hire minorities last and to fire them first," Herring said. "But I think that would be counterproductive for them. It's when they can least afford to do it."

Robbins agreed. "Ideas rule, and you get more ideas from people with diverse experiences."

Business would also do well to expand their definition of "diversity." Thomas, author of Beyond Race and Gender, said having men and women of multiple races working together is only beneficial if they're encouraged to behave and think differently. Now, more than ever, businesses can benefit from different perspectives on how to boost the bottom line and tap into new markets.

Raechal Leone is The Loop's senior editor and writes the Inside the Loop blog.

Should Fannie Mae get more bailout money?

Yes, we can't let it fail.

No, they got enough bailout money

Maybe, if this is guaraneed to help

I don't know enough about it