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Originally published February 13, 2013 at 4:48 PM | Page modified February 13, 2013 at 4:48 PM

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Op-ed: New CEOs know diversity means profits

For U.S. companies, diversity has nothing to do with political correctness or window dressing, and everything to do with business survival, writes guest columnist Edward Iwata.

Special to The Times

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TO corporate fossils and dinosaurs, diversity may be social engineering and politically correct propaganda. But to Ralph de la Vega, a Cuban immigrant who rose from Miami’s mean streets to become chief executive of AT&T Mobility, it is pure profit and bottom-line business.

De la Vega long has known that Hispanics, contrary to stereotypes, are avid technology consumers. Ignoring skeptics, de la Vega hired food-industry executive Roberto Garcia as AT&T’s Latino point man. Garcia’s cultural insights have helped AT&T, a company whose wireless business was founded in Kirkland, become a Hispanic marketing leader, with many of AT&T’s top-selling U.S. retail stores in Latino neighborhoods.

In earlier years, diversity was a dirty word. Businesses gave lip service to it. Employees shunned diversity workshops. Close-minded companies stumbled in a business Babel of foreign tongues and “exotic” cultures.

Or, in the post-civil-rights era, companies focused their diversity efforts only on regulatory matters, such as federal-required hiring data.

No more. The extraordinary pace and scale of globalization have led visionary multinationals to evolve dramatically, to broadly redefine diversity and raise it to a higher global level than ever before.

The cross-border diversity practices of multinationals such as AT&T, American Express, IBM, Intel, Cisco Systems, Procter & Gamble — plus Washington-based Microsoft, Starbucks, Weyerhaeuser, and others — are changing the corporate world in modern and emerging countries alike. Intel executive Rosalind Hudnell calls it “the new calculus of diversity.”

From Seattle to Shanghai, companies are deeply embedding diversity strategies into their business practices, from sales and marketing to human resources. They’re hunting globally for talent, creating hybrid, integrated teams. They’re training and promoting more managers and executives of all ethnic, cultural and religious backgrounds. They’re seeking new ways of thinking and innovating, without cultural blinders.

For U.S. companies, this has nothing to do with political correctness or window-dressing, and everything to do with business survival.

A growing body of recent research shows that global business diversity clearly pays. A McKinsey & Company study of 180 companies from 2008 to 2010 found that businesses with more women and foreign executives boasted a 53 percent higher return on equity than rivals.

Among the global mega-forces that companies cannot ignore: the explosive, seemingly never-ending growth of trade, finance and technology; record numbers of middle-class consumers, immigrants and mobile cross-border workers; the rise of multinationals in China, India, Latin America and Russia. This ain’t your daddy’s economy.

To truly compete, our workforces must reflect the increasingly diverse demographics of the United States and the world.

The data is convincing. The percentage of racial minorities in the U.S. population will soar to 57 percent, or 241 million, by 2060 — up from today’s 37 percent, or 116 million, according to the latest U.S. census data. Worldwide, half of the workforce is made up of women, who could boost economic growth 20 percent in emerging countries by 2030, according to Goldman Sachs.

To keep our companies thriving, old-school business leaders and archaic management styles also must change and grow. Long gone are the days of corporate colonialism, when Western executives could storm into countries and lord over foreign markets.

The new breed of successful cross-border executives are true global citizens, cultural chameleons and multicultural wonders. Among them: David Neeleman, founder of JetBlue and Brazil-based Azul airline and a devout Mormon from Utah; Renault-Nissan CEO Carlos Ghosn, who boasts deep roots in Europe, Japan, Latin America and the Middle East; Claudia Fan Munce, IBM’s venture-capital head, a native of Taiwan and Brazil and one of technology’s leading ladies.

In today’s borderless world, we know surprisingly little about diverse business people, whether they’re a 12-hour flight away, or in the next cubicle. The 21st century cries out for a more global state of mind, a crucible of transcultural ideas and innovation.

Forget political correctness. To remain the world’s strongest economy, we must become the world’s gold standard for business and workplace diversity, for decades to come. Our economic fate rests on understanding those who are different.

Edward Iwata is an award-winning journalist in Silicon Valley and the author of “Fusion Entrepreneurs: Cross-Cultural Execs and Companies Revolutionizing the Global Economy.”

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