Katherine Reynolds Lewis

3 signs your company's diversity goals are just window dressing

March 10, 2014: 1:43 PM ET

For decades, diversity programs have flourished in corporate America. Yet the stats on women and minorities in business leadership tell a very different tale.

By Katherine Reynolds Lewis

Three men sitting on bench, view of shows

FORTUNE -- There's plenty of talk about the importance of diversity at the top of companies to improve decision-making and risk management. Often left unsaid is the fact that it's quite difficult to tell the difference between a true commitment to diversity and plain old window dressing.

For decades, corporate diversity programs have proliferated, aimed at filling the pipeline of talented women and racial minorities who could step into top executive and board roles. And yet, more than a third of Fortune 500 companies have either one or zero women directors, according to nonprofit organization Catalyst. Women hold barely 17% of corporate board seats, a figure that hasn't changed in eight years. Similarly, the Alliance for Board Diversity reports that white men hold 73% of Fortune 500 board seats, marking little change over the last decade.

Clearly, there's a disconnect: It's not enough to have a Benetton-like rainbow of colors and genders throughout a company's annual report, executive ranks, or even around the boardroom table. The key is when those diverse perspectives and individuals actually have an impact on the decisions that are made at a company.

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"Like anything else, there's got to be a genuine commitment to it," says John Veihmeyer, chairman and CEO of KPMG in the U.S. "It's not just about numbers; it's about the culture you create either in the firm or the boardroom."

For an outsider trying to determine whether the numbers add up, here are three clues that suggest that a company is merely paying lip service rather than embracing legitimate diversity.

White men control profit-driving roles

You may have women and minorities at the table, but unless they have power over the bottom line, they're likely to be considered token voices. For board members, such power means chairing nominating and compensation committees. For a company's senior leadership team, that means running business lines and operations.

"If you have what looks like a diverse board but then you look at all the committee chairpersons and it doesn't look diverse at all, that may tell you something," Veihmeyer says. "One of the things I feel really good about is that our fastest growing business in the firm is led by a woman on my senior leadership team."

Catalyst vice president Brande Stellings remembers when women's initiatives began at law firms more than a decade ago to combat the departure of high-potential mid-career women. In some instances, women ended up "in a corner by themselves" because they weren't integrated into the business of the firm or cultivating important client relationships. A 2012 report by the National Association of Women Lawyers found that such initiatives often lack a clear mission, are underfunded, and may even increase criticism or cynicism within a firm.

Deloitte aims to prevent this outcome by steering women and minorities toward profit-driving relationships from the beginning of their time at the firm.

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"We have a significant focus on assigning our diverse talent at a very early stage of their career to our biggest and most important client projects," says Chairman Punit Renjen. "We believe that if you want to have diverse leaders 10 years down the road, we've got to make sure they're getting the right assignments, the right client experiences today."

Compensation is unrelated to diversity

To evaluate the sincerity of a firm's commitment to diversity, look at whether there's a tie between executive compensation and advancement to success in developing and promoting women and minorities, Catalyst's Stellings suggests. If an executive fails to develop diverse employees, do their pay or promotion chances suffer?

Stellings cites Kimberly Clark (KMB) Chief Executive Thomas Falk, who in October 2010 asked his senior leaders and top executives two simple questions: "Who took a chance on you and who are you taking a chance on?" The firm added a sponsorship program to its menu of initiatives, and has seen an increase in women board members to 25% from 17%. And internal promotions of women at the director level and higher climbed to 44% from 19% between 2009 and 2013.

"We've got to have the senior leaders of our firm feeling responsible and accountable for actually creating the opportunities and advocating for those high performers and putting them in a position where they have the opportunity to prove what they can do," says Veihmeyer.

Deloitte has even reached down into high school to identify talented Hispanic and African American students and build relationships with them, Renjen says. Whenever a promotion or assignment decision is made at the firm, the question is raised: what women and minorities were considered?

"Because it's become part of our questioning orientation, it forces individuals to look at a wide swath of qualified candidates," he says.

Leaders only claim to want feedback

Perhaps you've been in a meeting in which a leader asks for feedback or concerns, and everyone smiles and nods. That's a warning sign that true diversity of opinion isn't welcome.

To combat this, Veihmeyer says that he will often ask each person in a meeting to offer a position on a given issue. "I literally will go around the table and force folks who haven't expressed a view yet to jump in the pool," he says.

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At Deloitte, Renjen conducts an executive board session without management so that every board member can express concerns without concern of repercussions. He also defers votes on heated topics until the second day of a board meeting "so people can sleep on it and think on it."

In 2005, Campbell's Soup Company (CPB) launched a campaign to increase employee engagement and the promotion of diverse talent, with employee focus groups and mentoring. Top executives sought feedback from the ground up, including from a group of administrative assistants and plant workers. As a result, the company launched a successful line of soups aimed at "women on the go," Stellings says.

About This Author
Katherine Reynolds Lewis
Katherine Reynolds Lewis
Contributor, Fortune

Katherine Reynolds Lewis is an award-winning Washington D.C.-based journalist specializing in finance, work, and family issues. She has written for publications including the Fiscal Times, Money, MSN, the New York Times, Parade, Slate, USA Today magazines, and the Washington Post Magazine. Previously, she worked as a national correspondent for Newhouse News Service and reported for Bloomberg News in Washington. She began her career in New York at the Bond Buyer, after graduating from Harvard College with an A.B. in physics. She is active in the Asian American Journalists Association and serves as founding co-chair of the AAJA Digital Group.

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