Diversity's New Flavor

By VALERIE MARCHANT

When 16-year-old Rene Hernandez traveled from Cuba to the U.S. in the Mariel boatlift in 1980, his first hope was that he and his family would not drown or be attacked by sharks. Inspired by the plight of his father, a political prisoner, he decided to become a lawyer, although most people told him his English would never be good enough. But a corporate lawyer? That was even more farfetched. "Minority lawyers tend to shy away from the corporate world," Hernandez says. "We don't have the road map or the playbooks. And we feel corporations may not really want what we bring to the table."

Then while he was at law school at the University of Wisconsin, he attended an Allstate presentation and decided to become a summer intern. On graduating in 1994, he joined the company, where he is now, at 37, associate counsel in the law and regulation department.

There were 14.6 million Hispanics in the U.S. when Hernandez arrived. Now there are more than 35 million. By the time his three-year-old daughter joins the work force, the Latino population will have almost doubled again, to account for close to a fifth of the U.S. population. It's a group with $500 billion a year in buying power, but one that is changing rapidly. While Mexicans remain the majority, at 58%, the number of immigrants coming from other Central and South American countries grows each year. Increasingly, they are spreading into states, such as Iowa, that never had sizable Hispanic populations. This has made diversity a growing challenge to corporate America. But companies such as Allstate, Wal-Mart and Andersen have made huge gains in the past five years with diversity programs that are notable for their depth and scale--and bottom-line results.

In a period of almost stagnant growth for the insurance industry, for instance, Allstate has made diversity pay substantial dividends. Its Hispanic business has nearly doubled, to almost $2 billion.

You don't do this simply by reshooting your English-language commercials in Spanish. Allstate's diversity program includes in-depth training for all employees plus work-and-family policies, educational opportunities and networking and mentoring programs that suit Hispanics well. The company also created an evaluation system that judges and rewards managers according to how well they promote diversity.

"The mantra is that we leverage diversity to gain competitive advantage, and the premise is that if you don't tie diversity programs to the marketplace, they have no substance," says Ray Celaya, Allstate's assistant vice president of ethnic marketing. Accordingly, the number of Hispanics on the Allstate corporate staff has increased 13% in the last couple of years, to 3,167 employees. In areas with substantial Hispanic populations, the company also encourages its agencies to hire Spanish speakers, with the result that 2,500 of its 12,000 agencies are now what it calls Spanish able.

Agents serving Hispanics must capture what Celaya calls "the essence of the culture: the family coming together." To do so, they must recognize and respect the role each family member plays--including grandparents and children--when it comes to buying insurance. Allstate has created 300 Spanish-language marketing tools intended to educate and attract a multinational and multiracial Hispanic clientele. Even the very concept of insurance has to be sold in a different context. Celaya explains that "agents must learn not to emphasize death or potential failure. Instead they speak to each person's American dream. They must explain that insurance functions as the glue that allows capital to flow into a community to create wealth."

Allstate's Hispanic diversity initiative has reached every part of the company except one: the boardroom. And Allstate is hardly alone in this. Of the 10,597 seats that exist on Fortune 1000 boards, just 181 seats are held by 131 Hispanics at 146 companies, according to the Hispanic Association on Corporate Responsibility. Entire industries, including textiles, hotels, toys and health care, have no Hispanics on their governing boards.

Wal-Mart is one of the tiny number of top companies that have two Hispanic board members. One of them, Jose Villarreal, believes companies "will increasingly find it of critical importance to have boards that reflect the communities in which they do business." As a partner with the mega-law firm Akin, Gump, Strauss, Hauer & Feld, vice chairman of the Congressional Hispanic Caucus Institute and chairman of the National Council of La Raza, Villarreal certainly has juice. But, he notes, "I also offer the perspective of someone who grew up in a traditional large Hispanic family. My experience helps me understand how Wal-Mart can position itself to increase its market share." With Villarreal's encouragement, Wal-Mart has hired more Hispanics to play key roles in the company. Those managers have in turn helped to develop Wal-Mart's presence in the Hispanic market. Bottom line: sales of Hispanic-oriented merchandise have increased almost fivefold in the past three years.

Wal-Mart's other Hispanic board member, Roland Hernandez, CEO of Spanish-language television network Telemundo, believes that "being sensitive to cultural differences within the Latino population is tremendously important to both Telemundo and Wal-Mart."

Each national group--and there are many more in the U.S. than there were a decade ago--tends to live in a different area and have different income and education levels, family sizes and cultural and shopping preferences. And in the NAFTA era, there's a reverse benefit: Mexicans, for example, send about $8 billion home each year. As Mexico's largest retailer, Wal-Mart gains, then, from increasing U.S. Hispanic employment and wealth.

To satisfy its Latino communities, Wal-Mart, whose 87,000 Hispanic employees represent 10% of its work force, hires locally, uses Hispanic suppliers and marketers and "allows local management flexibility in tailoring that store to the local community," says Hernandez. In Rogers, Ark., shoppers can find three brands of Mexican laundry soap.

Hiring Hispanics for retail stores that serve other Hispanics is easy enough, but what about the esoteric world of consulting and accounting services? Arthur Andersen consultants used to be called Androids because of their white-bread interchangeability. No more, says Sandra Paiz Garcia, Experienced Manager in Andersen's Denver office who came to the company directly from university. Garcia reports that a growing number of prospective clients are demanding diverse professional teams. Recently, her office closed a deal with an organization that would hire only a culturally diverse consulting team.

Andersen's recruiting programs are recognized as among the best by the Hispanic community. Working with Inroads, a national organization that places talented minority youths in businesses, Andersen recruits in high schools, offering qualifying graduates summer internships for up to four years after graduation. The company says close to 95% of the interns accept full-time positions at the company.

Andersen's chief of recruiting, Dana Ellis, finds that "the challenge is to identify students really early. We are doing everything under the sun to reach them." Sandra Garcia's own summer internship gave her needed confidence in a corporate setting and helped her parents understand how she could manage to attend college.

If recruitment is the first step in diversity, retention is its more critical companion. "Companies get real focused on recruitment, [but] creating a welcoming culture is harder to do," notes Pat Bissonnet, Continental Airlines' director of diversity. "If you don't have the right culture, all the things you do to recruit won't help you a bit." Continental's hubs are home to large Latino populations, and the company gets 15% of its revenues from Latin and Caribbean countries. Hispanics now make up 20% of Continental's work force.

Pete Garcia, the company's vice president of sales and marketing for Latin America, describes the firm's environment as dramatically different from what it was when he joined 20 years ago as a reservations clerk. "I feel more loyal to Continental now because it adopted a policy that emphasizes that we treat each other and our customers with dignity and respect," he says. This is no mean feat in the airline industry, which has a horrible labor-relations history.

Garcia's department, working with others, launched a Latinization program three years ago, when the airline added many South American routes to longstanding stops in Mexico and Central America. Customer studies revealed that while Latin American customers appreciated that Continental flew to numerous destinations safely, they wanted to be able to speak Spanish, eat regional food and be put at ease by a warmer, more helpful staff. Now travelers in those countries can enjoy music, movies, television shows, magazines, newspapers and food chosen to appeal to them and served at times that suit them--lunch at 3 p.m and dinner at 8.

The Latinization program has helped contribute to a surge in income from south of the border. Continental's revenue from Latin American countries has quadrupled to $1 billion since 1997, and its passengers have increased from 3.4 million to 5.5 million. Such services, as well as the 150 Spanish-speaking employees in both Newark and Houston and the bilingual signs at more than 20 airports, also appeal to American Latinos.

Increasing profits is the ultimate goal of any diversity program. Not recognizing the growing power of the Hispanic market will be detrimental to that cause, and that will make stockholders of every race, creed and color very unhappy. And that's something a CEO does at his own peril.