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Senior executives responsible for establishing a company culture of inclusion

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Most senior executives have embraced the idea that companies with diverse and inclusive workforces — particularly at the management and executive levels — tend to outperform their more homogenous competitors on financial performance, talent retention and overall employee morale.

However, studies show that relatively few CEOs, chief financial officers and other top-level business leaders actively drive performance in corporate diversity programs.

A study released last month by the Los Angeles-based Korn/Ferry Institute found that while 96% of senior executives polled said workforce diversity can improve business results and employee engagement, only 72% directed their organization to implement a formal diversity strategy or program.

“The senior executive has to play a huge role in setting the expectations (for diversity programs), and it's only after that when you can start to execute on that,” said Chris Maleno, Philadelphia-based division president of Ace USA.

To begin with, experts said senior executives bear the responsibility of establishing a corporate culture that values inclusion and diversity of thought at all operational levels, including talent management, advertising and brand management, client and customer relations, and supplier agreements.

“Diversity has to be seen internally and externally as part of the organizational DNA,” said Shirley Davis Sheppard, Alexandria, Va.-based vice president of global diversity, inclusion and workforce flexibility for the Society for Human Resource Management. “It can't be seen as just a program you put in place. It has to be woven into the operational fabric of your company, not just a human resources initiative.”

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At the operational level, experts outlined several steps senior corporate leaders can take to drive greater inclusion of women and minorities in their managerial and executive spheres.

One particularly effective method to reinforce the importance of diversity, experts said, is incorporating such benchmarks in managers' and executives' performance appraisals and compensation structures.

“Tactically, CEOs get to approve a lot of things within their organizations that specifically and concretely affect your culture and your programs,” said David North, Memphis, Tenn.-based president and CEO of Sedgwick Claims Management Services Inc. “You have to have institutional ways to make sure that unintentional discrimination doesn't occur, and we have the power to put those programs in place.”

Only 52% of executives said their companies' management reviews included diversity as a measure of effectiveness, and only 23% said diversity goals factored into their own compensation structures as of August of this year, according to the Korn/Ferry Institute's report.

Additionally, when employers have established diversity councils or committees within their organization, experts said it is critical senior executives make a visible effort to participate in those groups as a symbolic gesture of support for their efforts, if not to take an active role in steering their activities.

According to a March study by Calvert Investment Management Inc., seven of 10 companies on the Standard & Poor's list of the 100 largest U.S.-based firms have established diversity councils, but only 56 CEOs participate in them.

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“Whatever we're doing today, the facts prove that it's not enough,” Mr. North said. “CEOs do fundamentally believe that (diversity) is an important thing to pursue; but in spite of that belief, meritocracy by itself is not working very well. We have to go further than saying that we're just going to let the best people move forward.”

Predictably, experts said, the lack of engagement in diversity programming among CEOs and other corporate leaders is reflected most sharply in the consistently paltry representation of women and minorities occupying senior leadership roles. According to the most recent examination of U.S. workforce demographics by the U.S. Bureau of Labor Statistics, less than 25% of chief executive positions were held by women in 2012.

Racial and ethnic minorities have fared even worse. Just 3.7% of U.S. CEOs were black, 4.2% were Asian and 4.7% were Hispanic in 2012.

“From a corporate perspective, that represents a huge loss in resources,” said Meryle Mahrer Kaplan, New York-based senior vice president at Catalyst Inc., referring specifically to the dearth of women in senior corporate leadership roles. “I look at this and I see lousy talent stewardship.”

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