For many years, businesses in America have promised to improve their diversity. And, for many years, businesses have failed to live up to those promises. “It’s the only area that corporate America can consistently ‘work on’ and not show results,” observed Mellody Hobson, the Co-CEO and President of Ariel Investments, at “Strides Forward on Rebuilding Trust and Social and Racial Equality,” a panel recently convened by the Yale School of Management’s Chief Executive Leadership Institute. She continued, “You can’t miss a product launch or earnings, but you can have a diversity conversation go on for a decade and not move the needle. You can say it’s an imperative and have nothing happen.”

Joining Hobson on the panel were Moderator Jeffrey A. Sonnenfeld, Senior Associate Dean for Leadership Studies and Lester Crown Professor, Yale School of Management; Mike Hyter, Chief Diversity Officer, Korn Ferry; Doug Peterson, President and CEO, S&P Global; Ginny Rometty, Executive Chairman, IBM; and Darren Walker, President, Ford Foundation.

The entire panel agreed that the numbers on diversity in corporate America reflect a lack of meaningful progress. Despite a spoken commitment to increasing diversity across America’s boardrooms and executive suites, the statistics remain dismal:

  • Black women who chair the board of a Fortune 500 company: 1 (Hobson, chairs Starbucks’ Corporation).
  • Black CEOs for Fortune 500 companies: 1 percent.
  • Black CEOs at companies with 100 or more employees: 3 percent.
  • Fortune 500 companies that do business with Black-owned businesses: 2 percent.
  • Black board members at major public companies: 8 percent.
  • S&P 500 companies without any Black directors: 150.

Until now, corporate America has been unable to achieve progress on diversity, equity and inclusion, despite repeated pledges to “work on it.” Walker articulated that the challenge facing American businesses was the failure “to move from performative acts to sustained commitment to change because incumbency, and the privilege of incumbency, is a durable phenomenon.”

Yet, the panelists expressed optimism that we have reached an inflection point since the events that unfolded after George Floyd’s death in May 2020. Here’s why.

What’s changed?

According to Hobson, we’re now in a period of “Civil Rights 3.0.” The Emancipation Proclamation launched Civil Rights 1.0, while Civil Rights Act and Voting Rights Act brought us Civil Rights 2.0. Since last summer, we’ve embarked upon a new phase. Although the diversity needle has been stuck for the last few years, the pressures on corporate America today are new and different. In 2020, corporations “learned very quickly that social unrest and economic inequality are bad for business,” said Hobson.

Today, more than ever before, society will hold businesses accountable for diversity issues, as will vendors and suppliers. A more recent example is the Washington Redskins NFL team, who changed their name to the Washington Football Team last year because minority team owner FedEx refused to continue supporting the team under its old name.

How companies can move the needle on diversity, equity and inclusion

The panel discussed a variety of ways that businesses can finally translate their pie-in-the-sky talk into meaningful action. But Rometty cautioned that, for companies that are serious about driving sustainable change, “It’s not one thing you do. It’s the consistency of doing a million things over time.”

Here are six things the panel suggested that organizations can do to start making real progress.

1. Set the tone at the top.

Peterson observed that setting a culture that embraces diversity and inclusion starts with leadership. Leaders can no longer “fake it”; they must be authentically committed to change and to ensuring that their organizations reflect “what society looks like” and “the needs of all of our different stakeholders.”

2. Establish measurable goals.

Investors, like society as a whole, are starting to realize the importance of diversity, equity and inclusion. According to Peterson, investors are starting to ask questions they’ve never asked before and  demand that organizations provide concrete data to measure their progress. Hobson agreed, stating that if diversity matters, it should be counted. She recommended that organizations measure their diversity across three P’s:

  • People, from the top to the bottom of the organization.
  • Professional services and purchasing, including vendor relationships, focusing on businesses in professional and financial services as well as in minority-dominated verticals like manufacturing, construction and janitorial services.
  • Philanthropy toward educational institutions and nonprofits that support inclusive causes.

3. Hold executives accountable for diversity initiatives.

Transparency in results is important, but accountability will ensure that executives follow through. Peterson observed that there’s little consistency on environmental, social, and governance metrics. And most companies don’t factor people metrics into their scorecard or bonus compensation. Hobson added, “You get what you incent. Be super clear. When something is a strategic imperative for a company, the CEO is held accountable for it, and their pay directly reflects their outcomes around that imperative.” Businesses need to hold leaders accountable—financially and otherwise—for diversity. She suggested, “You can’t be a superstar and get your full bonus if you don’t have a diverse team, because you’ll be committing corporate suicide over time if your company is not diverse.”

4. Establish meaningful hiring criteria.

Businesses often complain that they can’t build a pipeline of diverse talent because they just can’t find people who meet their specifications. Hyter vehemently disagreed, explaining, “Talent is available. If you can’t find them, you haven’t been looking creatively or hard enough.”

In some cases, businesses fail to find diverse talent because they’ve set unnecessary hurdles to hiring. For example, many middle management and higher roles require a college degree. Rometty noted that this criterion automatically—and unnecessarily—excludes 80 percent of Blacks, who don’t have a college diploma. That’s why she advocates a skills-based approach to hiring instead of one based on criteria that have little to do with job performance.

5. You can donate financially . . .

Everyone feels good about giving money to worthy causes. Since last summer, Hyter observed, “Billions of dollars have been pledged to various racial equity causes, which is good. I don’t want to take away from the intention of it.” But, he continued, “Good intentions aren’t good enough anymore.” Hobson added, “You can’t fix your house from without. You can only fix your house from within. [Writing a check] does not give you a pass on the issues that are plaguing our society.”

6.  . . . But also take tangible actions to remove structural barriers to upward mobility.

Rometty asserted that you can’t eliminate barriers to mobility by “wishing” them away. Rather, she said, companies need to “give people economic opportunity. “That’s the greatest equalizer for social justice. It gives you a chance to not only earn a good wage but also gives your family the chance to be upwardly mobile.” Rometty certainly walks the talk through several initiatives, including OneTen, a coalition she co-chairs with Merck CEO Ken Frazier. OneTen plans to hire 1 million Black employees into middle-class jobs with upward mobility within the next 10 years.

It’s time for corporate America to take the next steps toward diversity

Hobson observed, “America was born with a birth defect: slavery. Issues with race won’t be cured in a summer, a year, or even a decade.” To see meaningful, lasting progress on diversity, businesses still have to put in the work, although the groundswell of activity and accountability following the watershed events of last summer has given the panel hope.

To learn more about how your business can be a part of the meaningful change occurring in Civil Rights 3.0, watch the replay of the webinar.