CONTENTS

DIVERSIFIED SEARCH ODGERS BERNDTSON J U LY 2 0 0 9 D I V E R S I TY O F F I C E R O V E R V I E W Page 4 Introduction to the Diversity Officer Page 8 Importance of Chief Diversity Officers Page 10 Program for the Chief Diversity Officer Page 12 Diversity as Competitive Advantage Page 13 Diversity Leadership Holistic and Integrated Approaches Page 17 Compensation Overview for the Chief Diversity Officer

Diversity officers are being added each day. And in the past year several of the Diversity Officers our team has placed include corporate and association, health care and education. For example we have tracked three placed and are sharing their success: Baystate Health with Bobby Rodriguez as Diversity Officer, U.S. Tennis Association with Kevin Clayton as Chief Diversity Officer and Sherry Snipes, Director of Diversity at the American Institute of Architects.

DIVERSITY OFFICERS
Companies must demonstrate consistent strength in four key areas: www.diversityinc.com
CEO Commitment is the most heavily weighted area --personal involvement in diversity, how she/he holds executives accountable for diversity success and board-of-director demographics. HR: Diverse Human Capital includes race/ethnicity/gender/age-demographics questions surrounding the work force, new hires, management by levels, promotions and retention. Corporate and Organizational Communications examines such internal factors as employee-resource groups, mentoring and employee surveys, and such external factors as philanthropic contributions, multicultural marketing and web-site communication of diversity branding. Supplier Diversity looks at percent of procurement budgets spent with suppliers owned by Blacks, Latinos, Asians, American Indians, women, LGBT people and people with disabilities. It also examines whether supplier-diversity numbers are audited and have third-party certification; whether companies include supplier diversity in their requests for proposals (RFPs); and whether they mentor suppliers and offer them financial assistance.

THE BEST DIVERSITY OFFICERS
D I V E R S I F E D S EAR C H ANALYS I S , J U LY 2 0 0 9

10 FACTS

We have analyzed several hundred diversity officers and share the following facts:
1. Reporting: Diversity Officers primarily report through SVP HR or VP HR but many to COO or even CEO depending on industry. Staff: Average staff size is c. five on diversity staff (discuss roles) with many others with integrated functions and often a diversity officer appointment in the operating divisions. Diverse Leaders: Diversity Officers are diverse. Most are African American with growing trend to find top Hispanics and Diversified search will share the analysis. CEO and Board commitment: Top commitment from CEO and Board is critical and evident in review process and vision on web sites and in recruiting materials. Compensation varies by industry and estimate overall $200,000 base salary. Human Resources and Diverse Talent: Greatest percentage of function is HR and talent and diversity training and development with other work as representative internally and externally for the company; oversight and work with Employee Network Groups (ENGs). Mentoring and onboarding and ancillary programs are important. Diverse talent goals and metrics are used by all. Growing trend for company-wide Diversity Councils with representatives from operating companies/divisions. Business Case is now clear and the holistic programs: Best companies have ROI. Diversity Officer has major role with marketing, communications and community. Separate Supplier Diversity in most companies but all Diversity Officers have input and at least bottom line with focus on MBEs. Supplier Diversity Officers become advocates and have own goals with many companies reaching the billion dollar mark.

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CHIEF DIVERSITY OFFICER OVERVIEW

July 2009 Analysis by Diversified Search Odgers Berndtson Brief by Edie Fraser

6 CHIEF DIVERSITY OFFICER OVERVIEW www.diversifiedsearch.com T H E I M PO R TAN C E o f CHIEF DIVERSITY OFFICERS The importance of Chief Diversity Officers in the private sector, associations, health care, not-for profits, corporations, and government has never been more significant. This “Diversity Trends” overview is brief. It reviews diversity officers--their roles, responsibilities, competencies, significance. (There is a separate document on Compensation). The compensation ranges by industry, by organization and certainly by position, the Chief Diversity Officer who is a corporate or organization officer vs. the director of diversity reporting through the human resources infrastructure). We also emphasize the growing role of the Supplier Diversity Officers, many of whom are senior and all playing a role in insuring that minority and womenowned businesses (MBE’s) are getting their fair share of the work. Only a fraction of the Supplier Diversity Chiefs report directly to the diversity officer. The large percentage report to the Procurement Officer with dotted lines of reporting to Human Resources. The firm has been active in benchmarking and analyzing the role of the diversity officer, its function, and the office, infrastructure, and development. We want to share our existing knowledge of the diversity officer. The significance of the Chief Diversity Officer is growing; it is becoming more than just a stand alone role, and is increasingly becoming one of the professionals responsible for leveraging the resources of their organization. A successful officer will be able to grow the program while creating an atmosphere of collaboration and team work that elevates the diversity program and messages, internally and externally. The functional office of diversity has to collaborate with the “C” Suite and with internal and external stakeholders. The role of the diversity officer has changed and elevated over the course of the past five years. The best diversity officers function within the "C Suites.” The success of an organization’s diversity program will not be defined by the number of staff nor pronouncements. Rather, it will be determined by the diversity officer and staff team on building through innovation both internally and externally, building advocates and results wherever possible, leverage all resources. The chief diversity officer’s success depends on the team’s ability to serve in a cross-functional manner throughout the entire organization and its members and the organizations externally. The ability to impact talent in recruiting and advancement with development and training programs, linkage to programs, communications, and marketing-- are essential. The diversity officer’s role in best practice organizations cuts across a range of functions to ensure pipeline development at the members’ institutions while doing so much more. The best Chief Diversity Officers impact the future by combining a diverse and abundant pipeline. Compensation increases as most professional diversity officers take on more complicated tasks. We estimate from our surveys that more than 50 diversity officers earn more than $325,000 per year (base and bonus). The value of the diversity officer is becoming increasingly understood and valued, with diversity becoming an association imperative, and the compensation increase reflects the growth in responsibility.

This overview provides insight on the functionality, compensation, structure, competency and background training of diversity officers.

7 CHIEF DIVERSITY OFFICER OVERVIEW www.diversifiedsearch.com

Diversity:
There are many reasons why the diversity officer’s role is now an organizational imperative. • Is the future workforce. • Is related to customers. • Is the market. • Is innovation and productivity.

Who are the leaders within diversity? They are the organizations whose top leaders “get” the importance of diversity integration and operations in a “Holistic way.” They have the senior diversity officers at the table. Top leadership is engaged with the Diversity Officer and is Passionate about diversity.

Program for the Diversity Officer:
• HR System that has “pipeline movement” and measurement of change to be a diversity leader • Strategic program initiatives • Strong goals that are measured, quantifiable and qualitative • Diversity initiatives imbedded throughout all stakeholders

8 CHIEF DIVERSITY OFFICER OVERVIEW www.diversifiedsearch.com PROGRAM for the DIVERSITY OFFICER Infrastructure Leadership for Diversity ■ Leadership at the top as advocates from CEO and “C Suite” ■ Diversity officer and team -committees, and Employee Network or Resource Groups (ERG’s) ■ Diversity Council: Executive (internal and external): the trend is one with internal executives and representations from external and most have councils now through the different units of the organization.
1. Diverse Talent recruiting and retention 5. Community Relations 6. Strategic Partnerships, external networking

groups, and public policy outreach
7. Supplier Diversity - Procurement with

Vendors
8. Research 9. Training 10. Communications

that is tied to long-term benefits
2. Onboarding, OD, Training, and Education

11. Special Events 12. Government Relations and Public Policy 13. Special Initiatives

program to affect retention ■ Work on all areas for Development
3. Internal Stakeholders ■ Those within the system ■ Other dependent on type of

organization
4. External Stakeholder Engagement ■ Major organizations ranging from

Black and Hispanic MBA to those tied to the professional area of the organization ■ Community leaders in Community Organizations ■ Diversity Advisory Councils ■ Stockholder Relations

9 CHIEF DIVERSITY OFFICER OVERVIEW www.diversifiedsearch.com FRAMEWORK Recruiting a diverse workforce from executives to entry level. Talent development and pipeline advancements are the key to retention and productivity. A focus on engagement as well as cultural competency and fit is fundamental to success. Executives, senior leadership, and boards of directors are diversity advocates as never before. Their performance is being measured and compensation is being affected. Leaders now equate business growth, even stock performance, with diversity. Boards of directors will be challenged not just for representation data but also for engagement as top leaders and boards are held accountable. Huge demographic shifts prove it is a “New America”. Consider that five states already have altered demographics where minorities are now the majority. These include some of the larger states such as California, Texas, and other. North Carolina has the greatest percentage increase of Hispanics. One of every five American youth is Hispanic and, combined with the immigrants and others, the change in demographics requires diversity and inclusion to become a key priority. Each diverse constituency deserves our attention: Opportunities are in each diverse area and run the gambit: Hispanics, African-Americans, Asian-American, GLBT, Muslim and other religious groups, the elderly, disabled, and veterans. The Human Rights Campaign’s fifth annual Corporate Equality Index reported in the fall 2008 that an unprecedented number of companies and organizations apply and try to reach the 100% rating. Older people are also a new diverse constituency as well as the different generations. Member and market connectivity have never been more important and diversity is the cornerstone for much of the customer leadership and service issues. The market place creates a competitive advantage and value for diversity leadership. The valuation models are compelling. Communications and technology ties to diversity are strong with best practices organizations. Ethics and governance are tied to leadership as never before. Strategic partnerships have never been more important. Community and philanthropy ties to diversity are a major priority. Supplier diversity has a competitive advantage.

Best programs are integrated and seen as holistic for success.

• There are strategic plans and measurement systems. • There is leadership aligned with a vital CDO and board endorsement. • There is focus on talent pipeline “in” and pipeline advancement, career development successes. • There is a holistic approach as diversity is part of each area and every business unit.

10 CHIEF DIVERSITY OFFICER OVERVIEW www.diversifiedsearch.com DIVERSITY AS C O M PE T I T I V E AD VAN TAG E and DRIVER of PERFORMANCE Diversity is related to performance in new ways. The organizations that are more diverse and apply it to areas such as culturally competent care will have greater success and a larger market share, and the bottom line will be favorably impacted. Diversity is viewed as an organizational imperative Talent: Diverse Talent throughout the infrastructure as well other structures: Recruiting and retention of women and diverse talent: “Pipeline in and Pipeline up” Pipeline advancement, succession planning, and infusion of diversity and inclusion at all level drive success. The “Race for Talent” is on every agenda. LEADERSHIP at the TOP PROVES CRITICAL Measurement. Scorecards are in all areas and everything gets measured.

Best organizations for diversity demonstrate accountability. Boards of directors review diversity plans and progress.

Representation, engagement, succession planning, supplier diversity, and executive leadership are all measured and compensation systems are impacted and this trend will continue to soar. Diversity is part of the bonus plan not only for managers. Measurement and matrices overall are critical barometers, including that for the top leadership and direct reports. A Diversity Scorecard is an ultimate accountability tool to help CEOs track progress, identify drivers of change, and allow executives to communicate successes to their respective boards and diversity council members. Its broad-based metrics are flexible enough to add and adapt categories and metrics that may be more aligned with your specific business strategies.

In 2009, there are three major areas regarding recruitment and retention:
1)

Winning the “Race for Talent” from school entrants to faculty to networks (gaining the best of women, minority, immigrants, religious sensitivity) with new solutions and success models. Retention and growth Engaging champions and focusing specifically on white male engagement and participation.

2) 3)

11 CHIEF DIVERSITY OFFICER OVERVIEW www.diversifiedsearch.com D I V E R S I T Y L E A D E R S H I P: Holistic Approach Board of Directors Corporate Team Executive Diversity Council Corporate Leaders

Diversity Officer
Diversity Councils
A. Overall Management B. Functions

Purchasing/ Supplier Diversity

Networks & Affinity Groups
A. Internal (Employee network groups B. External Advisory Board

Training & Recruitment Education

Compliance EEO Legal

Customer/ Client

Information Technology

Communication

& Media

Marketing Multi-Cultural/ Urban Markets

Research &
Measurement

Surveys

Retention

Community Relations

Events & Foundation Sponsors

Third Party Relations

Government Relations

Public Policy

Research &
Measurement

Global

Partners

Communities

Stakeholders

12 CHIEF DIVERSITY OFFICER OVERVIEW www.diversifiedsearch.com D I V E R S I T Y L E A D E R S H I P: Integrated Approach Organization-wide diversity management ■ Talent o Representation management o Career management including pipeline management, succession planning management, and overall management o Focus on numbers of senior level leaders and build that pipeline

new ways of reaching customers and expanding markets while ensuring respect for differences. The integrated approach to diversity is the successful one. Diversity encompasses staffing and all aspects of talent acquisition and advancement, market share and customer growth, supplier, communications and advertising, technology, public policy, philanthropy and community, and more. I N T E G RAT I O N o f D I V E R S I TY MAKES it EFFECTIVE Training should be mandatory and should be done well. The new thrust behind diversity is to use exceptional trainers internally to work with external “superstars.” The focus is to prove engagement and ROI. Done well, the measurement for effective training is diversity engagement against business and organizational objectives. The goal is to also boast retention because of the engagement through the new types of training. Innovation is part of the new process with new ideas. TREND Communications, multicultural, and advertising support proves increasingly sophisticated.
Strategic communications for both internal and external, employee communications, marketing, use of technology for communications, and targeted advertising will grow as will the use of data to show ROI from these activities. Support for communications, internal and external, Internet and extranet, through sponsorships of events focused on market, workforce, and community are now part of all diversity programs. Changes we witnessed include the following:  Diversity either has staff assigned from the association’s public relations departments or the diversity team has outside PR staff hired to do the functions. The communications organizations are embracing diversity.

Internal o awareness of diversity and how it links to corporate strategy, using the internal web site and building all new mechanisms ■ External o Innovation in communications through quarterly and annual reports on diversity, engagement of external stakeholders, using a dramatic web site, speeches and engagement with strategic partners against key objectives and using the communications tools; addressing the needs of multicultural customers and increasing interaction with minority business and community leaders

Diversity management allows an organization to examine its workforce and management future, its supplier base, and its community engagement. Effective management requires leadership from a Chief Diversity Officer and other executives, from the CEO and the senior management team. Effective management means setting goals and measuring progress toward them. It means seeking

13 CHIEF DIVERSITY OFFICER OVERVIEW www.diversifiedsearch.com I N N O VAT I O N a n d CHANGE LEADERSHIP Innovation and change leadership are aligned with diversity as critical to the competitive advantage. Diversity Best Practices finds examples daily of innovation related to engagement, creativity, and ties that bind between diversity and innovation. Change and innovation leaders are mixing diversity programs and talent to drive new ideas. DIVERSITY and the TIE to PUBLIC POLICY Diversity and the tie to Public Policy has never been stronger. Strategic partnerships and alliances with outside groups are more important than ever. Trend #1: recognizing the importance of the relationships and partnerships. Trend #2: building the right talent for responsibility in this area. We find that most of the leading companies are naming Directors of Strategic Partnership, often with additional people responsible for Hispanic, female, AfricanAmerican, Asian-American, and other. There are specific staffs assigned to build the partnerships and relationships with local, national, and global organizations. Most Best Practices companies are engaged with strategic partners. Trend #3: building the relationships into the business plan for diversity. The area is rich for recruiting and marketing. We note the following: Strategic alliances: Best Practices organizations form strategic alliances with non-profit organizations and advocacy groups to build community relations with a bottom-line focus. ■ Strategic partnerships: These relationships are formed to develop and implement joint programs. ■ Affinity relationships: These bonds are established for longer periods of time because of similar, market, or community interests.

TREND Supplier diversity is more important in terms of setting an objective and hitting 5% and using suppliers in the business or with the organization or government department.

PUBLIC POLICY Public policy and government relations issues are ever-important to diversity. Leadership changes in the Congress of 2009 and the Obama Administration are driving the issue for diversity. The issue of diversity is important, from those affecting cable and telecom to those of technology. Then there are areas affecting talent. For example: Immigration is front and center in 2009, from our borders with Hispanic workers to others issues. Immigration is causing major recruitment problems, especially for Chinese and Indians coming to the United States. The “brain drain” is a reality and policy has not kept pace. Immigration is changing the landscape of many countries and impacts corporate recruitment.

14 CHIEF DIVERSITY OFFICER OVERVIEW www.diversifiedsearch.com E T H I C S a n d VALU E S Ethics and values are intrinsically tied to diversity and its success. The Diversity Officers are now taking on ethics responsibilities or are connected with the Chief Ethics Officer and Counsel, and this area will continue to grow in its significance.

COMPETENCIES for DIVERSITY OFFICER ■ Leadership capability ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ Influence with executive team and alignment with the team Diversity experience in building effective strategy and execution Previous experience and expertise in diversity-related issues/laws Passion for diversity Business acumen and sensitivity to unique culture Cross-cultural competence The ability to focus and drive results Driving change Building and maintaining relationships Building strategic partnerships Building trust and integrity Organizational awareness Communication skills Managing organizational boundaries

CHIEF DIVERSITY OFFICER C O M PE N SAT I O N OVERVIEW

2009 Compensation Analysis by Diversified Search Odgers Berndtson

16 C H I E F D I V E R S I TY O F F I C E R C O M PE N SAT I O N C O M PE N SAT I O N f o r DIVERSITY OFFICERS Compensation is on the agenda for Chief Diversity Officers as well as Directors of diversity. The salary for the top diversity officer is increasing as the chart below reflects and it is clear that it is highest with more experienced diversity officers, those who report to the most senior level and those who operate in the “C Suite.” When a Chief Diversity Officers is truly an officer within the “C Suite” the responsibilities and the compensation are commensurate. We estimate salaries to be at a $250,000 base for the senior diversity officers in the Fortune top companies. With bonus and incentives the overall package may be more than $400,000. The highest paid have been those in the financial services industries with three who we know to have exceeded $ 1 million in compensation. Times have certainly changed and even those salaries are now more in line with industry leadership overall. What we note is that the corporate world has led in compensation numbers for chief diversity officers but some of the latest hires in higher education have total compensation at the highest level. There are many well-performing diversity officers at the $150,000 base salary range as well. It is clear from interviews: • At companies where the diversity officer reports to the senior executives, salaries are definitely higher. These salaries are on a rise as the function becomes more important.
• There is a difference by type of industry. • There is great discrepancy even within an industry. In the petroleum companies we know of one base at $300,000 plus and another company at $135,000. The utility industry is less. The financial industry still is high but has fallen in major ways not only bonus but also base as expected with the financial market fall. The technology leaders have senior officers. The insurance industry has paid as positions grow in responsibility. The responsibilities at

www.diversifiedsearch.com

SENIOR DIVERSITY OFFICER

Chief Diversity Officer
Salary Base more than $300,000 $200,000 - $300,000 $100,000 - $200,000 Bonus Range $100,000 $75,000 $50,000 Compensation Estimate 23.3% 46.4% 30.3%

Directors of Diversity
Salary Base more than $300,000 $200,000 - $300,000 $100,000 - $200,000 Bonus Range $100,000 $75,000 $50,000 Compensation Estimate 2% 21.2% 76.8%

some of the major retailers have grown with function expansion and we know of three diversity officers in the top range. The same is true with major associations, higher education leaders as they advance their diversity officers. • We focused only on base plus bonus with estimated options. Projection: The average salary at $170,000 and the total compensation at $220,000 as they reflected on all diversity officers. We have taken the 180 with the most senior titles and responsibilities* * Based on both written and a wide range of interviews after a

thorough list developed of the 180 most senior diversity officers.

17 C H I E F D I V E R S I TY O F F I C E R C O M PE N SAT I O N N E O G T IAT I N G SALAR Y a n d BONUS is CRITICAL UPFRONT There is a major drive to select and advance more diversity officers and have them report at a higher level. Titles, there are more senior diversity officers, vice presidents of diversity than ever before, and more reporting to the CEO or President, or with a dotted line to the top. The support from majority (the larger, and generally white-owned and led) executive search firms vs. the minority-owned and led firms is a new and considerable debate as we interview many diversity officers. There is a definite trend: TREND (1) train the majority firms as they hire experienced minorities to recruit for them across the board; and (2) many more dollars expended for work by minority firms. The reasons for the latter are that they know the marketplace of those to place; they know diversity, and they are part of the support for supplier diversity. www.diversifiedsearch.com

Executive The executive diversity council gives top-level support and credibility as the “diversity office” leverages cross-functionality. Driving Diversity into the Business Units and Across the world. Diversity is being driven into the business units. Budgets often are decentralized, as well. The headquarters diversity budget may be separate from the business units and global offices. The total Diversity is being driven into the business units. Budgets often are decentralized, as well. The headquarters diversity budget may be separate from the business units and global offices. The total resources allocation and staff allocation then receives attention from the aggregation of the central office staff, and functions and those which are decentralized.

C O M PE N SAT I O N R E F LE C T S OTHER INFRASTRUCTURE FACTORS Diversity Officers command more base salary and bonus Structure The infrastructure is changing as the responsibility of the diversity officer is elevated. Diversity as a function, within the infrastructure, has more clout, staff, and leverage. Where a business is strong there are more resources. The formal lines and dotted lines into line and staff functions are more pronounced.

DIVERSIFIED SEARCH
ODGERS BERNDTSON

Diversity Practice, Washington D.C. Office 1990 M St. NW Suite 740 Washington, D.C. 20036 Phone: 202-296-5222 Fax: 202-296-5233 www.diversifiedsearch.com

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