Commentary: Chief diversity officers should be more than figureheads

Appointing a chief diversity officer (CDO) may make retailers and their shareholders feel better -- but it may not lead to the desired results.

Russell Reynolds Associates recently charted the prevalence of CDOs among the 50 largest U.S. retailers, based on National Retail Federation data, and compared these findings to our broader study of CDOs across the S&P 500. Overall, we found that retail is meeting or surpassing key benchmarks when it comes to hiring CDOs. To start, 64% of retailers have a CDO, compared with 47% of S&P 500 companies.

Nearly one-third -- 32% -- of those CDOs have been CDOs before, while only about a quarter -- 26% -- of S&P 500 CDOs can claim the same. Half of the retail CDOs have also held more junior D&I-related roles, right on par with the 52% of S&P 500 CDOs with this experience.

The high prevalence of experienced CDOs in the retail industry is good news. In a world where many companies still attempt to manage diversity and inclusion (D&I) strategies through general HR oversight – or worse, do not address D&I at all -- appointing an executive who is dedicated to D&I shows an above-average commitment to getting it right. And getting D&I right is particularly important for retailers who can touch millions of consumers each day through widely-dispersed workforces across a plethora of channels. Setting the right tone at the top may not completely protect retailers from biased sales associates or tone-deaf marketing campaigns – but without it, there’s almost no chance of avoiding them.

However, simply appointing a CDO is not enough. Without the right resources, competencies and support, the CDO risks being a figurehead.

In our experience, setting up a CDO for success starts long before placing an executive in the role. At best-in-class organizations, the CEO and executive leadership team must first agree on a core D&I mandate that clearly links D&I strategy to business strategy. In retail, for example, more diverse management teams are more likely to represent the company’s customer base, giving them early insight into emerging trends and the ability to more effectively navigate customers’ sensibilities and preferences. The Estee Lauder Companies puts this into practical terms on its website: “With consumers in 150 countries, it is essential that we continue to have a diverse workforce that understands local relevance and the changing beauty needs of all our global consumers.”

With consensus on why the CDO role is necessary, the CEO and top leaders cast a wide net to find the executive best suited for the job, targeting the experiences and competencies will help the CDO overcome the specific challenges their organization faces. While most retail CDOs come up through HR roles or D&I specific roles, effective CDOs can come from a variety of career paths, including business roles and communications roles. What’s non-negotiable is that the executive is able to influence change throughout the organization without direct lines of authority.

Finally, organizations that prioritize diversity create accountability through structure. They work with the CDO to set specific D&I goals and track key metrics. They create regular opportunities for the CDO to update management and the board. One example of such accountability: Walmart, Inc publicly disclosed demographic data across all levels of the organization for its U.S. workforce in its 2018 Culture, Diversity and Inclusion report, providing year-over-year comparisons and retail benchmarks for each level as well.

How are retailers doing when it comes to realizing the full potential benefits of their CDOs? Further analysis of our data suggests some concerning trends.

Many retail CDOs (63% vs 50% across the S&P 500) have competing broader responsibilities -- often HR, talent management or community relations -- making it is less likely they have the appropriate amount of time to devote to building proactive D&I strategies and measuring key outcomes.

Retailers are also more likely than others to appoint insiders to the CDO role (72% vs 65% across the S&P 500). While insiders can bring certain advantages, including institutional knowledge, they may lack the momentum necessary to catalyze the scale of change that may be required. This concern is underscored by the fact that half of the retail CDOs in our study hold a title below the VP level, and few if any report directly to the CEO.

RRA’s 2018 D&I Pulse offers another perspective on how retailers are faring. The survey, completed by more than 1800 executives across sectors worldwide, asks leaders about their perceptions and experiences of their organizations’ cultures, including commitment to D&I. From the 98 retail and wholesale executives surveyed, we find many of the necessary conditions for CDO success are missing.

For one, 45% of retail and wholesale executives said their organizations do not have a D&I strategy at all, compared with 32% of executives across all sectors. Just 36% say their organizations emphasize D&I as part of business strategy. Thirty percent or fewer said their organizations set D&I goals or keep executives accountable to them.

For retailers, the path to D&I success starts with taking a proactive approach to D&I instead of a reactive one. It means trying to make profound cultural changes instead of simply navigating the inevitable PR issues.

Investing more deeply in the CDO role is one key piece of the solution. An equally important piece is training all leaders across the organization on how to foster inclusion in their everyday interactions – a strategy that Yum! Brands, Kroger Co, and others are already putting into motion. Inclusive leadership behaviors, which include raising awareness around differences and helping diverse groups collaborate effectively, are skills that any leader can practice. Finally, enforcing accountability for D&I results for all leaders across the organization – not just the CDO – is essential to sustainable success.

Kalpana Denzel is a Singapore-based consultant in leadership advisory and executive search firm Russell Reynolds Associates’ Consumer Practice.

John Long is a Dallas-based consultant focusing on retail in Russell Reynolds Associates’ Consumer Practice.