CMOs Switch From Words To Action When It Comes To Forcing Diversity On Madison Avenue

At the ANA annual conference in October, Brad Jakeman, president of PepsiCo beverage group and a frequent critic of Madison Avenue, denounced agencies’ lack of inclusiveness and diversity. As I have pointed out in the past, Madison Avenue is not a progressive industry. Paradoxically, its institutions are very conservative and slow to adapt to change. In the past, transformation was not self-imposed. It was forced on it by outside forces, usually by the people who pay the bills - the  the clients.

Last week two leading Advertisers took the matter of diversity on Madison Avenue into their own hands. Antonio Lucio, the chief marketing officer of HP , sent a letter to HP’s advertising and public relations agencies demanding that they improve the makeup of their work forces by hiring more women and minorities. Lucio has asked his agencies to diversify their ranks within the next 12 months.

At the same time, General Mills announced an agency search. The search seems unusual in that it dictates staffing quotas for competing agencies –  50% women, and 20% minorities. This is a somewhat unorthodox approach to holding an agency pitch. The main reason agencies are usually hired is their ability to come up with ideas. Curiously, General Mills mandated quotas for the creative department only, not for other departments or the agency as a whole. Good or bad, this is a first. I am not aware of any other Advertiser dictating staffing quotas to an agency in a search.

While both approaches sound alike, they are not. Quotas are externally imposed, in this case by the Advertiser, without any input from the firm it is imposed upon, and can sometimes be artificial. HP’s approach is collaborative and calls for jointly establishing a scorecard and success benchmarks. Benchmarks are specific measurable metrics, with a discrete time frame in which they are to be achieved. The approach calls for evaluation by a scorecard and an on-going dialogue about progress.

By making it a collaborative approach there is greater commitment on the part of agencies and it has a much higher chance to succeed. It’s no wonder that Andrew Robertson, CEO of BBDO, one of HP’s agencies, and whose agency has publicly committed to double the number of senior female executives, told The Wall Street Journal, “[Lucio’s] initiative to formalize an action plan on his business is something we welcome.”

The key to success is quantification of these action plans. Measurement is critical. What you can’t measure, you can’t improve. Here are some of the areas where I recommend that agencies should develop specific benchmarks:

1. Hiring. Diversity is a hot potato (even my critique of the status quo will be guaranteed to draw criticism) and changing it is difficult. This is in spite of the fact that we know that all business and recruiting processes are dramatically more effective when they are driven by data rather than emotion. In order to be successful, agencies must gather data to identify the critical success factors of effective diversity recruiting. Data should drive every decision, including who should do the recruiting and which recruiting and branding approaches have the highest impact when it comes to diversity.
2. Retention. Measure success or failure by specific KPIs. For example, if the objective is to retain women and minorities, what are the retention rates, employee engagement, and employee satisfaction of these groups? Does the agency track advancement rates, and the employee perception of an organization?
3. Mentoring. Measure longer-term outcomes. After 3 years do the mentees have greater career advancement, as evidenced by one or more promotion compared to employees at the same rank and experience who are not part of the mentoring program? What is their career path over time and salary trend over time? What is the length of participants’ tenure in the organization? What changes in the demographics have been achieved?
4. Wage gap. A diversity strategy must include a plan for closing the wage gap. For most agencies there is a wage gap of at least 20-25% between white men and women, and more between whites and minorities who are in comparable positions. Since agencies regard individual salaries as proprietary information and do not share it with clients, a confidential, blind audit by a third party, similar to contract audits and media audits should be performed to determine wage parity compliance.
5. Incentivizing. Most agencies get a bonus for meeting KPIs such as sales or share market, which are set collaboratively by clients and agencies. It is time to add to to the agency's bonus plan diversity KPIs, e.g., measuring how many women and minorities were hired, how many were promoted, and whether the agency achieved specific benchmarks. To encourage an accelerated path to diversity, the bonus should have a risk-reward structure: agencies meet reward if they meet diversity goals, and risk income if they don't.

General Mills’ approach to diversity is different than HP's. Instead of asking the agencies to develop benchmarks and an action plan, it imposed prompt on-the-spot quotas. Their intent is good, but this strategy may not work as well as HP's. It is not clear how the agencies that are vying for General Mills’ business will react: some may be resistant and view it as interference with their business practice. It is also not clear how the it will be implemented: will the agencies, for example, be forced to fire many qualified white males and hire instead women and minorities in order to comply with the quota? The fact remains that agencies might easily circumvent the diversity dictate by redefining roles and titles and claiming compliance.

Then legality of quotas as an approach to diversity is questionable. In Europe, quotas have become an accepted method, although success, especially in adding women to corporate boards seems to be inconclusive. But in the U.S., the Equal Employment Opportunity Commission warns companies to “proceed with caution” when implementing a quota they as might expose themselves to lawsuits.

The closest thing the business world has to a universally acknowledged truth is that diversity is a good thing: the more companies hire people from different backgrounds, the more competitive they will become. Greater diversity is essential for businesses, our society and the economy and, most of all, it is the right thing to do.

Often, opponents oppose diversity with the still-common objection that quotas are anti-meritocratic. In fact, that is more true of the status quo.

As appeared first in Forbes.