Member Viewpoint

• Minorities constitute about 30 percent of the population of the United States, and are expected to account for half the population by 2040.
• Minorities represent $1.2 trillion in annual spending power
• Minorities are an important group for employers. Annual minority enrollment in higher education has surged by 122 percent over the past 20 years, and women make up the majority of college students in almost every racial/ethnic group, according to the American Council on Education (ACE). Minorities have progressed from receiving 11 percent of all bachelor s degrees in 1980-81 to receiving 22 percent in 2000-01, and from 11 percent to 19 percent of all master s degrees.

Despite these realities, the issue remains one rarely broached by the real estate industry. Why? The reasons are many; chief amongst them being the perception of real estate as a functional rather than a strategic activity within the corporate and commercial worlds, focused solely on delivering and maintaining space. Has real estate missed the boat by failing to recognize and embrace the momentous changes taking place within our country and our economy? Perhaps, but it is never too late to adopt and champion a winning idea.

So what is this idea? Diversity used to be a euphemism for affirmative action. Today the concept of diversity is no longer black or white, or male or female. Instead, diversity is simply an effort to include all perspectives in order to yield the best result. As our world continues to become a global trading system, a company that wants to succeed in the commercial real estate industry (or any other industry) cannot ignore the importance of racial, ethnic and religious diversity in the workplaces and the communities in which it operates. Failing to understand the perspectives of those we serve, employ, compete against or partner with, puts us at risk of losing competitive advantage.

Demographics and legal compliance are not the only reasons for real estate companies to be inclusive. Real estate service providers must care about this issue because their clients care about it. Many corporations today recognize that their sustainability depends on understanding and maintaining good relationships with a diverse customer base as well as fostering economic growth within that constituency.

Corporate America understands that by investing in supplier diversity, they grow the number of minority and women-owned businesses (typically, these businesses employ 75% women and minority workers). This eliminates poverty and unemployment and increases the spending power of those communities. Economic parity of the growing minority population would grow their current spending power from $1.2 trillion to $2 trillion annually, according to some estimates. Does the picture become clearer?

Understanding this logic, corporate RFPs today feature a line item about the demographics of service providers employees or subcontractors. In a competitive bid situation, real estate companies that cannot demonstrate a commitment to diversity may lose out to others that embed it in their mission statement. Why? Companies do business with those that reflect their corporate values. It s that simple.

The case for diversity is even more compelling for real estate firms that want to do business with federal or state governments. The General Services Administration and other government procurement agencies place a great deal of importance on the policies and practices relating to diversity that prospective service providers follow. By extension, major employers that do business with the government also emphasize diversity in their selection of subcontractors.

One way corporate real estate departments support their companies diversity efforts is to reach out to minority and women s business enterprises (MBE/WBE) to meet corporate Supplier Diversity and Strategic Sourcing goals. Many companies set a goal to spend at least 5 percent of their capital budget to hire MBE/WBE directly, known as Tier 1 Spending; In addition, they mandate that their service providers meet certain requirements in terms of hiring MBEs and WBEs, known as Tier 2 Spending. Both Tier 1 and Tier 2 Spending are counted on a corporation s "balance scorecard," a strategic management tool for measuring performance by non-financial as well as financial criteria.

Most companies take their MBE/WBE commitment very seriously as evidenced by where their money goes. BP spends $520 million annually on MBE/WBEs. PepsiCo has a target of 12 percent of its capital budget to MBEs and WBEs. The corporate real estate department at Kraft has a MBE/WBE target of 40 percent of the overall vendor budget.

"One of the signals of an industry that truly embraces diversity is when MBEs and WBEs can move from being functionaries and tactical providers to providing strategic business services," says James I Clark III, Managing Principal of Chicago-based EnTrust Realty Advisors, a minority-owned real estate investment advisory firm that specializes in property dispositions, acquisitions and financing. "A host of minority-owned firms are providing the intellectual capital to change the perceptions in the business world at large. In the end, diversity brings excellence by virtue of integrating different experiences, cultures and expertise."

Whether the real estate industry can be characterized diverse remains to be seen. A 1991 study of the corporate real estate industry found that women constituted 20 percent of the industry, and non-white employees constituted just 2 percent. To be sure, the corporate real estate business may not be analogous to other functional outsourced areas such as construction and facilities management which are mature in their inclusion efforts; Also, the numbers have probably improved in the past 13 years. Nevertheless, the debate is underway and industry associations such as Corporate Real Estate Network (CoreNet Global), Corporate Real Estate Executive Women (CREW) and Urban Land Institute (ULI) are actively seeking ways to increase the participation of women and minorities.

We can t find enough qualified minorities. Sound familiar? A company that cannot find excellent minority or women-owned suppliers or employees probably has not looked very hard. In seeking MBE/WBE participation, corporate real estate departments and service providers can start by asking around their existing supplier network to get introductions to MBE/WBEs. There are also minorities and women business associations that are a powerful source for referrals: Organizations such as the Real Estate Executive Council exist to promote minority participation, while groups like the Women s Business Development Center and the Chicago Minority Business Development Council certify and promote MBE/WBEs independent of industry. Others like the Hispanic American Construction Industry Association (HACIA), Black Contractors United, and various minority and women bar associations serve specific functional areas. Once it is clear that a company is committed to diversity, MBE/WBEs can be found if you begin asking questions. But a good-faith effort must be put forth.

The same process applies to internal hiring. A successful diversity campaign involves casting a wide net that identifies the places where minorities and women can be found: diversity fairs; colleges and universities with diverse enrollment; M.B.A. associations with multiple demographics; and various other functional associations.

A commitment to diversity does not end on the day a new employee is hired or when an alliance with an MBE/WBE is struck. The affirmative action plan at Chicago-based Jones Lang LaSalle emphasizes four areas for developing and maintaining diversity: Recruitment, retention, career development and the company s reputation as an equal opportunity employer. The company s emphasis on diversity starts with senior executives and cascades down through business unit leaders to anyone in a staff management position. This commitment is a factor in the performance reviews of managers up and down the line. One result is strong representation of women and minorities at every level of the company, starting with the CFO and several business unit leaders.

What does the future hold? Professional real estate firms are pursuing assertive strategies to attain diversity. Minority and women owned firms are even banding together to increase their platforms. Witness, Concordis, a national alliance of nine MBE/WBE firms that has joint-ventured with Cushman & Wakefield for mutual benefit. Fortunately most corporate real estate departments at Fortune 1000 companies are beginning to make diversity a priority. Given the many benefits that diversity brings to the table, it s no wonder that firms are emphasizing these initiatives.

Cecilia A. Mowatt, founder and President of Strategies In Site, recently gave a presentation on diversity in her role as an active member of CoreNet Global s Chicago Chapter. For information on upcoming programs, visit www.corenetglobal.org/chapters.chicago.