When Fannie Mae decided to redesign its minority-employment efforts back in 1993, "the first thing we did was to benchmark best-in-class," says finance chief Tim Howard.
The results were surprising. "We found out," says Howard, "that even before we launched a diversity program, we were already best-in-class." Indeed, the companies that Fannie Mae assumed were far out front — "particularly the ones that were getting all the terrific media publicity" — were leading with their lips. "When you looked at what they were actually doing, the numbers weren't all that impressive," he adds, without mentioning any names. The ranks of African-American, Hispanic, Asian, and Native-American executives were extremely thin — especially within finance management, where "white guys in ties" prevailed.
So the shareholder-owned, publicly chartered mortgage-funding concern chose a new target: "to look like America," reflecting the country's minority-majority and male-female demographic mix. "It was a very ambitious goal," the CFO acknowledges. Today, Fannie Mae is nearly the demographic mirror it had sought to become, with minorities holding more than 24 percent of its 633 management-group jobs, up from just over 9 percent in 1994. Representation of female managers has jumped to 45 percent from 40 (According to the 2000 census, Caucasians now comprise 69 percent of the U.S. population.) The company's diversity push — initiated by former CEO James Johnson and sustained by current CEO Franklin Raines, an African-American — has led to a series of initiatives, including "networking groups" and mentoring programs. CFO Howard, who has assisted in these initiatives, says they have increased communication not only among minorities, but also among other interest groups, such as veterans and single parents.
And in finance? Progress there has been significant, though slower. Today, nearly 13 percent of Howard's 82 corporate-finance managers are minorities, triple the 1994 rate. "Our goal is clearly to get those numbers higher," says Howard. The task is complicated by the need to search among New York portfolio strategists and analysts for job candidates. "And diversity," he says wryly, "is not widely sought after on Wall Street."
If you judge strictly by the numbers, diversity doesn't seem to be much sought after in the rest of U.S. industry either. The Council on Economic Priorities, for example, reports that minorities hold only 15.7 percent of the management jobs at large companies. And while media outlets regularly examine the best workplaces for minorities, most coverage focuses on corporate missteps. Coca-Cola, Texaco, and Denny's all have made highly publicized efforts to redress offenses against minority managers.
And if Corporate America as a whole has little to trumpet regarding diversity, finance shouldn't make a sound. Eight years after Fannie Mae began its initiative, a CFO survey shows that only 14 of the finance chiefs in the Fortune 500 (year 2000), 10 of the treasurers, and five of the controllers are people of color. While comparative numbers for minorities are not available, the number of women in the top three finance posts at the same companies continues to grow, albeit incrementally, based on CFO's surveys. The 24 female CFOs in the Fortune 500, 14 more than in 1995, represent a 71 percent growth over six years, though still only a paltry 4.8 percent of the total. "Ethnically diverse candidates in finance are probably where women were 20 years ago — just beginning to emerge, and getting the experience and exposure they need to rise to the top," says E. Peter McLean, vice chairman of global search firm Spencer Stuart.
The truth, at least in finance, is that despite decades of trying to hire and promote minorities, success stories like Fannie Mae's — or those of Cummins Inc. and Medtronic Inc., two other companies we have chosen to highlight — are few and far between. Overall, says Marian Carrington, principal of Carrington & Carrington, in Chicago, one of about 30 recruitment firms specializing in finding minority job candidates, "we're absolutely amazed at the lack of change." And "unfortunately," she adds, "we're not sure things will look very different 5 or 10 years down the road."
Sense of a Ceiling
Why such sluggish progress? Some cite the slow trickle of African-Americans and Hispanics moving through the usual pipeline — MBA and CPA programs — to jobs in corporate finance. African-Americans accounted for only 6.4 percent of MBA degrees in 1998, Asians for 5.5 percent, and Hispanics for 3.2 percent, according to the International Association for Management Education.
Others blame CEO inertia. "There is too much [grandstanding] during Cinco de Mayo or Black History Month, and too little confronting what the calculus should be for diversity in a successful company," says David Thomas, a Harvard Business School professor and co-author of the book Breaking Through: The Making of Minority Executives in Corporate America. Even CEOs passionate about the subject sometimes back away after shaky early experiments, he suggests. "Once you have diversity, you must manage it, and companies have to concentrate on promotion and retention," according to Thomas. Some executives "wanted to create a pipeline of minority executives, but then didn't know what to do with it. The organization became content with the revolving door."
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