Diversity: “the condition of having or being composed of differing elements: variety; especially: the inclusion of different types of people”.

For 8 years we’ve reviewed the number of women attendees as a small viewpoint into how the industry is changing. Albeit this is not the most scientific survey but the results confirm the obvious; we are a male-dominated industry, and worse; we’re not changing to meet the demands of the near future. There are elegant rationalizations for that; the distribution industry was launched in it’s current form from the end of World War II, when the returning soldiers represented an extraordinary influx of labor at a time of government sponsored construction projects; where the availability of materials was a major contributor to the efficiency of our re-birth from the War. The industry was started by servicemen and has remained virtually male-only for 65+ years. Dad’s turned the business over to sons, and a handful of daughters, but a strategic process of attracting a diverse workforce into distribution and even electrical manufacturers simply never gained traction. Here are the results for 2012:

               Category          # of Females    Total # Attendees       % Female       Executives

2005    Distributors           20                  322                 6.2%

2006    Distributors           22                  316                 6.9%

2007    Distributors           21                  323                 6.5%

2008    Distributors           25                  396                 6.3%

2009    Distributors             9                  159                 5.7%

2010    Distributors           22                  254                 8.7%

2011    Distributors           15                  243                 6.2%

2012    Distributors          17                  208                 8.2%         12 (5.8%)

2005    Manufacturers       27                  381                 7.0%

2006    Manufacturers       17                  358                 4.7%

2007    Manufacturers       17                  331                 5.1%

2008    Manufacturers       23                  348                 6.6%

2009    Manufacturers       21                  221                 9.5%

2010    Manufacturers       23                  289                 8.0%

2011    Manufacturers       24                  282                 8.5%

2012    Manufacturers      23                  254                 9.0%          9 (3.5%)

2005    Total, above          47                   703                 6.7%

2006    Total, above          39                   674                 5.8%

2007    Total, above          38                   654                 5.8%

2008    Total, above          48                   744                 6.5%

2009    Total, above          30                   380                 7.9%

2010    Total, above          45                   543                 8.3%

2011    Total, above          39                   525                 7.4%

2012    Total, above          39                   462                 8.4%       21 (4.5%)

My professional interpretation? Although there have been some fluctuations throughout the past 8 years, there are no significant changes in diversity. And the facts reveal the rapidly diminishing relevance of the NAED conferences.

This year I decided to look more closely at who those women actually are. 12 of the 17 women attendees from Distribution hold titles of VP or higher. 9 of the 23 manufacturing women hold VP or C-level titles. As a total, 21 of a meager 39 total women attending held executive level positions at VP through C-levels. Male senior executives represented 165/208 distributor attendees (79%) and175/254 manufacturer attendees (69%).

Expressed another way; there are a total of 360 senior executives attending this conference. Women represent 21 of those: 5.8%

In a recent Harvard Business Review study by Zenger and Folkman* that compared leadership effectiveness of women vs. men, it concludes that women outscored men in 15 of 16 leadership competency variables they tested. They tested over 7,000 leaders across multiple industries and reported that the average number of women at senior executive levels is ‘only’ 22%. The NAED industry conference is arguably considered one of the top gatherings of industry senior executives and it has an executive representation of only 6% women?

The 2012 conference is the first conference in many years that actually has talent development on the agenda. The conferences have largely been formulaic: how to improve gross margins or cash flow, manage rebates, decrease inventories, etc. Darwinism will take care of companies that can’t figure out how to manage inventories. The real gorilla in the room is talent to succeed in an industry that is going through disruptive changes due to technology. The industry needs to talk and exchange ideas on: new channels, new technologies, risks/rewards of entering new markets, how to attract or train talent to up-sell, how to maximize government stimulus dollars, how to Topgrade your organization, etc? Those topics can only be addressed with diverse input. Talking to the exact same 360 legacy executives over and over again won’t help the industry adapt to ‘new’.

As rapidly as the industry is evolving, it’s time to stop talking about rebate dollars, SPA credits and RMA policies and move to real business discussions on how to access the 2.1M commercial buildings across America that are using outdated lighting and electrical equipment and would be eligible for incentives to modernize them. The same discussions could occur for other areas of growth; alternative energy, data centers, smart grid, etc. Just as conferences have emerged and grown for specialty applications (Automation Fair, LightFair, Strategies in Light, AWEA, CEDIA, BICSI, EmergeAlliance, etc.) the industry needs a vehicle to attract the leaders of the industry into discussions of real value. As an example, Strategies in Light had 5,000 attendees. NAED can’t find 500 people to show up. NEMA is too small but NAED could provide the medium of helping the industry address its legacy hangovers: diversity, technology, channel fragmentation, and competitive threats from corporations that dwarf the largest US electrical manufacturers. It’s time for either NAED to step up or an alternative organization to arise.

In short, do you want to grow and become more profitable? Then you need to attract people who look at this industry as a step into the future; where electronics and low voltage applications will dominate everything: lighting, controls, factory automation, building management, security, as well as: TV’s, sound, voice and all computing. Technology is emerging now for behavioral control through color. The industry needs to be at the forefront of this R&D and deployment.

Let’s break down the barriers and promote real idea exchange, with women, minorities and consultants who view the industry from the sidelines. Some of these people play golf, too.

*http://blogs.hbr.org/cs/2012/03/a_study_in_leadership_women_do.html

Companies have generally adopted two strategies of adding specialty talent into their organizations. Specialty talent is defined as: sales, marketing, engineering, operations and all leadership positions. These are positions that require industry savvy in order to be effective in their roles.  The approach to attracting and retaining talent in these disciplines are either a transactional recruitment of those individuals they need for the issue of that time (or possibly to build a bench for succession or expansion plans) OR a build your own plan. There are advantages and risks to both approaches; as follows:

Transactional talent acquisition. I consider this the rough equivalent of outsourcing those services you don’t want to develop into a departmental organization within your company. Transactional talent acquisition allows the company to define the specific needs of the company and attract that need.

Pros.  Transactional talent acquisition allows you to attract talent only when actually needed; to replace the loss of a critical employee or develop a new discipline within the company. The costs of hiring are higher on a per employee basis, but the overall expense to the company is generally significantly lower. The talent can be narrowly specified and can be defined as permanent or temporary, as the need may require. The acquisition of the talent can be more efficient if the responsibility, definition and selection of the talent are limited to the direct hiring authority, with a small number of internal interviewers involved in the selection process. Transactional talent acquisition enables a company to attract talent for specific tasks; such as product development, engineering, sales or marketing channel development or operational expertise (LEAN, manufacturing engineering, plant management, plant expansion or relocation, etc.). Transactional talent acquisition shines when the task is to attract the best and brightest talent available. The costs of hire for this approach to hiring can be reviewed on a direct ROI basis; tied to each hire with their metrics of performance delivered as a percentage of hiring costs expended.

Cons. Transactional talent acquisition can be expensive for functions that are very broadly defined at an administrative level within the organization: administration, accounting, customer service, etc. As a general rule (see TopGrading for an excellent discourse on the costs of hire), the cost of a hire is directly related to the level of responsibility and compensation for an employee. As such, investing in an outsourced solution for a Director of Marketing, relative to their compensation and responsibilities is usually a very strong ROI (assuming you hire well).  The impacts on internal equity for compensation models tend to get strained by continual outside sourcing since the cost to attract someone away from their current employer usually results in paying a premium to their wages; and typically a premium to your internal salary ranges. Most compensation plans have a mechanism of mitigating these costs by arbitrarily changing the period of merit raises; but ultimately, attracting people at current market rates may have a negative impact on your comp budget.

Build your own. This model has been employed by many large corporations for decades; companies such as GE, Graybar, Eaton, Grainger all have formalized campus recruitment programs with extensive training and development resources to attract new people into their companies and build them into performers in the future.

Pros. Build your own programs contribute many benefits to the organizations. You’re able to attract young, well-educated people from your preferred universities. You can train them in the culture and the strategy of the company. It builds a strong internal brand identity to the company at large, as eventually the new kids enter the industry and project a similar identity of shared values, structures and policies. Coupled with a strong leadership training and development program, you build in a well-defined and clearly visible to the enterprise succession plan. It delivers a constancy that is dependable, predictable and nurturing. It also allows the company to closely manage their comp/benefits budgets with strict oversight on merit raises and employee costs. Managing a homogeneous workforce is easier and far more malleable than one built by attracting the best and brightest from outside the company.

Cons.  Build your own talent acquisition requires a very large investment in talent acquisition, training, mentoring and administration. Build your own works only if the company has the ability to think outside of their own company; most companies tend to become very inbred with a build your own approach to talent management. Build your own strategies struggle dearly during recessionary times. They reduce their college recruitment efforts and cut training costs and when the economy returns, their bench strength strategy is often lacking in sheer manpower or specific skillsets.  When a BYO company is faced with a critical employee loss, they are often faced with a large internal compensation struggle when they realize that their salaries aren’t competitive with key competitors and the premium required to attract an occasional recruit renders their cherished internal equity policies moot. BYO appeals to slow steady growth companies where headcount programs are carefully planned and staged. Emergence from a recession doesn’t allow for careful, staged talent acquisition. It’s a race for the best and large corporate recruitment departments rarely feel ‘rushed’ to make a hire. The long term ROI for a BYO strategy is rarely as cost-effective as a transactional attraction strategy. If times are good and steady growth is predictable, then building a bench is a cogent strategy for large companies. But if the company recognizes that the industry is changing and products and markets are changing, then BYO may be a very limiting approach to enable thinking out of the box. The calculation of a cost to hire is nearly impossible under a pure BYO strategy. The infrastructure required to administer all facets of this approach are seldom included in internal budgets for costs of hire. BYO is inherently more expensive than a transactional model; but it delivers a longer term bench strength and succession planning strategy than the transactional model.

Buy or Build? It’s your call, but buying talent in a market that is undergoing considerable changes makes the most sense to me. It’s difficult for our clients to build a solar or wind or controls or LED expert; especially when there is little talent inside of the company to train them. As fast as this industry is changing, we see the Bigs adding transactional attraction into their talent acquisition models; at the risk of tweaking their core brand identity and succession plan org charts.

The next 5 years will bring transformational change to our industry. Now is the time to ensure you’ve got the people who can help shape your company for those changes.