Culture Shock

By 2020, nearly half the workforce will be female and non-white. Are utilities ready?
Fortnightly Magazine - June 1 2003

By 2020, nearly half the workforce will be female and non-white. Are utilities ready?

Utilities, like other businesses, understand that-moral and ethical imperatives aside-a diverse workforce makes their businesses stronger. But at a recent transmission conference in Washington, D.C., the 50-or-so attendees were mostly male (two of the four women in the room were conference organizers), mostly white (two blacks and three or four Asians), and mostly older (half had gray hair).

The United States workforce population doesn't look much like that group (see Figure 1, p. 35). But by and large, utilities' workforces look more like that group than not. That doesn't bode well for the industry, which must find a way to tap into diverse segments of the labor force-or face an impending labor crisis.

Diversity and the Bottom Line

In today's business climate, few if any investor-owned utilities lack a diversity program. Diversity programs of one variety or another have been around for 20 years.

While such programs have often been dismissed as another flavor-of-the-month initiative, utilities are starting to see the real benefits to having diverse leaders and workforces.

Case in point: Renae Conley, president and CEO of Entergy Louisiana. She took the reins in mid-2000. At that time, J.D. Power and Associates ranked the company in the second or third quartile of all utilities in four out of five performance metrics: power quality and reliability, company image, price and value, billing and payment, and customer service. By July 2002, J.D. Power ranked Entergy Louisiana in the top quartile in four of the five categories.

While Conley is too modest to credit herself for these changes, she believes a diverse workforce helped the company improve. "I definitely believe we are a better company because of diversity, and all the different backgrounds we have in our company," she says.

In fact, all the utilities interviewed for this article emphasized the importance of building a workforce that reflected the racial and ethnic makeup of the communities they served. But diversity isn't just about increasing the number of women and minorities at a utility. According to Berlinda Fontenot-Jamerson, diversity manager at Sempra, "Diversity is managing human capital better." It's about understanding what best motivates different parts of the workforce, and about where to find the best recruits. Diversity is not exclusively about race and gender, she emphasizes. Doing diversity successfully means a company will get a better return on employees through increased innovation, creativity, and adaptability to changing circumstances, she says.

Yet business managers of all stripes are understandably reluctant to participate in corporate feel-good initiatives that don't help the company's bottom line, and utilities are no different. To achieve diversity, companies need to ensure that managers understand exactly how diversity impacts the bottom line.

Conley offers a concrete example: advertising effectiveness. When you think about ways to approach customers, she says, if you don't have people on your team that see the world through the eyes of your customers, with similar backgrounds to those customers, you can't communicate with them. Without diverse employees, "you're going to totally waste money in how you're trying to communicate with [customers]."

Conley says a recent ad campaign, explaining why increased gas prices increased customers' rates, succeeded in large part because of input from diverse employees. "When you get something from an ad agency that doesn't understand Louisiana, it doesn't fit, so you make a lot of adjustments [based on input] from people that live here, work here, and have diverse backgrounds," she says. That input increased ad effectiveness, improved customer understanding, and relayed the information the company wanted to relay. "So it's money well spent, and customers view you more positively," Conley notes.

Alliant isn't interested in diversity "just because it feels good, but because it makes good business sense," says Bernie Nugent, the managing director of human resources and labor relations at the company. "We feel a diverse organization makes better decisions." Nugent says increasingly diverse labor markets, an increasingly diverse customer base, and greater business interaction worldwide make diversity business-friendly.

At the moment, the labor force supply exceeds the demand in the United States. But that balance is expected to shift dramatically over the next couple decades. Nugent cites projected gaps in both the United States and Europe between a shrinking native workforce and jobs that need to be filled. He, along with other experts, predicts immigrants will help fill that gap over the next 40 years.

To cope with these expected changes, Alliant has set multiple goals for minority recruitment and retention for 2003. The company aims to achieve a minimum of 10 percent diverse new hires, or possibly reach the "distinguished" level of 15 percent. On the retention side, Nugent says that at a bare minimum, the company wants no more than 6 percent of its departing employees be minorities (3 percent qualifies as "distinguished"). Last year, Nugent said, 6.67 percent of Alliant's departing employees were minorities; somewhere between 8 and 10 percent of new hires were diverse.

Hiring Boom

More than a few utilities will face a large wave of retirements very soon, as the retirement of baby boomers during the next 10 to 20 years drives down the number of workers.

Donna Smith, human resources director at Alabama Power, says, "We have a lot of people who will be retiring in the next 10 years, so we're focused on hiring, and getting ready for those vacancies." While the Birmingham population historically has had a large black segment-in the neighborhood of 25 percent-in the last decade there has been a big increase in the Latino population, according to an Alabama Power spokesman.

Joyce Feaster, assistant vice president of human resources at We Energies, says one of the big motivators for diversity is customer service. In the company's service territories, customer demographics are changing, with growing populations of ethnic minorities. Feaster says it's crucial the company understand its customer base. Part of that, she points out, is communicating with customers in their native language, if they don't speak English. "We don't have full customer choice at the residential level, but we can envision that [it] will happen. To exclude or not tap into our community would be suicidal for us as an organization," Feaster states emphatically.

"The bottom line is, the world is changing," Feaster says. "We have to be able to relate to customers to be in business."

National and global companies have already come to this realization, Feaster maintains. "The more diverse the customer base is, the easier it is for Pepsi [employees], for example, to understand clearly the case for diversity. Every employee there has to think about how [diversity] impacts the bottom line," Feaster observes.

Creating a diverse, inclusive environment within an organization takes time. "Changing culture to value diversity is not an overnight event," says Smith. What it takes, more than anything, is opening up the lines of communication, according to Stephen Paskoff, president of Atlanta-based ELI (Employment Learning Innovations). Paskoff, a former attorney for both the Equal Employment Opportunity Commission and a management-side law firm, has advised a host of utilities on diversity programs.

Paskoff says that companies may find that creating that inclusive environment benefits them in other areas, like safety. He cites an example of a nuclear utility client from several years ago whose employees went outside the company-to regulators, plaintiffs' lawyers, and the press-to air their concerns about safety. To address the problem, Paskoff had the company randomly pick a number of employees to participate anonymously in a focus group.

The employees said that if their employer wanted them to feel comfortable talking about safety, they needed to feel comfortable talking to management about anything. If management was not responsive on other issues, the employees questioned, why would they respond to safety issues? In instances like this, creating an inclusive culture in which employees feel safe raising a host of concerns, regarding diversity or something else altogether, can reap unexpected benefits. As Paskoff points out, "All of these issues are related."

Slow Going

Yet despite all the sound business reasons for diversity, progress has been slow in the utility industry (see Figure 2). Take that Washington transmission conference, which might fairly be assumed to be representative of the management-level operations workforce at a typical utility.

Even comparing the meeting's demographics to 1995 U.S. population figures, the attendees didn't reflect the racial make-up of the country, which were: 12 percent black, 3.3 percent Asian/Pacific Islander, and 10.2 percent Hispanic (see Figure 3). While the combined total of minority attendees at the Washington transmission meeting, 12 percent, was closer to average population figures, the percentage of women attendees, 8 percent, was nowhere near the 46.5 percent of the workforce that women now occupy.

The U.S. Labor Department predicts that by 2050, whites will still make up the majority of the U.S. population, but barely: only 52.8 percent. Those of Hispanic origin are predicted to jump to 1 in 4 (24.5 percent), blacks will jump slightly to 13.6 percent, and Asian/Pacific Islanders will more than double, to 8.2 percent.

The number of women in the workforce is also predicted to grow to 48 percent by 2005.

Getting Ahead of the Curve

In a very troubled economy, it might seem like focusing on diversity is a luxury utilities cannot afford, whatever its long-term business justification. Yet even though hiring freezes may be in effect, companies can still focus on their existing workforces, Paskoff says. Companies can build better, more inclusive workplaces that are friendlier to different groups of people with the workforce they have-and thus be prepared for an industry turnaround, he says.

Already, the ways that companies approach and implement diversity is changing. For example, at We Energies, the company is moving away from the simple diversity training model-where, as Feaster says, employees learned about diversity, went to training classes, and then checked the task off their checklist-to a multi-pronged approach. Now, the company emphasizes that diversity is simply how it does business. She notes that employees and managers are learning to ask, before making decisions, "Do we have all the right people in the room, or are we just calling the same people we always talk to? Have we included all the businesses that would be impacted by the decision?"

Paskoff emphasizes that diversity programs need to focus not just on difference, but also on sameness. He says that if you task a group of 10 people with finding how they are different, in 15 minutes they will say, "My God, I don't even know how I can talk to you, we're so different." Yet if those same 10 people are asked to find their commonalities, they will have an entirely different, and more positive, view on how they relate.

Sometimes, the problem is rooted in a true lack of candidates-particularly when it comes to highly technical jobs, which have much lower numbers of women with the necessary educational background. The utility workforce is highly technical-Smith says 90 percent of Alabama Power's jobs are engineering or technical in nature. After all, for many years, girls were told that they were not good at math and science-a bias that society will spend many years eradicating. And even if women have the requisite training, there remains the fact that many of the jobs in a utility require brute strength that not all women possess.

Even today, the average engineering program can boast of only a 20 percent enrollment of women. In comparison, law, once as male-dominated as engineering, overall has roughly equal enrollment of men and women. And while engineering programs may look diverse, the fact is many of the foreign-born students that add to that diversity return to their country of origin once their education is complete.

"You can't count on diversity [in hiring] from following normal ads and normal recruitment [practices]," says Alliant's Nugent. Many times, it's getting out into the community, learning where diverse employees live, and putting on recruitment fairs that specifically target diverse candidates, he points out. Outreach is a vital component of any recruitment program that wants to see diverse candidates apply. Alabama Power, for example, recruits heavily for engineers from historically black colleges, and it is involved with organizations like the Society of Women Engineers.

One question it pays to ask, says Marti Smye, president of coaching and executive development at Korn Ferry International, is whether the company thinks it's getting the lion's share of top minority and women recruits. She advocates encouraging those kind of candidates, when they are still students, to pursue education and training that will make them qualified for jobs at the utility down the road.

There is a time factor in assessing a company's progress on diversity, Smye says. Companies that consistently hew to a set of values around diversity, she says, will see payoffs over the long term; those improvements won't be immediately apparent.

One way to gauge effectiveness before many years have passed, Smye suggests, is to look at the job applications. If diverse candidates are interviewed, yet the recruit is always a white male, "you've got a problem." But recruiting diverse candidates alone does not suffice. If retention and promotion are not also part of the effort, "it's just a revolving door," says Feaster at We Energies.

In many instances, the problem is less about a lack of qualified candidates and more about environments that are less than welcoming to women or minorities. Smye cites the example of car sales, which is still a predominantly male preserve. Car dealers complain that the reason they can't find women salespeople is because women don't want to work the necessary long hours. Yet, Smye observes, women work in retail and call centers, both of which also require long hours. "The reason car dealers can't get women is that the environment is not conducive to women. Car sales environments are extremely macho, a kind of old boys clubs [in which men say] we know how to do it, and exclude women, and make sexist jokes around women. Women don't find that atmosphere appealing."

It is difficult, but essential, to gauge softer values, such as how different groups of employees feel about the company's progress on creating a more diverse, inclusive company. The perceptions of groups typically differ widely. For example, one utility that has been aggressively pursuing a more diverse workplace commissioned an independent study to gauge where it was on the path to inclusiveness. On a six-point scale, most white men pegged the company at 5, indicating they thought that the company had nearly achieved its diversity goals. White women, on the other hand, gave the company culture a 4, saying that there was a growing core of people who were different from the typical employee, but they weren't necessarily valued for their talents and perspectives. People of color (both men and women) graded the company even lower, at 3, meaning that they thought the company tolerated different appearances, but not different behaviors.

On Board?

Even if an organization has a relatively diverse mix of gender and minorities within its workforce, those people often feel the glass ceiling problem acutely if they do not also see faces like theirs in upper management and on the board of directors of their company.

A diverse board and executive team signals an inclusive company, says Smye. And the converse is also true, she says. If diverse candidates perceive that they aren't going to be treated as part of the team, she says, many simply won't apply in the first place. It's just too hard to do good work and battle to be included on top of that.

As Smye notes, "One woman doesn't make a different environment-that's a token." The same holds true for minorities (see Figures 2 and 4).

Concrete Goals

Part of the problem, too, is that company commitments to diversity are often embodied in lofty statements, leaving employees and managers unsure of what they need to do or not do, according to Paskoff.

"Frequently, diversity is not treated with specificity" in organizations, Paskoff says. Approach a CEO at a major utility about how company goals of growing the customer base or adding megawatts can be achieved, and he can tell you precisely what steps are needed, Paskoff maintains. Yet when it comes to diversity, CEOs often can't articulate exactly what they mean, he argues. In fact, he says, if you ask 50 people in a company what diversity means, and you get 50 different answers, it means the organization has a pattern for discord and chaos.

Paskoff challenges his clients' management teams to explain why, if employees can consistently explain the company's commitment to safety, they cannot do the same for diversity. For Paskoff, the answer is simple: Diversity is not treated the same by management.

Are We There Yet?

So how does a conscientious CEO or executive tell if a diversity program works, and isn't just so much window-dressing? Fontenot-Jamerson advises not analyzing programs to death. Instead, she says, decide on the front end how long the evaluation period will be. If at the end of the designated period there is no noticeable change in diversity, it's time to end that program and move on to a different program or strategy to improve diversity.

Fontenot-Jamerson knows whereof she speaks. She has served as the company's diversity manager for 12 years, almost as long as the company has had such a position. Under her guidance, along with active support from former CEO Richard Farman and current CEO Stephen Baum, Sempra has achieved some impressive diversity numbers: 49 percent of its workforce can be classified as minority or ethnic. That percentage correlates closely to the average workforce figures in California (see Figure 1).

Who's Driving This Train?

While listing diversity as a company core value certainly sends a message, diversity is likely to remain merely a message unless the CEO and senior management make it clear that diversity is a priority for them. Paskoff maintains that the CEO must be very specific about the results he wants. "As an example, the CEO needs to say, 'If I have a group of direct reports in five years that all look like me, I'm going to have some serious questions about what we've done here, and I'm going to need some serious answers to how this could have happened.' That's the kind of focus a CEO needs to have" on diversity, Paskoff says.

Fontenot-Jamerson agrees. She says a bottom-up process simply cannot work. "Where goes the head, the body follows."

In many instances, a vital clue to the level of management's commitment to achieving diversity is whether the diversity officer reports directly to the CEO. Often, diversity experts say, if the diversity officer reports to the head of human resources (HR), the ability to implement a strong diversity program is limited. And Fontenot-Jamerson agrees, even though she herself reports to Sempra's senior vice president of HR, Joyce Rowland. "[Rowland] is a true diversity champion. But if it were any other person, I would say I could otherwise be more effective" reporting directly to the CEO. In most other circumstances, Fontenot-Jamerson says, the diversity officer needs to report to the CEO directly to ensure the strongest implementation of diversity programs.

If companies don't take the lead on making themselves more diverse, regulators may well step in. Carl Wood, a commissioner at the California Public Utilities Commission, has already voiced his support for making California utilities accountable for diversity in their workplaces.

Yet in the end, regulatory pressure is not nearly as likely to motivate action as is the simple need to fill open positions with the best possible candidates. Waiting until women and minorities comprise half the workforce before realizing the benefits of diversity is a losing bet for utilities.

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