Denny's Recipe For Diversity
Monday, January 16, 2006Denny's Recipe For Diversity
PAUL KANGAS: We begin tonight with Denny`s. It took a big lawsuit for the restaurant chain to realize it had a diversity problem and a public relations one, as well. Since settling that suit back in 1994, the company has made a turnaround from a symbol of racial discrimination to one of the best companies for minorities. From Denny`s headquarters in South Carolina, Darren Gersh reports.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: This meeting is what makes corporate diversity different at Denny`s.
RAY HOOD, CHIEF DIVERSITY OFFICER, DENNY`S: This is the real deal. This is about a $1.4 million opportunity.
GERSH: This is Ray Hood, Denny`s chief diversity officer. And that`s Denny`s CEO Nelson Marchioli.
NELSON MARCHIOLI, CEO, DENNY`S: So, $150 more per store, for a grand total of how much?
GERSH: Ray is an officer of the company. She sits on the Denny`s management committee and is one of just seven people to report directly to the CEO. Many companies relegate diversity to a task force or give the job to a junior executive reporting to human resources. Not Denny`s.
HOOD: You don`t run finance by a council. You have a CFO. You have an SVP of human resources. Marketing is not run by a task force. So why would we do this? And actually, we felt that it was a bastardization of the business actually and that it would make diversity this appendage off to the side of the business and not integrated into the business. So we really broke the mold.
GERSH: Denny`s really had no choice. In the mid-`90s a Denny`s restaurant in Annapolis failed to serve six uniformed African American Secret Service agents in town to guard President Clinton. They sued and Denny`s became a punch line for late night comics.
HOOD: We became like an icon for corporate discrimination. And I read someplace where they called us the poster child.
GERSH: Since then, Denny`s has become the poster child for how to make diversity work. Surveys rank the company as one of the best workplaces in the country for minorities and women. Now other CEOs ask Marchioli for advice. When he offers it, he hears back doubts about the cost and extra work of hiring and managing a chief diversity officer.
MARCHIOLI: Well, what about a task force or I think this should report to HR? And I push back and advise them that it is really about your commitment as the CEO.
GERSH: It is certainly not cheap. Denny`s says it spends millions of dollars a year on diversity training.
UNIDENTIFIED FEMALE: We did have a couple that was a little grumpy negative, but once we got into it, they picked up and it was really fun.
UNIDENTIFIED MALE: Very good. The fact is that maybe we might have seen them originally as grumpy or maybe difficult, but the fact is you worked through it, and that`s about appreciating others and diversity.
GERSH: Every new Denny`s employee is trained in the company`s core values, including appreciating others. Over the last decade, Denny`s estimates two million people have taken its diversity training and the company claims to be the largest diversity trainer in the country. Each of Denny`s 85,000 employees receives an hour and a half of diversity training, managers: nine and a half hours. Hood says the experience can be an eye- opener, helping some understand the kind of subtle and not-so-subtle discrimination minorities face everyday.
HOOD: If someone is walking through that day in and day out, perhaps by the time they come to you and the silverware is not clean, or you sit them back of the restaurant, then it`s like, it gives me a context to understand where this is coming from. Light bulb goes off.
GERSH: From a company with no top black executives or suppliers a decade ago, Denny`s now says half its board and senior leadership team are women or people of color and more than 12 percent of total purchasing contracts are with minority suppliers. Denny`s insists these are not quotas.
HOOD: We want to see women, we want to see white males, we want to see people of color and may the best person get the job.
GERSH: Denny`s can`t afford another mistake. The company faces fierce competition from Ihop and in the crowded family dining category, Denny`s can`t risk another hit to its reputation. But Hood is not worried. She believes the company has taken the diversity message to heart.
HOOD: If I were to get hit by a bus, heaven forbid, it could go on and on and on. So that everybody owns it. It`s who we are. That`s what it means for Denny`s at this very specific point in time. And that`s big for us.
GERSH: Darren Gersh, NIGHTLY BUSINESS REPORT, Spartanburg, South Carolina.
GHARIB: Joining us now to talk more about the issues of diversity, we`re happy to have with us Bernard Anderson, professor of management at the Wharton School of the University of Pennsylvania and David Thomas, professor of business administration at the Harvard Business School. Gentlemen, thank you so much for joining us. Dr. Thomas, let me begin with you. You know, everybody talks about diversity, but if you had to come up with a short definition of what makes a diverse workforce, what would it be?
DAVID THOMAS, PHD, PROF. OF BUSINESS ADMIN., HARVARD BUSINESS SCHOOL: It would be a workforce that reflects the community that the business serves and the available labor markets, as well as reflecting diversity at all levels of the company and both in the company`s peripheral and core businesses or units.
GHARIB: Dr. Anderson, do you see it the same way?
BERNARD ANDERSON, PHD, PROF. OF MANAGEMENT, WHARTON SCHOOL: Yes. I would express it a little bit differently. I would say that a diverse workforce is one in which there is a nondiscriminatory environment for the management of human resources.
GHARIB: So how would you be able to tell, Dr. Anderson, if a company has been successful at creating a diverse workforce compared to one that`s been a failure?
ANDERSON: Look at the numbers. I`m a numbers man. I think that you have to look at who is s employed in that company and at what level they are employed. A diverse workforce is one that will reflect all of the population groups in this country, all of those who are in the labor market. It is not one in which you find an overwhelming majority of senior and management positions held by one population group, namely white males.
GHARIB: Dr. Thomas, is it all about numbers? Is that what success or failure is determined on?
THOMAS: I think it`s about numbers. I also think it`s about the culture, and I think it`s also about retention. There are many organizations that are able to keep their numbers looking perfect, but when you actually look at what`s going on, they`ve got a revolving door for talent and in particular, for female talent, talent of color.
GHARIB: So, Dr. Thomas, what would you say then are the real challenges or the stumbling blocks in terms of creating a diverse workforce and then keeping it that way?
THOMAS: I think the -- probably the major stumbling block is leadership accountability and having that leadership accountability run all the way through the organization, so that after initial success with the numbers, we don`t take our eye off the ball in terms of creating the kind of culture and environment that allows people to succeed and makes people want to be retained. So I really see today`s stumbling blocks lying primarily at the level of leadership.
GHARIB: I know, Dr. Anderson, you believe a lot that corporate leaders can play a big role in creating a diverse workforce. What would you say is the key thing that a corporate leader has to do?
ANDERSON: The first thing the corporate leader has to do in my view is understand the importance of workforce diversity for the performance of the company. I think if you look at the evidence, you will find that those companies that are high-performance work companies, are high-performance organizations, are organizations that have a diverse workforce.
GHARIB: Dr. Thomas, for companies that do not embrace diversity, what`s the biggest cost for not being diverse?
THOMAS: The biggest cost is that they will fail to adapt to the environment around them. There`s plenty of evidence that shows that companies that don`t have the diversity within, in order to track what`s going on in their markets and connect well to those markets, ultimately lose their position.
GHARIB: Gentlemen, let`s take a little break here and we`ll continue our conversation with Dr. Anderson and Dr. Thomas a little later in the program.
