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Great Minds Think Unlike: How Diversity Is Good for Business


June 8, 2011 - BOSTON, MA

Major European organizations display little diversity in the ranks of their top management. An analysis by The Boston Consulting Group (BCG) of 40 randomly selected companies from the Euro Stoxx 50 index shows that, on average, 93 percent of the executive directors were male; 86 percent were native Europeans; and 49 percent were between the ages of 51 and 60 years old. By contrast, the market demands on these same companies are far less homogeneous: the purchasing power of women is steadily increasing; the companies generate, on average, approximately 40 percent 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," explained Dr. Rainer Strack, senior partner at BCG, HR expert, and an author of the report.

In collaboration with the European Association for People Management (EAPM), BCG has conducted its third study on the trends in people management, surveying more than 2,000 executives in more than 30 European countries. In the just-released Focus report "Hard-Wiring Diversity into Your Business," BCG and EAPM analyzed how 444 executives responded to survey questions about the challenges in diversity management.

An Aging Workforce Presents the Greatest Diversity Challenge

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

Thanks largely to recent debate in Europe about quotas for women and about the immigration of foreign talent, the topic of diversity management appears to be a focus at most companies: 80 percent of respondents said that their company had implemented at least three measures to enhance employee diversity. For example, the measures cited most frequently included flexible working-time models and parental leave -- both seek to increase the proportion of women in the workforce. However, the survey also found that most companies apply these initiatives only selectively.

"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," explained Stephanie Bird, an author of the report and the director of HR capability for the Chartered Institute of Personnel and Development (CIPD).

In addition, the survey results reveal considerable differences in how various groups of employees view the effectiveness of diversity initiatives. For example, older workers rate measures for promoting age diversity as less effective than their younger colleagues do. "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," explained Jean-Michel Caye, senior partner at BCG, expert in talent and leadership, and an author of the report.

Diversity Is an Integral Part of HR -- and the Entire Company

"Diversity is an integral element of HR work. It's a recurring theme that touches all topics, including workforce planning, recruiting, and career management," added Pieter Haen, president of EAPM and an author of the report.

Only initiatives that go beyond the minimum level of diversity required by legal mandates and social norms can help companies gain advantage. As a first step, companies must analyze which aspects of diversity can promote their business success. The BCG/EAPM report explains 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 that the organization's internal diversity can be tapped and enhanced.

  • Build leaders for the twenty-first 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.

Further results of the survey will be published by BCG and EAPM in September 2011 in the latest edition of the "Creating People Advantage" report.

To receive a copy of the Focus report or arrange an interview with one of the authors, please contact Eric Gregoire at +617 850-3783 or gregoire.eric@bcg.com.

About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of The Client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 74 offices in 42 countries. For more information, please visit www.bcg.com.

About the European Association for People Management
The European Association for People Management (EAPM) and its national member organizations in more than 30 countries in Europe are pursuing the goal of improving the quality of human resources management and developing and improving professional standards. With its initiatives, surveys, and dialogue platforms, the EAPM is promoting professional exchange among HR experts. For more information, please visit www.eapm.org.

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