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"Affirmative Action: Why Bosses Like It"

May/June 1995 issue of Poverty & Race

Corning, a small town in upstate New York, used to be about as multicultural as an episode of "I Love Lucy." In the past decade, however, it has made enormous efforts to immerse itself in the melting pot, getting hooked up to a black-oriented cable channel, bringing in a black hairdressing business (which has recently decamped) and instituting a "diversity awareness" program in the local schools.

All this was the work of the town's biggest employer, the eponymously named Corning, a technology company. When James Houghton became chairman in 1983, he made workforce diversity one of the company's top three priorities (the other two were total quality and a higher return on equity). The company has made every effort to recruit people from minority groups, forming close relations with organizations such as the National Black MBA Association and even linking managers' bonuses to diversity targets.

But it has been discovered that affirmative action is not enough if the people you have carefully hired and expensively trained decide to leave. So the company has also gone out of its way to make minorities feel at home, providing them with "mentors," putting all managers through "sensitivity training" (one and a half days for gender awareness, two and a half for racial awareness), and celebrating diversity in its in-house newspaper.

Corning is not alone in its enthusiasm for such things. Avon Products, a cosmetics company, has set up a "multicultural participation counsel" to encourage diversity among employees. Xerox Corporation, an office-equipment maker, regards affirmative action as "a corporate value, a management priority and a formal business objective" (in the words of its former chairman, David Kearns) and has set employment targets for women and minorities throughout the company.

Digital Equipment Corp., a computer company, has established a Valuing Differences program, which
sponsors cultural events, such as Black History Month, and encourages workers to.form small discussion groups to help them "confront their prejudices." Many companies send employees to the American Institute for Managing Diversity, based at Morehouse College in Atlanta, to have their consciences raised on matters multicultural.

Even Wall Street is catching political correctness. Firms that win Department of Labor awards for their success in implementing affirmative action are rewarded with a boost in their share price within ten days of the announcement, according to an article in the current issue of the Academy of Management Journal. Press disclosures that firms discriminate against women or minorities soon result in a fall in the share price.

So far as many businesses are concerned, multiculturalism is not just a moral matter. White males already make up a minority of the workforce, and 85% of new recruits between now and 2000 will be women or non-white men. So firms with a good track record of producing non-white managers and managing people from different backgrounds will enjoy a growing advantage in recruiting and motivating workers. They may also be more attuned to an increasingly diverse population of customers. Equally, firms which continue to favor white men will find themselves fishing in a shrinking pool of potential employees.

Most intriguingly, ethnic diversity may help American firms outperform their rivals abroad. In particular, it is becoming an article of faith in American business schools that heterogeneous firms will be better placed to form global alliances and strike international deals than the Japanese, who tend to reserve real power for themselves, or the Europeans, with their history of colonial entanglements.

Reprinted from The Economist, March 11, 1995.

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