This article originally appeared in The Huffington Post.
We all know about glass ceilings as the deceiving transparency of moving into the upper ranks of a corporation by members of under-represented groups. We don’t often think of that barrier as a detriment to an enterprise’s long-term success and value. We tend to think of it as a matter of fairness and equity towards those who have struggled to gain access and develop their careers.
However, if one stops to think a bit more deeply, glass ceilings inhibit vision and action that could augment the ability of a company to see more opportunities, understand more consumers and manage resources more effectively. By blocking would be points of view that could contribute valuable insights to corporate strategy, glass ceilings are actually obstacles to rapid evolution, which could stunt the growth of companies seeking a fresh outlook on rapidly growing consumer segments — such as women, cultural minorities and those with unconventional gender identification.
Just as glass ceilings can inhibit a company’s growth, more dangerous is what I’d like to refer to as “foggy windshields” — the blurred vision that results from not having diverse points of view in the C-suite and boardroom amid a rapidly evolving consumer landscape. Foggy windshields diminish a company’s ability to navigate accelerating change in our dynamic consumer and business economy. Today’s consumer economy is increasingly driven by the growth of Hispanics, Asians, African Americans, other ethnic minorities and those with alternative gender identifications. However, today’s boardroom and C-suite looks much like it did fifty years ago.
It is a general consensus in the business world that growth is good — growth in revenues, profits, exports and enterprise value. This is such an obvious concept yet it somehow escapes even the most visionary leaders in the corporate world. Linking a company’s consumer focus towards high-growth segments seems a no-brainer, yet too many companies still need to be convinced that a business strategy that embraces diversity requires appropriate funding. Oftentimes, instead of investing heavily to capture this growth, many publicly traded companies appoint junior level managers with little or no budget yet expectations are very ambitious when engaging diverse cultural groups. Turnover rates are high as are frustration levels both of the hired managers and the executives who seek extra-ordinary ROI from these experimental efforts.
This year, there are 60 million Hispanics, 18 million Asians and 40 million African Americans from among the 341 million people living in the United States. Even more compelling is that the Hispanic population has doubled since 1990 while the white non-Hispanic population grew by only 10 percent. Hispanics tend to be younger, building families and spending heavily. Their presence in so called millennial (those born between 1980 and 1998) or generation Y and generation Z (those born 1999 and more recently) are increasingly diverse from a cultural perspective; nearly 60 percent of the Generation Z cohort is other than white non-Hispanic. More connected, open and vigorously informed thanks to the teeming internet connected environment we enjoy today, Hispanics are influencing culture and contributing to the top and bottom lines of corporations listed on the New York and NASDAQ stock exchanges, no doubt.
Lifetime revenue potential is universally embraced as a key corporate metric yet commonly ignored when it comes to business strategy. In many spending categories, Hispanics out-spend other cultural groups. Certainly in the grocery, clothing and furniture stores, to say the least. More importantly, the trajectory of a younger consumer with larger families means they could contribute to a company’s revenue goals for a longer period of time. Lifetime revenue potential is universally embraced as a key corporate metric yet commonly disregarded when it comes to business strategy. My company estimates that the average active Hispanic household will spend nearly $582 thousand dollars more than the same cohort of white non-Hispanics. This metric is even more pronounced with Asian households who will spend almost $977 thousand more in their lifetimes. This means that an investment towards acquisition in loyalty today, will likely payoff much more handsomely over the lifetime of that consumer.
I’d like invite corporate CMOs to write to me on whether or not this key metric is a part of their business strategy. If they’re still not convinced, perhaps knowing that at least one major bank has reported that half of its new mortgages taken out since 2010 have been to Hispanic households will help convince them to act.
The business case for serving Hispanic consumers has been made time and again — some companies are listening (and taking full strategic advantage) while others may continue to require further convincing. When it comes to the C-suite and boardroom — where investors require vision, strategy and decisive action — it seems these facts have been fundamentally ignored.
According to the most recent Heidrick and Struggles report, “The share of new board appointments for Hispanics remained flat for the seventh consecutive year... and of the 399 directors appointed by Fortune 500 companies in 2015, only 16 were Hispanic — just 4.0%” — while about 19 percent of the American population and half of its growth is Hispanic.
The reasons? Well, many reasons can be conjured up as long as you’re willing to avoid the obvious. The most common reason is that an insufficient number of “qualified” candidates exist. Many list requirements such as having served on as a publicly traded company’s CEO; of course that criterion by itself is a thick-enough filter. As my company has reported (and others have reported similar statistics) Hispanic business enterprises are growing at 15 times the rate that of companies overall. Although most of the companies are small to mid-sized, many are able to view and analyze financials and contribute to strategy — especially due to their unique point of view as business executives and Hispanic consumers.
The real question is, how long will chairmen and intuitional investors wait before their board is a better representation of the nation at large? The current and inevitably more colorful mosaic for years to come will become the America we know and must embrace — it will be driven by diversity and our longer-living fellow Americans will depend on their success in order to enjoy more years of retirement in a thriving nation.
At some point we need to say we’ve waited long enough. Those who act quickly will gain the respective business advantages. As reported by Goldman Sachs in its report “The Hispanization of the United States,” publicly traded companies can be ranked according to how well they have embraced this inevitable shift in cultural composition. The color that matters most is green — of course we want to serve all customers well and respect their heritage and values — but if we want this shift to benefit the trajectory of the stock price, we’d be better-off thinking of how to engage the consumers of the new American mainstream. The future is coming at us fast, we’d better wipe and defog the windshield or risk our position as the leader of the free world.