Although most CEOs acknowledge the value of diversity, few Canadian companies have programs to build and then leverage the talents of a truly diverse workforce. This author, a long time community activist in Nova Scotia, outlines the business case for diversity, underscoring the urgency for companies, and CEOs especially, to take action now.

(This article is based largely on a $500,000 research study conducted by the Conference Board of Canada. Senator Oliver initiated, secured funding for and subsequently led the study.)

Anticipating the unexpected

Great companies today are not like symphony orchestras where there’s a set musical score and each musician knows which notes to play. Rather, great companies are like jazz ensembles, where the musicians play off each other, take risks, and experiment. As the esteemed business educator, Warren G. Bennis observed: “… the sound of surprise is jazz and if there’s one thing we must try to get used to in this world, it’s surprise and the unexpected.”

In today’s global business environment, where the unexpected can be expected and where ideas, knowledge and creativity are the only enduring sources of capital, companies must adapt, change and learn. Building a more diverse workforce where the numbers that point to a shortage of skilled labour. I will show why attracting and retaining visible minorities is essential to solving this dilemma and illustrate some of the problems visible minorities encounter in Canadian organizations. Second, I will explain the added value that visible minority employees bring to Canadian companies, describing some of the advantages of building more diverse workplaces. Third, I will outline the key features of an effective diversity strategy.

I recently spearheaded a comprehensive, multiyear research and education project conducted by the Conference Board of Canada to examine the impact of visible minorities on Canada’s economy and Canadian business. It includes an evaluation of the contribution of visible minorities to Canada’s economic growth as well as a thorough investigation of the best practices at twelve national and international, public-and private-sector organizations. In addition, the Conference Board conducted a series of focus groups with successful visible minority managers to better understand their perspective.

Interviews with selected leaders of unions, executive search firms and non-governmental organizations were also conducted, as well as a survey of 69 medium and large Canadian organizations on the representation of visible minorities at senior management levels. Just recently, the Conference Board published an employer’s guide entitled, Business Critical: Maximizing the Talents of Visible Minorities.

In this article, I will present some of the findings of the Conference Board’s research, first providing the numbers that point to a shortage of skilled labour. I will show why attracting and retaining visible minorities is essential to solving this dilemma and illustrate some of the problems visible minorities encounter in Canadian organizations. Second, I will explain the added value that visible minority employees bring to Canadian companies, describing some of the advantages of building more diverse workplaces. Third, I will outline the key features of an effective diversity strategy.

My message is that the best business leaders, the most profitable companies and the most prosperous nations of the future will be those that capitalize on the full potential of all employees, including those from the visible minority community.

Escalating shortage of talent

Advances in technology, the globalization of markets and the emergence of liberal trading regimes have fundamentally changed the way we conduct business. Today, all sectors – from retail and manufacturing and from forestry to financial services – require people adept at analyzing, planning and leveraging technology and new ideas.

As a result, highly skilled occupations accounted for almost one-half of Canada’s total labour force growth between 1991 and 2001. Of the 15.6 million people in the labour force in 2001, according to Statistics Canada, more than 2.5 million were in highly skilled occupations that normally require a university education. This was a 33 percent increase from 1991 – triple the rate of growth for the labour force as a whole. Statistics Canada’s research also shows that this trend was evident across all provinces and territories – and that this trend will accelerate sharply. It will deeply influence the competitiveness of all types of companies and the economy in general.

Meanwhile, during the next decade, the baby boomers — the largest generation ever — will be leaving the workforce, leaving a smaller one to take its place. We will begin to see the ratio drop from about five workers for each retired person, to about 2½-to-one.

But this isn’t a uniquely Canadian phenomenon. Just like Canada, Italy, Germany, France, and other European countries are not producing enough new people to grow their labour force. For example, by 2030, people aged 65 years or more in Germany will account for almost half of its adult population. DIW Berlin, a leading German economic institute, estimates that Germany will have no choice but to import one million immigrants of working age — each year — simply to maintain the size of its workforce.

Historically, most immigrants to Canada came from European countries. Today, China, India, other Asian countries and South America are our main sources. The same is true for most other major economies. Consequently, the competition for talent will be ferocious. It will largely determine who wins and who loses in the world economy.

Canada’s growing dependence on immigrants

So how are we doing so far? Canada today, thanks to progressive immigration laws, welcomes more than 200,000 immigrants each year. About 70 percent of these immigrants are visible minorities and most of these newcomers (54 percent) have professional skills or have met specified business criteria. That’s better than the Canadian population in general. A recent report by Statistics Canada found that immigrants are more likely than native born Canadians to have a post-secondary credential. Furthermore, the National Visible Minority Council on Labour Force Development reports that in 2001, visible minorities were “over represented” among the Canadian population with university qualifications.

Visible minorities, who comprised less than 11 per cent of the labour force on average between 1992 and 2001, accounted for a full third of the labour force’s contribution to Canada’s real gross domestic product (GDP) growth. Clearly, Canada now depends on immigration for its labour force growth and for a significant proportion of its economic prosperity. These trends will endure. For example, the Government of Canada expects that immigrants will account for all labour force growth by 2011. And by 2016, the Conference Board projects that visible minorities will constitute about 20 per cent of our population – or a full 6.6 million people.

In terms of economic growth, the Conference Board expects that total real GDP will increase by $794.7 billion (in 1997 dollars) from 1992 to 2016. Of these gains, $302.1 billion relates to growth in capital stock, $241.2 billion in technical efficiency gains, and $251.4 billion in labour force numbers. And of the more that $250 billion in labour gains, visible minorities will account for a full $80.9 billion or more than 10 percent of Canada’s total gains in GDP growth. These gains could be even greater if Canada fosters an overall employment culture that welcomes visible minorities.

So what’s wrong with what we’re doing now? The first problem is the gap in average wages between visible minorities and other Canadians. In its study, the Conference Board uncovered that visible minorities earned 11 per cent less than the Canadian average in 1991. This gap grew to 14.5 per cent in 2000. In its most recent release on immigrants’ earnings in Canada, Statistics Canada indicates that new immigrant men from Asia had first year earnings, which were ten to 15 percent lower than immigrants from the United States with similar years of experience and schooling.

A second problem is that visible minorities are apparently not treated with the fairness and respect they deserve. According to Statistics Canada, one in five members of the Canadian visible minority community reported experiencing discrimination or unfair treatment in the last five years. This figure is four times greater than that for non-visible minorities.

What’s more, the Conference Board’s research reveals that visible minorities are poorly represented in key decision-making positions in Canadian organizations. In its recent survey of organizations, the Conference Board found that only three percent of respondents have a chief executive officer who was a visible minority and just three percent of the almost 900 senior executives in the surveyed firms were visible minorities. The survey further revealed that nine in ten organizations do not have a plan to recruit visible minorities to the Board, even though a majority believes that it is important to have visible minority representation on boards.

Taken as a whole, this research points to a devastating truth: Canadian business is wasting talent, talent it can ill afford to waste.

Diversity fosters corporate success

There are compelling reasons why companies must begin now to build and sustain more diverse workforces. Here are some of the advantages:

Ability to capture new global markets

Most visible minorities living in Canada are foreign born and their knowledge of, and connections to, other countries provides compelling growth opportunities. For example, China and India will soon emerge as two of the world’s largest economies. In these markets, however, personal relationships and an understanding of business culture are critical to establishing trust with new customers and partners. Today, more than one million people in Canada are Chinese and 75 percent were born outside Canada. Tapping into this community could help Canadian companies gain greater access to the Chinese market, which today accounts for just over five percent of Canada’s exports.

Strengthened relationships with ethnic markets

Companies with a workforce that mirrors their customer base are also securing new business growth in Canada’s burgeoning ethnic markets. For example, the Bank of Montreal saw its business among Chinese Canadians jump by 400 percent over a five years period after it began to focus specifically on this market segment. The bank established 60 Chinese branches across the country, hiring employees who speak Chinese and understand the cultural nuances of their communities.

Enhanced innovation and decision-making

According to the Conference Board’s research, one of the top ten concerns of executives today is their organization’s ability to innovate. It provides an essential edge in today’s fast-paced, highly competitive world. Groups composed of people from a variety of cultures bring more perspectives to the table and generate more ideas. And their creativity often spurs innovation, as Xerox Canada discovered. The company’s research centre in Mississauga brings together 150 employees from 36 different countries. That diversity has attracted top scientific talent from around the world, including Beng Ong, who came to Xerox Canada from Singapore some twenty years ago. Ong and his team have captured more than 100 U.S. patents. (Canadian Business, March 29, 2004).

In addition to fostering new ideas, diverse corporate teams inevitably enrich the decision-making process in companies. The Conference Board’s research cites a study that compared the interaction and performance of culturally-similar and culturally-diverse teams over 17 weeks. Although the homogeneous and diverse teams scored equally well on measures related to process and performance, the diverse group scored higher on the range of perspectives provided and the generation of alternatives.

Powerful magnet for attracting employee talent

Creating a diverse workforce enables companies to attract the best talent. Carnegie Mellon economist Richard Florida has shown that the number of creative occupations is growing and, that to be successful, companies and regions need to embrace diversity. He believes that smart, creative people want to live and work in places and organizations that are technologically advanced and provide the opportunity to learn from other skilled and educated people. Above all, these creative people seek tolerance. A feeling of acceptance is important to them – very important. They look for organizations — and countries — that are diverse and inclusive.

Creating diverse and inclusive workplaces

What can companies and their leaders do to capture the full and rich potential of visible minorities? The Conference Board’s Employer’s Guide provides a comprehensive approach to building and then leveraging the talents of a diverse workforce. I would like to highlight the three areas that I believe are the most important.

First, companies must examine their overall corporate context to evaluate whether it creates a truly inclusive environment that not only attracts visible minorities but also encourages them to stay. The Board’s research shows that companies place a lot of emphasis on attracting visible minorities, but have tremendous problems retaining them. Consequently, many companies suffer from a “revolving door” syndrome. This occurs when a member of a visible minority joins a company only to find that the corporate environment is uncomfortable. So, they simply leave.

Indeed, the Board’s focus group discussions clearly identified organizational culture as the principal reason for high turnover among visible minorities. “The pipeline is not only long, but it is leaking quite fast,” said one manager. In these focus groups, immigrants also reported that they face daunting barriers to achieving career success – from lost opportunities because they speak with an accent to a refusal to recognize their work experience and professional credentials.

Immigrant participants acknowledged that becoming proficient in Canada’s official languages and adapting to Canadian cultural norms are required for success. But many immigrants felt that even speaking with an accent gave employers an excuse to screen them out of job competitions. Organizations use terms like “lack of fit” to exclude talented visible minorities from senior positions, according to the participants.

To foster a truly inclusive culture companies must train their managers to understand differences in culture, tradition, religion and behaviour. This will help managers to recognize their own cultural biases and prejudices and act upon them accordingly.

Companies must also establish and enforce a zero-tolerance policy for racism. This policy must include well-defined penalties for abuse. It should make managers duty-bound to deal swiftly and decisively with racist behaviour. And it should make managers responsible for ensuring that all employees understand the policy, its purpose and its implications. That’s the calibre of action required to effect profound, positive and enduring change.

Second, companies must have a rigorous accountability framework for diversity that continually evaluates progress, acknowledges failures and rewards results. This framework must include specific goals for the representation of visible minorities not only across the organization, but also on the top management team. This is not about quotas. It’s about insisting that hiring and promotion managers not overlook talented people because they are different.

The appointment and promotion of more ethnic minority managers and executives send a powerful message to all employees. It tells existing employees that the contributions of visible minorities are valuable to the organization. It signals to potential employees that the organization is receptive to visible minority applicants.

Third, and most importantly, corporate leaders must move beyond a purely intellectual appreciation of diversity to an aggressive “make-it-happen” strategy. Strong leadership on the diversity issue is critical. According to the Conference Board, the single, most important factor in creating inclusive and diverse workplaces is the role played by the leader. Leaders must demonstrate a deep personal commitment to ensuring that the talents of visible minorities are not only recognized, but leveraged fully throughout the organization.

The reality is that we have problems on this front. Research done by the Centre for Creative Leadership shows that some leaders just simply intellectualize their awareness of diversity issues, such as injustices suffered by people different from themselves. This stage is referred to as “pseudo diversity”, where criteria for understanding and relating to others are based on political correctness.

Leaders in organizations need to move to a higher stage where they develop realistic plans for advancing visible minorities and for regularly reviewing the organization’s performance on this issue. They must recognize their role in creating truly inclusive workplaces. They must devote resources to this issue. They must hold themselves and their people accountable. They must be prepared to become a champion for diversity. This level of personal commitment and involvement is absolutely critical.

In conclusion, the Conference Board research shows that the prosperity of Canada as a country – and the success of Canadian companies – depends on our ability to attract and retain employees from the visible minority community worldwide. As the Canadian economy continues to evolve, visible minorities are contributing an increasingly significant proportion to our country’s GDP. With their knowledge and connections, they give Canadian companies a competitive edge in markets across the globe and in burgeoning ethnic markets at home. They bring the skills and help to foster the innovation that Canadian companies need to succeed.

But, we are not treating them well. We are not paying them enough. We are not recognizing their talents. We are not enabling them to advance. We are wasting a valuable resource.

Canadian business leaders need to act quickly, decisively and with resolve on this issue. It is not just an equity issue. It’s a business imperative. The competition for valuable talent within the global marketplace is fierce – and it will intensify in the future. The most successful companies in this emerging global battle will be the ones that create a welcoming environment for new immigrants. These companies will learn, adapt and prosper in the increasingly global business environment. And customers and investors will applaud their new music.

About the Author

The Honourable Donald H. Oliver is a member of the Senate of Canada and Chairman of the Standing Senate Committee on National Finance.