Damned if you do, damned if you don't. (plaintiffs' attorneys push 'diversity' training lawsuits)(Industry Overview) Seth Lubove.

Abstract: Workplace diversity training programs are now a $10 billion unregulated industry. Companies feel squeezed between a decline in legal acceptance for affirmative action programs, lawsuits over past hiring practices, and demands that company-wide diversity sessions be included in court settlements.

Full Text: COPYRIGHT 1997 Forbes Inc.

CHICAGO-BASED printing giant R.R. Donnelley & Sons Co. is defending itself in a big racial discrimination suit. Among the evidence in the plaintiffs' file: A black worker was forced to sit through four showings of a movie depicting lynchings in the Old South.

"To me, that just sounded disgusting," says H. Candace Gorman, the Chicago lawyer representing a potential class of 3,500 black Donnelley employees. There was also the questionnaire that asked for responses to such statements as "It is a fairly well established fact that blacks have a less pleasant body odor than white people" and "One of the main characteristics of Puerto Ricans in the United States is their sexual looseness and immorality."

The handiwork of a freelance racist in a white hood? Not at all. Donnelley's sin was that it instituted a companywide "diversity training" program. The $6.6 billion (1996 revenues) company had established the training as an outgrowth of the settlement of a previous discrimination lawsuit in 1993. The purpose of the movie showings and the questionnaires was to make white employees confront their alleged racism.

Multiple jeopardy is just one of the pitfalls of diversity or "sensitivity" programs, which Training magazine figures are now used at half of the 136,605 U.S. companies with over 100 employees. By one estimate, $10 billion a year is being shelled out trying to change attitudes and putatively prepare these companies for multicultural work forces and marketplaces. That figure doesn't include the lost time that employees spend at the sessions.

This full-speed-ahead approach in the private sector occurs even as the preference regimes known as affirmative action increasingly meet resistance in the public sector. Many companies come to this game under duress. It's not enough for them to shovel out millions of dollars to settle discrimination or harassment lawsuits or settle with the Equal Employment Opportunity Commissionor some other federal agency. More often, the plaintiffs' lawyers also demand that a company do penance by forcing every employee through some kind of sensitivity-training program, even tying management's compensation--or careers--to achieving diversity goals. Bank of America's head of diversity, Valerie Crane, freely admits that failure to toe the corporate diversity line contributed to the ouster of several high-ranking executives. To call this a reign of terror is in some companies to exaggerate only slightly.

"These cases are very important not so much for the money but also because they change the landscape of the American work force," brags James Finberg of San Francisco's Lieff, Cabraser, Heimann &Bernstein. Finberg was co-counsel in a case where Home Depot had to shell out $65 million to women who were allegedly denied promotion, plus $22.5 million in attorney fees, and it was ordered to institute diversity training into the bargain. "This settlement is going to help them get better people in sales and management positions, which means they will have higher revenues and less turnover." Thank you, Mr. Finberg, for your unsolicited help.

Home Depot isn't commenting on the settlement, other than to deny any wrongdoing. And even though the lawsuits were filed against the company's West Coast division, the plaintiffs' lawyers are forcing diversity training on the entire company. Many of Home Depot's managers have already been through diversity training. The lawyers twisted that fact around to imply that management should have known better before allegedly discriminating.

Washington, D.C.'s Cohen, Milstein, Hausfeld &Toll were co-lead plaintiffs' attorneys in the $176 million settlement imposed on Texaco last year. That firm's Cyrus Mehri brags: "What we're trying to do is change the corporate culture to make it much more open for people of different backgrounds so there is a fair and objective career development system that benefits all employees at Texaco." It has done so in part by forcing people who have already undergone "sensitivity training" to undergo much more of it.

Emboldened by its success at Texaco, Mehri's firm is going after others in the oil industry. "These guys have a cowboy mentality when it comes to civil rights laws, and they've been off the hook," Mehri proclaims, warming up to the task. Corporate America isn't afraid of the Equal Employment Opportunity Commission, he says. "With some exceptions, this has been an area that has been grossly unenforced. There's been a lot of people bringing individual suits, but they don't really get at the corporate culture."

The EEOC itself, through which many discrimination cases pass before they are pursued in the courts, says it has no policy forcing diversity training in settlements with corporate violators. But corporate defense lawyers say they're seeing it more frequently. Merril Mironer, head of labor and employment practices at New York's Rosenman &Colin, says he's negotiating a settlement with the EEOC in a disability bias case in which the agency is demanding sensitivity training as well as cash to the employee. "The EEOC is very big on that," says Mironer.

"It used to be they wanted money and maybe you'd consider whether to place the individual in the next job vacancy. Now they're into this training business. That's their newest thing. They told me they won't agree to a settlement in this case [unless the employer pays for diversity training]."

All this creates moneymaking opportunities for armies of quacks. With thousands of consultants calling themselves diversity trainers, and peddling videos, simulation games, CD-ROMs and so on, qualifications range all over the place. There's the Center for Justice & Social Change, a St. Louis outfit that in addition to providing "cultural diversity seminars" and instructions on suing your boss also offers a $24 program on repairing lousy credit. Or the Mawasi Co. of Akron, Ohio that teaches something called "African Centered Rites of Passage. "If you'd like to sensitize the homophobics on your staff, there's Brian McNaught, the "godfather of gay sensitivity training," or Dave Pallone, a gay former baseball umpire who lectures on diversity between appearances on the talk show circuit.

Actors who'd otherwise be working the dinner theater circuit are cashing in on the diversity racket. Typical is an Aptos, Calif. troupe called TransFormance Theatre, whose clients have included Hughes Aircraft, GTE and Hewlett-Packard. The troupe is run by Jonathan Rosen, a self-described teacher of transcendental meditation and "wind energy expert," and its brochure promises that "once you have glimpsed into the deeper nature of your co-workers, it will be very difficult to engage in stereotyped behavior toward them."

A marketing manager forced to endure American Express' diversity training says one exercise involved continually crossing and uncrossing his arms in an unusual way, supposedly to teach him about different ways of looking at things. Costs of this nonsense can range from a few thousand dollars for a daily training session to $50,000 for a "cultural audit" of a company.

With 27 years of experience, Elsie Cross is about as close to an established professional in the field as one gets. Cross has been working with Johnson &Johnson for over 10 years now, and with Corning for some 12 years--and is only halfway through. The firm starts by scrutinizing data on employee retention, jobs held by minorities and women and whether they're in the "profitmaking part of the corporation." There are also surveys of minorities and women on their perceptions of how they're "treated" by the company.

"The people in the organization need to be educated about the stereotypical belief that if we are women or minorities then we cannot contribute like white males," Cross asserts. "We want to free white men who now want to work for a corporation that can deal with work and family issues. Embedded in the culture of the corporation are rituals that perpetuate sexism, discrimination and racism."

Like many of the practitioners in this field, Cross is a black woman who says she bumped up against institutional discrimination early in her working career. And what's the cost of her advice? Don't ask. If you do, she won't tell. We do know she reportedly charges companies as much as $500,000 a year. "I don't want to talk about annual revenues," she snaps.

Ironically, much of the nonlegal imperative for seeking out the diversity industry is based on the misinterpretation of the Hudson Institute's influential 1987 Workforce 2000 report, which predicted the increasing presence of women and minorities in the workplace. This inspired the belief that women and minorities would soon become the majority. That wasn't what the report said. It said only that women and minorities would become an increasing component of the net inflow of new workers, but that the base would still largely be white males. In a new follow-up report, Workforce 2020, the authors regret the "diversity entrepreneurs" who exploited the earlier study.

But what's the harm? Plenty. So much diversity training has gone awry that there's now a cottage industry of trainers who go into companies to mop up the messes created by other diversity trainers. Seattle consultants Hellen Hemphill and Ray Haines have parlayed the dissatisfaction into a book, Discrimination, Harassment, and the Failure of Diversity Training, and a new business of fixing the mistakes caused by others.

"There's a large amount of backlash related to diversity training," says Haines. "It stirs up a lot of hostility, anguish and resentment but doesn't give people tools to deal with [the backlash]. You have people come in and talk about their specific ax to grind."

Stephen Paskoff's Atlanta firm, Employment Learning Innovations, has been called in on diversity-training mop-up missions. He believes training should focus on rules of civil behavior rather than trying to change people's beliefs. In other words, people who violate existing rules don't need their heads checked; they need to be told that they're breaking laws, however much they disagree with them. "The underlying, factual allegations that add fire to these lawsuits are behaviors that are out of control in the workplace," he says. "What we do is identify the kinds of behaviors the laws are designed to manage and focus on that without a lot of social theory."

A few courageous companies have told the diversity industry to stuff it. One was the politically incorrect Hooters restaurant chain, with its well-endowed waitresses and their cheeky assets. The EEOC butted in even before discrimination complaints were filed by men seeking to become "Hooters girls." In 1995 the bureaucrats demanded the chain contribute $22 million to a fund to be distributed to male "victims" of Hooters' hiring policies and provide training to teach employees "how to be more sensitive to men's needs."

The company fought back with ridicule, says Michael McNeil of Hooters. The EEOC backed off, but Hooters still had to fork over $3.75 million in damages and attorneys' fees to the plaintiffs--four years after the suit was filed. At least it avoided getting into the mess Donnelley finds itself in: Damned if it doesn't, damned because it did. Says Michael Delikat, head of the employment law department of New York's Orrick, Herrington &Sutcliffe: "There's not much quality control out there in terms of diversity consultants. It's not like you need a degree or there's a board of standards. A lot of people who claim to be diversity consultants don't really know what they're doing. They can come in and create a problem or provide a catalyst for problems that coalesce in a lawsuit." Just ask the chagrined folks at Donnelley.