Q1 Blog: Building a Case for Team Diversity by Carl Herman

Herman Blog

Welcome to the first SEI Executive Membership blog! This blog is the kick-start to the first quarter of Executive Membership, where SEI has been exploring the changing demographics amongst new generations in today’s business environments. 

Fore more blogs and resources, sign up to be a member today:

http://www.bauer.uh.edu/sei/executive-education/membership/

Have questions or need further information? Contact Frances Wheeland, fwheeland@bauer.uh.edu 

 

BUILDING A CASE FOR TEAM DIVERSITY

This quarter’s SEI Executive Membership blog discusses the benefits of diversity in sales organizations.  

There is clearly a movement to increase the diversity of the workforce in many organizations.  In today’s corporate world most senior leaders believe in and support the societal benefits of diversity and equality in the workforce.  These benefits are not unique to the sales force, they are true for all parts of all organizations. But these corporate social responsibility benefits are not the focus of this blog.   The Stephen Stagner Sales Excellence Institute (SEI) is always focused on improving sales performance and that is the reason this blog is focused on diversity.  

We are pragmatic; sales organizations should be diverse because they will sell more.  “Racial and gender diversity are associated with increased sales revenue, more customers, and greater relative profits.  And, not only are racial and gender diversity significantly related to sales revenue, they are also among its most important predictors.”1. Additionally, “companies that commit to diverse leadership are more successful.”2   Diverse companies outperform their heterogeneous 55 year old white male competitors.  Many companies recognize this and are taking steps to promote positive change.  

What do we mean by diversity?  When we talk about diversity we mean in all dimensions, not just racial and gender as mentioned above.  A diverse sales force is one that has a mix of:

  • Gender and sexual orientation
  • Racial/ethnic groups
  • Nationalities
  • Ages
  • Socio-economic levels

We cannot be prescriptive on the ratio for each, but in a sales context,  the makeup of each of these groups in a company’s target market(s) should be a prime determinant.  That approach is one of the reasons for Schlumberger’s practice of hiring (and educating) local citizens in the 140 countries in which they operate.  At Intel the goal is that the diversity of their workforce should match the ratios in the communities in which they operate.   The students in SEI reflect this broad definition of diversity, and as we will see it is one of the reasons we have a successful sales organization.

There are four reasons diversity increases sales:

  • Customers relate better to salespeople who are the “same”
    • State Farm and Henry Schein examples
  • Diverse organizations develop better strategies for different groups
    • MillerCoors example
  • Diverse teammates have different backgrounds and perspectives;  learning from each other creates positive results
    • Information processing company example
  • Diverse teams are more likely to think outside the box to creatively solve problems
    • SEI examples

Let’s look at examples of each of the reasons diversity increases sales performance.

Customers relate better to salespeople who are the “same”

Years ago Rita Howard, Vice President at State Farm, told me she wanted to increase the diversity of State Farm Agents to reflect the diversity of the Houston market.  She wanted Agents that “looked like” the community they served.  Dean Kyle with Henry Schein Dental agreed and hired a Vietnamese student from our sales program.  This salesperson was very successful selling Schein Dental products and services to the Asian, primarily Vietnamese, communities in Houston. 

Sometimes the advantage of diversity can be obvious,  as in these two examples.  But are there benefits to a diverse sales force in complex global business to business sales?   

Diverse organizations develop better strategies for different groups

One of MillerCoors largest distributor partners, Manhattan Beer Distributors (MBD), has embedded diversity into its business, and has realized substantial sales growth as a result.  Key outcomes garnered from their diverse workforce are better business decisions and increased innovation.  

Faced with the crowded New York marketplace, MBD needed a strategy to build strong brand equity among beer drinking consumers faced with countless choices.   To increase market share among Latino consumers MillerCoors and MBD developed strong relationships with Hispanic retailers by listening to their needs and developing point-of-sale marketing and promotional materials that resonated with key Latino beer drinkers. Today 51% of MBD’s combined workforce is Latino, and it has experienced double-digit Coors Light sales growth every year since 2003. As a result, Coors Light is now the best-selling beer in New York City, and has higher share among Latinos in New York than the general market.3

Diverse teammates have different backgrounds and perspectives;  learning from each other creates positive results

In a 2002 study of the effects of diversity in a Fortune 500 information processing firm a research team headed by Thomas Kochan at MIT Sloan School of Business found that diverse companies that fostered an “integration and learning”  team environment, (i.e. teammates were exposed to and learned from people with different experiences and backgrounds) outperformed other teams.  “In this company emphasis is placed on recognizing the contributions of people from diverse cultures, backgrounds, and lifestyles. Efforts are made to create an environment in which people from diverse backgrounds feel comfortable and are treated with respect.  These efforts are made in order to give the company a competitive advantage by harnessing the power that diversity can bring to the organization.  By recognizing, fostering, and utilizing the contributions of people from diverse backgrounds, the organization increases its ability to innovate, to compete, and to meet customer needs.”5

Diverse teams are more likely to think outside the box to creatively solve problems

My passion about the value of diversity in sales teams comes from personal observation of the performance of student sales teams in the Stephen Stagner Sales Excellence Institute (SEI) at U of H.  

The University of Houston campus reflects the amazing diversity of Houston. “Houston has surpassed the likes of Los Angeles and New York as the most ethnically diverse metropolitan area in the the U.S4.” Below is the ethnic makeup of the Spring 2015 SEI class.  It reflects the diversity of Houston and is consistent each semester.  Gender diversity is almost always near 50/50, usually with a few more women than men.  Although we don’t measure it, we also have significant numbers of LGBT students in each class and a wide range of socio-economic backgrounds.  

Readers of this blog are likely to know that, more than other sales programs, SEI successfully creates a real world sales environment for our undergraduate students.  As students progress through our four quota-carrying classes, they make real sales to real companies to make real quotas.  If they don’t, they don’t make a grade sufficient enough to continue in, or graduate from, the sales program.  Students go through this rigorous curriculum as a cohort of 60 to 70 students.  During the year they are together, these 60-70 salespeople have many opportunities to work together to solve market problems and make or exceed sales quotas.  

So, SEI is a real sales force that has broad diversity.  How does that diversity impact sales performance?

When we say diversity is part of the culture, you have to see it to understand it.  To our students anything else would seem unrealistic and weird.  They work together without a thought of difference.   They are just salespeople working towards common goals of supporting teammates to make their individual quotas and as a team, outperforming the prior class.  The value of the diversity is in the ability to relate to prospects, the different thinking, the different approaches to problem solving, and the creativity and innovation these differences make possible.  

Although there are many possible examples of diverse SEI teams creatively solving problems that resulted in significant sales, I will share just two.  

In the spring of 2015 a student Key Account team closed the largest sale in SEI history.  The team was an Hispanic woman, a Caucasian woman and a Libyan National man.  The customer was an existing Program Partner of our sales program, the lowest level of Partner status.  This team, like the three teams before it, wanted to upgrade the customer to a Strategic Partner, our highest level of Partnership.

What the team did to make this sale is impressive, but the steps they took are not unique.  They did what we teach them to do.  They did extensive research on the account so that they understood their business situation and their relationship with SEI.  They met with the key decision makers and influencers – formally and informally.  Over a period of months they clearly identified and clarified the customer’s problem:  They did not have enough exposure to our students, their potential new-hires, to determine which ones had the ability to perform in their technically and organizationally complex sales environment.

At this point, we were near the end of our sales year – the team had to close this deal to make their quota.  With some urgency, the team developed an innovative and creative solution to give the customer the exposure they needed to identify their best new-hire candidates.  In three challenging presentation and negotiation meetings with the customer, working as a team, these three students closed the deal.  Each of them brought their own strengths to the process, especially the creative problem solution and the contract negotiation.  In these two steps the different abilities were critical and were clearly a result of the different experiences and diversity of each member.   

A second example of diverse SEI teams achieving superior results:

In the spring of 2013, we were in danger of losing one of our best, oldest and largest partners.  This partner, in the financial services industry, had determined that they were not achieving a sufficient ROI from their SEI investment.  

The four students on the Key Account team responsible for this account were an Asian woman, a Hispanic man, a Caucasian man and a Caucasian woman.  They knew about the account’s problem and had tried repeatedly for months to engage the account to develop a plan to increase the value of their SEI investment. They were not even able to meet with the decision maker and dominant influencer.  

One afternoon, very near the end of the sales year, the team sat down to brainstorm solutions.  A little after midnight they had the general concept of a solution – a new SEI sales class focused on students interested in the financial services industry. This class would create a natural pool of potential candidates for this, and all the other financial services customers.  Again, this was a creative solution that had never been done before.  Developing this idea and ultimately the winning proposal required the talents and diverse perspectives of this great team.

Why did these teams succeed when others had not, and in such a dramatic way?  There is not one simple answer, but by working together as well as they did, they achieved something others had been able to accomplish.  Their differences were a significant part of their combined strength and capability.

SEI and these examples are evidence of what diversity can achieve, and the potential the future holds for those organizations that embrace the power of diversity in sales.   

The scope of this article does not include how to increase diversity, only why.  But we do want to acknowledge the tremendous effort associated with changing from a relatively heterogeneous workforce to an appropriately diverse one.  This transition is difficult and requires a sustained initiative over many years.  Schlumberger has had a successful diversity policy for 40 years.   A more recent Intel initiative will be 5 years old when their goal is reached in 2020 – lightning speed. Hopefully, we have built the case that it is worth the effort.  

Diversity sells!    
References

1Cedric Herring, Does Diversity Pay?: Race, Gender, and the Business Case for Diversity

American Sociological Review,2009, VOL. 74 (April:208–224)

2Vivian Hunt, Dennis Layton and Sara Prince, Why Diversity Matters,  McKinsey Research, January 2015

3Steve Medina, Diversity Journal, 2/25/2011

4The Huffington Post, 3/5/2012 and The Kinder Institute, Houston Region Grows More Racially/Ethnically Diverse, With Small Declines in Segregation, 2011

5Thomas Kochan, et al, The Effects of Diversity on Business Performance: Report of a Feasibility Study of the Diversity Research Network, Human Resource Management, Spring 2003, Vol. 42, No. 1, Pp. 3-21

 

Fore more blogs and resources, sign up to be a member today:

http://www.bauer.uh.edu/sei/executive-education/membership/

Have questions or need further information? Contact Frances Wheeland, fwheeland@bauer.uh.edu