Developing Diversity Ignites Innovation

The question posited is – “Does developing diversity ignite innovation?”.  The answer to this question seems quite straightforward, as most people assume that developing diversity leads to ignition of innovation.

However, in reality, it is very hard to tell if this innovation is indeed a product of diversity.  This is because there is no real concrete way to measure this, yet we still attempt an answer.  Before we delve into examining this question, we must define the word diversity.  Some will inevitably assume an organization is diverse if there are women in the workplace; this is only one type of diversity.  Gender has for a long time been at the forefront of the diversity diorama, yet diversity encompasses far more ranging from sexual preference to ethnicity both of which are becoming more evident in the workplace.

Defining innovation is a bit more straightforward. For the purpose of this exercise, we will submit that innovation is an idea that leads directly to an impact on the bottom line of an organization.  In our attempt to draw a correlation between diversity and innovation, let’s take a look at two women noted for their business acumen who have greatly influenced their organizations.

Our first leader comes from the non-alcoholic beverage industry. Indra Nooyi, has been the Chief Executive Officer of Pepsico since October 2006, where she has led an aggressive push to increase Pepsico’s market share against its rival Coca Cola.  The reason why Indra Nooyi was chosen is that she is perhaps one of the best examples of diversity leading to innovation.  She started her career at Pepsico back in 1994 and rapidly progressed through the ranks, becoming CFO in 2001.  During her tenure prior to becoming CEO, she played a significant role in Pepsico’s corporate strategy.  She was the lead negotiator that made Pepsico’s acquisition of Quaker Oats possible in 2001.

Ms. Nooyi, we must note, is the first female and first non-American to be appointed CEO of Pepsico, which is notable in that, much like its rival Coca Cola, they are considered American brands (Note: both companies’ revenues are now primarily derived outside of America).  Her strategy of innovation has been to lead Pepsi away from being a traditional purveyor of “junk” food (soft drink and chips) to becoming a health food provider1.  This has been accomplished through acquisitions of companies in which she played a role, such as Tropicana and Quaker Oats.  Perhaps the pièce de résistance of her tenure to date has been Pepsi’s purchase of two of its largest bottling companies in late 20092.  In monetary terms, Indra Nooyi’s leadership style and innovation in the workplace has lead Pepsico to experience 72% growth in annual revenues since she became CFO in 20003 and where profit has steadily increased, except for a slight downturn between 2007 and 2008.  Indra Nooyi, is considered one of the most influential women in the world, and rightfully so.  She demonstrates that developing diversity ignites innovation.

Our next leader comes from a diverse background.  Moya Greene has been the CEO of Canada Post since May 2005, where her ideas have led to innovation with an impact on the bottom line.  Apart from a brief stint in the financial sector, she has been a career public servant and overseen the privatization of Canadian National Railway and deregulation of the airline industry.  During her tenure at Canada Post, she vowed to increase the efficiency of the organization by cost cutting, increasing automation, and improving labour relations with the unions that have long dogged Canada Post.  One of her key focuses has been reducing absenteeism, which is no small task for what is one of Canada’s largest employers (with 72,000 employees) and, in her opinion, stems from chronic industrial relations problems4.  However during her five-year tenure not only have profits increased,5 but a four year collective agreement was also signed with minimal labour action.  Indeed her innovation in a stereotypical bureaucratic crown corporation has not gone unnoticed, as she is set to be appointed as the next CEO of the Royal Mail in the UK, where they trust that her experience with unions as well with privatization will play a role in the eventual privatization of the organization.

That both Nooyi and Greene are highly effective innovators in their own right is indisputable.  That their top suite CEO status and success sets them apart in a yet male dominated business landscape appears to speak to the value of diversity.  Even though there is no direct way of measuring whether developing diversity can lead to innovation, it seems clearer now – through the above examples – that there may be some connection.  Both of the women were pioneers of gender diversity in their respective organizations and both have lead these corporations to considerable success during their tenures.

HR professionals might wish to examine other instances where organizations have developed diversity through different examples of leadership, analyzing whether this has indeed lead to innovation and, eventually, increased profitability.   The result of this review may well encourage us to be at the forefront when it comes to developing a diverse workforce.

By Neil McEachern, CHRP candidate

1    Currently, the largest food and beverage company in America receives $10 billion of its annual revenue, or 18% of its overall revenue, from what Nooyi likes to call “good-for-you” (read: healthier than average) products like Dole, Quaker Oats and Tazo teas.  CNNMoney.com

2    Traditionally, Coca Cola and Pepsico did not bottle their own products, thus making Pepsico’s 7.8 billion dollar acquisition of Pepsi Bottling Group and PepsiAmericas quite a remarkable feat.

3    Since 2000, when she became chief financial officer, the company’s annual revenues have risen 72%, while net profit more than doubled, to $5.6 billion last year. As chairman and CEO, Nooyi promotes the concept of “performance with purpose,” trying to make PepsiCo a ground-breaker in areas like selling healthy food and diversifying its workforce.  BusinessWeek 2007

4    “When I talk about absence in our company, which is a very big problem and it is part of a legacy that has a lot to do with the industrial relations history of the company” Globe and Mail

5    “since 2005, steered the organisation to a trebling of its net profit to C$281 million (£183 million), despite a 5.1 per cent drop in revenues, through aggressive cost-cutting” Times Online

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