A recent report reveals that diversity policies are much more than a numbers game. Kate Hilpern talks to businesses which are profiting from a raft of initiatives

2005 marks the 10th anniversary of the RfO campaign and the fifth year of benchmarking with member companies. During that time, by far the biggest changes have been around the motivation for achieving diversity, says RfO's director, Sandra Kerr.

"Ten years ago many organisations in both the private and public sector would ask us why there should be a need for diversity. Now, newcomers to the network can see the benefits of diversity and are asking how they can improve their performance in this area," she explains.

Diversity is good for profitability, she explains. "The estimated value to our members' bottom line this year from the strategies they have implemented was calculated at £13.3bn." Little wonder that 91 per cent of organisations state they now have a clear case for racial diversity - compared to 78 per cent in 2004 - and 85 per cent have put in place clear action plans on diversity, directly linked to their business objectives.

When a company establishes a respectful and rewarding culture for employees, those employees will deliver exceptional customer service, says Kerr. The best feedback a company can receive is when staff say "I enjoy working here", she says.

Jenny Nixon, organisation development consultant for Bupa - the "most improved" private sector company in this year's survey - agrees. "We track employee satisfaction and it has improved with our focus on race diversity. In turn, we have a statistical link between employee satisfaction and customer satisfaction and profit. So we know it affects our bottom line."

But the business case for diversity cannot be won without leadership commitment. The RfO report cautions: "It is not by pure chance that the overall top scoring organisations have established race champions at board level. Without senior leadership and cultural change, diversity goals simply cannot be realised."

Rob Sutton, diversity manager for the Environment Agency - one of the top performers in the public sector in the RfO report - agrees. "Our chief executive is our diversity champion, so she is personally driving the diversity agenda and everyone that works here can see for themselves how personally committed she is to bringing about change. I've worked in organisations where this hasn't been the case and true diversity just doesn't happen." The organisation's involvement with RfO helps them find ways of improving diversity not only in employment, but in service delivery, he says.

Among the most dramatic changes revealed in this year's survey is the number of organisations who have effectively integrated race into their key performance indicators for senior management. "This number has almost doubled from 24 per cent of organisations in 2004 to 44 per cent in 2005, confirming that if race diversity is important to the organisation, it should be measured and inspected," says Kerr. "It's interesting because a few years ago many organisations commented that this was 'far too difficult to measure'. The comments today are , 'How could we ever have progressed without them?'"

The ethos of "if it matters you will measure it" is particularly effective at Lehman Brothers - one of the "most improved" private sector companies in this year's survey. Every year, each division at the company is now required to develop a diversity business plan which is formally presented to the CEO and tracked monthly using a scorecard. In addition, there is a formal review at mid-year and year end.

The company also measures demographic information quarterly across the whole organisation. "We look at the current population, graduate hires, flexible working arrangements and leaver data, with reasons for leaving," explains a spokesperson, who goes on to explain that among its achievements has been providing a mechanism to catch problems early so something can be done about them. This reinforces that Lehman Brothers' commitment to diversity is a high-level, important business imperative and it dispels the myth they are working to target numbers. It even drives healthy competition between the divisions.

Another key trend in this year's RfO report is the number of organisations briefing employment agencies, recruitment consultants and head hunters on their policies and objectives on race. "Some are asking for a diverse shortlist of candidates, while others are asking these organisations to explain what they are doing internally in the way of race diversity," explains Kerr. "It's not about ticking boxes, it's about saying we want to be consistent in our approach. Perhaps not surprisingly, we have had a number of recruitment companies joining the network in the last year."

According to the survey, Marketing has been a priority for companies this year too. "The report contains examples of innovative organisations that have hugely increased their revenue and customer base through developing and implementing marketing strategies to reach diverse consumer groups," says Kerr.

At BT - one of the top performers in the private sector - there is a special marketing group which has been focusing on race. "We currently have a campaign aimed at Afro-Caribbean communities and we've noticed very positive results," says Pat Farmer, group equality and diversity manager.

A rather slower area to take off has been supplier diversity. The report discloses the fact that only 58 per cent of organisations have a current and effective supplier diversity policy, with the private sector taking the issue more seriously than the public sector. Leigh Lafever-Ayer, corporate HR manager for the UK and Ireland at Enterprise Rent-A-Car - another of the "most improved" private sector companies - says she isn't surprised. "It has such an important value, but quite honestly, it is hard to identify those kinds of organisations."

Among the other organisations recognised in RfO's report this year are the best newcomers in both the private and public sector. "It doesn't mean they are new to their commitment to race and diversity, but in their first year participating in the RfO benchmarking programme," explains Kerr. "Likewise, the 'most improved' organisations refers to those who have demonstrated significant improvements compared to last year, rather than suggesting they were really bad to start with."

Credit Suisse First Boston were best newcomers in the private sector. Yashica Olden, assistant vice-president, diversity and inclusion office, explains some of their current activities: "We've been particularly successful in creating employee networks. We've also been focusing on events such as Black History Month and Chinese New Year. We've been doing quite a lot in terms of recruitment too, working with organisations such as Capital Chances and SEO (Sponsors for Educational Opportunity)."

Sandy Nairne, director of the National Portrait Gallery - also in the best newcomer list - agrees that working alongside other schemes is vital in developing race diversity. "They really help build up momentum, whether they involve taster days, fellowships or work experience."

He says that working with RfO can help the arts community become more systematic in the way they tackle race equality, and also provide links with other organisations from which they can learn. "Like many arts organisations in the UK, we really want to be more representative. While 12 per cent of our workforce are from ethnic minorities, senior management is still entirely white."

'Embedding the issue into our leadership has really worked'

Top Race for Opportunity (RfO) performer in the public sector: the British Army

"About a decade ago, the Commission for Racial Equality told us we must get our act together in terms of race equality," says Colonel David Brown, who is in charge of the army's equality and diversity employment policies. "That caused us to see if there were any other organisations that could help us. We quickly spotted RfO, which plays hard on the people agenda. Every year since, we have got more out of it - particularly in terms of talking and listening to other organisations.

Probably the biggest change for us is how we've embedded the issue into the leadership of the organisation. I know it sounds glib, but by heck it works. We have the chief of general staff - the top man in the army - personally signed up to it, telling his commanders to make sure it works.

The other thing that's been important is identifying our very own case for diversity. We have worked out exactly why it is important for us as an organisation.

Unlike 10 years ago, I think the perception among ethnic minorities is that if they join the army, they will be welcomed, treated fairly and valued for who they are. But equally, I do detect in quite a lot of ethnic minority communities, that the army is not a natural place to gravitate to. While we are not going to try to change that, we are sowing the seeds in terms of fostering understanding about who we are and what we do.'

'Managers used to be fearful about saying the wrong thing'

Top RfO performer in the private sector: Lloyds TSB

"The key message that came out for us in 1999, when we consulted our staff, was that there was no clear programme on race and diversity," says Andrew Wakelin, senior manager, equality and diversity at Lloyds TSB. "That led us to develop a plan of action led by our group chief executive.

Participating in RfO's benchmarking activities shows us how well we are doing and where we can improve further. Many people said they weren't sure how serious we were about wanting to develop ethnic minorities and that led to a series of positive action training programmes. That has sent out a clear message to our black and Asian colleagues that we are serious about developing all our people.

We also focused a lot on recruitment. For example, we worked specifically with ethnic minority graduates and their families to show them that banking is a worthwhile career. We have also made the imagery of our literature far more inclusive and made links with newer universities, where there are higher proportions of ethnic minorities.

Other important strands of our work include helping managers - particularly white managers - to understand how to manage race as a business issue. Managers were quite fearful back then about saying or doing the wrong thing, and so we've done a lot of work around managing cross-cultural issues that have equipped them with the skills and confidence to manage diverse groups of people and customers.

Most recently, we've been focusing on how accountability for diversity rests with everyone. It's not just an MD or HR issue and it's something that needs to be measured. We have also been developing products and services for specific groups of customers, as well as making our advertising more multi-cultural.'