Case Study: How Hard Should You Push Diversity?

"Did you see this?" Kumkum Bhatnagar asked incredulously.

She held up a printout of an article by Will Sonenberg, the CEO of GlobeBank. It had appeared in a special online supplement of Businessweek on the subject of diversity, and it concerned the company's efforts to increase female and minority representation in management. Charles Begley, GlobeBank's managing director of diversity recruiting, was already reading it onscreen, dumbfounded.

"We worked with him on every draft," he sputtered. "Where did this line come from? A glance at the photos of our executive committee on our website is all it takes to see how little headway we've made on diversity. Who wrote that?"

"He must have written it himself, after we signed off," Kumkum, Charles's deputy director, said with a note of despair.

"He had no business doing that," Charles said.

The line in Will's article made it sound as if Charles and his team had been sitting around doing nothing for the past four years. Hadn't the CEO just last month sent out an official recognition of their achievements? Hadn't he cited their "unprecedented progress" in filling the executive pipeline with minority candidates?

"Why would he take a swipe at us like this — and in public?" Charles asked.

"I don't know," Kumkum said. "But of course, when it comes to the executive committee, we both know he's right."

(Editor's Note: This fictionalized case study will appear in a forthcoming issue of Harvard Business Review, along with commentary from experts and readers. If you'd like your comment to be considered for publication, please be sure to include your full name, company or university affiliation, and email address.)

With Kumkum standing over him, Charles opened the executive committee page in the "About Us" section of GlobeBank's website. Pictured among the 67 photos were eight women, one black man (Charles himself), and one Hispanic (Hugo Suarez, of GlobeBank International).

"Probably what happened," Kumkum said, "was that the web team had finished redesigning this page and asked Will to approve it just as he was about to send the final version of his article to the editor at Businessweek. He must have noticed the disconnect between the pictures and the wording we all agreed on. So at the last minute he made a few changes."

"Whose idea was it to put those pictures up there anyway?" Charles growled.

"You know Will likes to go off script," Kumkum said. "Remember that headline in the Journal three years ago? 'CEO Says Lack of Diversity Disgraceful'? But you have to hand it to him — he does care about the issue. You can't take it personally."

"I do take it personally."

Four years before, Will had come to Charles, arguing that GlobeBank's lack of diversity was preventing it from attracting the best talent in the marketplace. Charles was running U.S. equity sales at the time — he was one of the highest-ranking African-American executives in the company — but Will wanted him to give up that position and become the bank's first managing director of diversity recruiting, reporting directly to the CEO. Charles had been wary; his ultimate aspiration was to be the bank's global head of sales, and an HR role could prove to be a disastrous sidetrack.

But he'd gone for the job because deep down he did want to turn GlobeBank into the kind of company where someone like his son, Jason, now a high school senior, could move up through the ranks without having to jump all the hurdles Charles had faced. In fact, he had talked about Jason when he formally interviewed for the diversity job with representatives of the executive committee. "I've told my son there are no limits to what he can achieve in this world," he'd said to the group. "Am I telling him a lie?" People squirmed, as he had hoped they would. "GlobeBank's numbers say I am. So should I stop telling him that?"

That's how Charles had got the job. His strategy since then had been to focus on filling the pipeline with top women and with African-American, Hispanic, and other candidates of color. He and his staff searched worldwide for the right people and went to great lengths to bring them in. Now GlobeBank had a large pool of high-potential minority candidates, the envy of the industry. But because they hadn't yet made it into the executive ranks, Will was calling the effort a failure — calling Charles a failure.

Charles stared at the article on his screen. How little headway we've made. "This is a gauntlet," he said. "And I'm going to pick it up."

"If you ask me," Kumkum said, "this gets back to my old point: Executive diversity isn't just about the pipeline."

"Of course it is."

"It's partly about the pipeline — you have to have good people to promote. But we've always neglected the 'pull' part. We need to make sure that everyone in the upper echelons of this company is pulling folks up into management positions. I think we — you — have done a great job of nurturing diversity. But too many of the business-unit heads are still blockers."

"You know we can't tell them specifically who to promote."

"No — but as I've always said, the company could rewrite its scorecards so that executives are evaluated not just on whether they're good bankers but on whether they're hitting diversity goals."

Charles shook his head. He wasn't going to go there with Kumkum. "I don't want this company to be telling the head of investment banking, or trading, or risk management, that he has to promote a black woman if he thinks a white man is a better candidate," he said. "This is a business. The unit heads should have the freedom to make the best talent-management decisions they know how to make. Besides, Will would never go for it."

"This is a business — true," Kumkum replied. "But it's a business that has made promoting women and minorities one of its priorities. And Will has just reiterated that priority in the clearest possible way."

Life in the Pipeline

Charles had previously scheduled back-to-back meetings later that day with two young executives in GlobeBank's talent pipeline: Anthony Taylor and Trey Sugarman, African-American MBAs with Ivy League pedigrees whom Charles had been instrumental in recruiting. Anthony had made his appointment just to "check in," he said. But as he told Charles what he had been doing, the real reason for the meeting became clear: He was bored and felt underutilized.

"I've spent the past month doing pitchbooks for a pulp-and-paper IPO that's never going to happen," Anthony said. "There are big deals happening — just like you promised — but I'm not getting staffed on them, which means no exposure, no recognition, nothing."

Afterward, when Charles met with Trey, he heard almost exactly the same complaint.

Charles had found Taylor and Sugarman at a competing bank and had been given permission to recruit them into GlobeBank's investment banking division at the VP level. He had wooed them with assurances that they would be working on the most important mergers, acquisitions, and IPOs in the world, and that they would quickly rise to the director level. But nearly 18 months (and two promotion rounds) later, that hadn't happened. And two intelligent, hardworking young men were wasting their time on insignificant deals.

That night, Charles kept thinking about Taylor and Sugarman as he watched the end of a basketball game with Jason.

"I've created a bench, and no one's getting off it," Charles said, more to himself than to Jason. But Jason asked his father to explain.

Charles sighed. "I've created a little ghetto in my own company, for people just like the kind of guy you're going to turn into," he said. Jason muted the TV — the game was a blowout anyway — and Charles told him the whole story: the CEO's article, the conversations with Taylor and Sugarman, Kumkum's philosophy. "I'm starting to think she's right about the pay-for-diversity thing," he said.

"We did the Bakke case in Mock Trial," Jason said.

"The what?"

"Affirmative action," Jason said. "Quotas."

"Oh, that."

"And we learned about the quotas they have in Norway now to get more women on corporate boards," Jason said.

"Yeah, but I'm not talking about quotas. Can you put the sound back on?"

"Sure you are," Jason said. "You'd be telling your executives, 'You have to hire X number of black people or your pay will be docked' — even if they're not the best candidates."

"It would never be as simple as that."

"Personally, I wouldn't want to work for a company that did that," Jason said, putting the sound back on. "Not ever."

Charles felt confused. Before going to bed, he forced himself to write an e-mail to Will. It wasn't the angry response he had contemplated earlier. His tone was neutral. He simply said that he had seen the revised article on the Businessweek site and asked for a meeting to talk about its ramifications.

Stonewalling

The next day, Kumkum was far from neutral. She was as animated as Charles had ever seen her. She handed him a two-page memo to Will that she'd drafted to outline her proposed incentive plan. If women and minorities were to crack the upper echelons of GlobeBank, she'd written, "senior executives' evaluations and subsequent compensation must reflect their diversity promotions and hires." She'd included a memorable line about executives' needing to be reminded that "diversity is their day job, too."

"This has got 'quotas' written all over it," Charles said with exasperation. "When you impose quotas, you always get a backlash — not to mention unintended consequences. Managing directors will start promoting every nonwhite face they can find, and those people won't be equipped to survive."

"OK," Kumkum said, "then we'll include something about retention — they'll be compensated not only for head count on Day 1 but also for whether those people are still in place 18 months or two years later."

She just didn't understand the sort of uproar this would generate, Charles thought. In frustration, he went looking for Bernie Regan, the head of investment banking. Bernie's booming voice signaled his whereabouts.

"Charlie, good to see you, man," Bernie said.

Charles told Bernie he wanted to talk to him about Taylor and Sugarman.

"Oh, yeah — good guys," Bernie said.

"So? We brought them in to work on big deals. Why are they getting staffed on dead-end pitches? Why aren't you putting them in a position to get promoted?"

Bernie put his arm around Charles and walked him toward a quiet corner. Lowering his voice, he said, "You know I'm not involved in all those decisions. The MDs pick who they want on their deals. And then everyone votes on promotions. Don't get me wrong — you did a great job recruiting those guys. But maybe it's a seniority thing. They've got — what? Eight years of experience between the two of them?"

"So we should be giving them more experience, more exposure, at least a fighting chance to be a director. If they're not given those opportunities, they're going to leave. And what is Will going to say about that?"

"Don't threaten me. Those guys will get their deals. They'll get their promotions."

"You're not being straight with me."

"You want me to be straight with you?" Bernie said. "I saw Will's article yesterday. It was brutal. Will does that sometimes — he cuts your feet right out from under you." He looked at Charles for a response, but Charles said nothing. "If I were you," Bernie continued, "I'd think very seriously about what this job is doing to your career. Stay in it too long, and you never know — you could get tainted. You were such a great sales guy."

The unsolicited advice irked Charles. "There's a lot more value in diversity than you — or the rest of the executive committee — realize," he said.

"I'm sure you're right," Bernie said, giving him a pat on the back. "I'm sure you're right."

***


Charles stopped in the hallway to read a reply from Will. It had clearly been texted from Will's car — it was ragged and full of typos — but the passion in it was clear.

"sry to blindside you. that web page ticked me off. all white and male. were not making progress and i promised we wld. you knw about this stuff. tell me what to do and ill do it."

Tell me what to do, and I'll do it. What would Kumkum say if she saw that? Here was their opening to really shake things up. But would he be turning GlobeBank into exactly the kind of company his son wouldn't want to work for?

QUESTION: Should Charles advocate for financial incentives to increase the number of diversity promotions?

Please remember to include your full name, company or university affiliation, and email address.

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