Diversity and Inclusion Is A Business Strategy, Not An HR Program

Corporate diversity and inclusion is a very hot topic. It comes up in almost every client I visit. Why? With the #metoo movement, #blacklivesmatter, and a continuous political discussion about income inequality and fairness, companies want to step up.

And there’s plenty of pressure. We have strict regulations prohibiting discrimination in recruitment, state laws mandating pay transparency, websites like FairyGodBoss, Vault, CareerBliss, and Kununu that rate companies on their treatment of women, and a proliferation of tools to help companies identify and remove bias in hiring, performance appraisal, pay, and promotion. 

All this is a good thing. Much research shows that diverse teams outperform; companies with women board members outperform, and companies with inclusive cultures make better decisions. And in today’s tight labor market, companies have to expand their reach just to attract good people.

But despite this focus and effort, one problem remains. When the problem is driven by HR, the needle moves too slowly. Our research found that while over 70% of companies believe they are advanced in this area, only 11% truly understand the depth of the problem.

Let me suggest another approach. Consider this a business strategy, not an HR problem.

The Schneider-Electric Story

I recently met with Olivier Blum, the CHRO of Schneider-Electric, one of the largest global power systems companies in the world. (Schneider-Electric generated over $6.7 billion in revenue last quarter and has over 110,000 employees around the world, manufacturing control systems and switches to conserve and manage energy.)

Schneider is a French company, and for years its executive team was made up of French nationals located in Paris. As Olivier explains in his LinkedIn article, the company had a “one-headquarters” operating model, one where leaders and their decisions were decidedly French.

Olivier is a business executive and he spent many years building the company’s China and India business. What he found, which most of us now understand, is that these fast-growing economies are very nationalistic by culture. Chinese and Indian leaders want to work for Chinese and Indian companies; they want to build and support their own country’s economy, and they want to join a company that facilitates their personal growth.

In years past companies like Schneider, GE, and others typically repatriated US or French nationals into these jobs. The CEO Jean-Pascal Tricoire and Olivier realized that this was no longer viable. As I learned about years ago in my work with Scotiabank, the only way to build a local business is to “become part of the local economy.” This means localizing your brand, localizing your product offerings, and localizing your talent and leadership, with a focus on empowering these people to make local decisions.

Today, as Olivier explains in the article, Schneider is a “multi-hub business model,” where “We want everyone everywhere in the company to have the same chance of success, irrespective of their nationality or location.” In the past all decisions and leaders came from France: today the company delegates more and more sales, channel, and product decisions to these business units.

This means diversity and inclusion is now core to Schneider’s strategy. The company can no longer tolerate a “French-led” leadership team, or any forms of bias, discrimination, or non-inclusive thinking in its strategy. And as a result, Schneider is now truly what we call a “social enterprise.” I love this cartoon – it really drives the point.

Schneider-Electric really means it. Read the company’s manifesto to diversity, it’s truly inspiring.

Today the company has three global leadership hubs: one in China (Hong Kong), one in the US (Boston), and one in Paris. The Paris hub is no bigger or more important than the others, and each is now operating under a new set of decision rights that empowers local decision making among local nationals, coupled with global strategies and business plans.

Does it work?  The numbers tell the story. This company grew by 6.2% in Q1, its Asia-Pacific business grew by 14%, and the company’s transition to digital power management is accelerating. I don’t believe this would be possible without a focus on diversity as strategy.

Globalization Means Diversity, Inclusion, and Localization By Nature

As I visit companies around the world I see many variations on this evolution. Companies like Chevron, Nestle, Deloitte, and IBM do this as part of their DNA. Many others are learning as they go. 

If you’re struggling to move your diversity metrics ask yourself a simple question. Is D&I an HR program or is it truly essential to your business? Are you ready to empower women, minorities, or local nationals really run your company as it grows? Are you ready to let young leaders take the reigns from older leaders, or empower leaders in their 70s to come back into the workforce? (There’s a lot of age discrimination we have to think about too).

More importantly, does your CEO and other leadership understand that without this pool of talent your company simply will not be able to compete? If you haven’t yet come to that conclusion then you may not truly be there yet. Diversity and Inclusion is one of the most powerful business tools you have, take it seriously and you’ll see the needle move.