Herb Stokes knows how to make diversity work for his $6-million company. Now he's on a mission to make it work for the rest of corporate America as well.
Herb Stokes is outspoken, aggressive, and controversial in his quest for diversity. He's also effective
One morning last spring, Herb Stokes descended on Bob Chinn's Crabhouse, a cavernous restaurant in Wheeling, Ill. The owner of Alliance Relocation Services LLC had arranged to provide English-language training programs to the restaurant's predominantly Hispanic cooks and busboys, and he was there to talk logistics. Before the lunch crowd arrived, an appreciative audience of 30 employees, many of them clad in yellow T-shirts proclaiming "I got my crabs at Bob Chinn's," swarmed around him.
This is the Herb Stokes people love.
As the meeting wrapped up, Stokes's cell phone rang. Taking the call in an adjoining dining room, the entrepreneur began to pace, visibly perturbed. On the line was Jorie Thompson, a principal at Grayscale Inc., an advertising and graphic-design company that was working on a routine $15,000 project for Alliance. Stokes had hired Grayscale, in part, because Thompson is African American. But when it came time to present the work, Thompson had sent two white employees to Alliance's offices. After they left, Stokes groused to his vice-president of marketing, "Why didn't they have anybody who looked like me -- like us -- at that meeting?"
Thompson subsequently explained that although her agency employed African American designers, she had trouble finding skilled minority candidates. Sensing an opportunity, Stokes persuaded Thompson to help him develop a youth training program for her company. The day before the gathering at Bob Chinn's, Stokes and Thompson were scheduled to discuss the program, but Thompson, who had a family emergency, missed the meeting without calling to explain. When the subject is diversity, however, Stokes accepts no excuses.
On the phone, Thompson complained that she felt as though she were "under a microscope" and even offered to resign from Stokes's account. "I was trying to send him the message that he's not going to tell me how to run my company," Thompson says.
Later, Thompson struck a conciliatory note when discussing her relationship with the Alliance CEO. But Stokes still bristled. "If people want to say I'm a bully, so be it," he says. "I don't think I'm a bully -- -just adamant in what I believe in."
Alliance moved from a tiny suburb to the inner city. 'A luxury high-rise didn't recruit the type of people I wanted to employ,' Stokes says.
Stokes's dispute with Thompson underscores how charged and complex the diversity issue has become, even among people with similar perspectives. The difference between Stokes and Thompson is that while she cares about advancing minority opportunities, he is fanatical about it -- both within his own company and in the companies with which he does business. "I'm like a pit bull," he says. "When I get my teeth in an idea, I'm going to own it."
For Stokes, 50, diversity is more than just a noble cause. The CEO has discovered that the louder he talks about the issue, the more big companies listen to him -- and buy from him. These days corporations are eager to award contracts to qualified minority-owned businesses. Discrimination lawsuits have hit such powerful companies as Coca-Cola, Texaco, Xerox, and Microsoft, spurring CEOs to embrace diversity for their own legal protection. New census statistics reveal that the U.S. population is more racially and ethnically mixed than ever before. Consequently, so are the customer bases of many large corporations. What's more, the federal government often takes minority representation into consideration when awarding contracts.
"There was a time when I had to do a lot to explain what I did for a living, but not anymore," says Maye Foster-Thompson, the executive director of the Chicago Minority Business Development Council, which introduces minority-owned businesses to large corporate buyers.
With just nine employees and $6 million in revenues, Stokes is under no external pressure to turn his company into a diversity showcase. But Chicago-based Alliance, which contracts with companies to move employees who have been transferred, profits from its CEO's philosophy. Customers attracted by Alliance's rainbow initiatives include Coca-Cola, McDonald's, Popeyes Chicken & Biscuits, UPS, McGraw-Hill, and Nordstrom. "He has the quality, he has the service, he has the delivery, and also he's doing philanthropy in the community and bringing others along," says Brenda Dizer, the supplier-diversity manager at Nike Inc., who wants Stokes to bid on upcoming contracts. "It shows he has aligned his goals and objectives with ours, and that really makes him attractive."
Stokes has grander ambitions as well. The CEO believes his expertise in training and integrating minority employees can become a viable enterprise in its own right. Much as W. Edwards Deming -- whose books Stokes has studied -- built a reputation by championing corporate quality, Stokes would like to become a leading guru of diversity.
To that end, he has begun informally advising his Fortune 1,000 customers regarding their recruiting and contracting practices. If his plans to launch a diversity-management consultancy pan out, Stokes says, he can go to his relocation customers and say to them, "What's your strategy in the inner city? I can help you with that."
Recently relocated to a building just blocks from the notorious Cabrini-Green housing project, Alliance has a setting that seems congruent with Stokes's desire to be at gritty ground zero of the diversity movement. The building's interior, however, is the picture of opulence. Stokes's loftlike office is filled with Tiffany lamps, large paintings in gilt frames, objets d'art, and photos of the CEO with such luminaries as Henry Kissinger and Bill Clinton. The decor mirrors Stokes's personal fashion style. He's a peacock, typically clad in perfectly tailored suits, shirts with French cuffs, and vintage cuff links.
If Stokes is choosy about his silk ties, he is even more meticulous about selecting employees. The Alliance staff consists of five African Americans, two Latinas, and two Caucasians. That mix is no accident. Several years ago, when Alliance needed to hire a customer-service representative, Stokes says, he told one of his managers, "I want a Hispanic in here." Finding a qualified person required more than 20 interviews, but the CEO never relented. On another occasion, when Stokes was recruiting a grant writer for a nonprofit that he also runs, he thought it would be nice to have a person from India. A.K. Hazari, a native of Hyderabad, in Andhra Predesh, got the job. "When I want something, that's what I want, and there's no discussion," Stokes says with a smile.
Such bald pronouncements sound provocative at a time when lawsuits are piling up against affirmative-action programs. Todd Campbell, manager of the diversity initiative at the Society for Human Resource Management, says that if Alliance "underutilized" the Hispanic segment of the labor force, Stokes could make recruiting Hispanics a priority. But turning a priority into an edict might cross the line into what a court would consider discrimination, according to two employment lawyers who talked with Inc .
Asked about that analysis of his practices, Stokes modified his original statement, saying that he requested only that his customer-service hire be "bilingual" -- fluent in Spanish and English. And he insists that his hiring policies conform to the letter of the law. Stokes's wife, Valeria, a human-resources executive, tutors him on the legalities of hiring. In addition, Alliance retains legal counsel to vet its business practices, including diversity initiatives. "I'm not discriminating at all," Stokes says. "I made a conscious decision that I wanted a diverse company, so I recruit from sources -- employment agencies, placement companies -- that are going to give me diverse people."
Alliance's management team supports Stokes's methods wholeheartedly. "I think Herb should be commended for what he does," says Diane McElhany, vice-president of operations.
Stokes's obsession with diversity evolved during his 23-year tenure with industry giant Allied Van Lines, the only place -- other than Alliance -- that he has ever worked. The CEO began his career as a laborer in his native Newark, N.J., and remained with Allied even when he was assigned to an office in Nebraska. But as he advanced into the management ranks, Stokes noticed a disturbing trend: the number of African Americans he saw each day kept shrinking. "It became apparent that there was very little diversity in the company," says Stokes, who was for years Allied's only African American executive. "I had a responsibility to help change that."
At first Stokes sought to reverse the situation by mentoring other African Americans who worked at Allied. But he began to realize that Allied was not unique: the entire relocation industry had the racial makeup of an Iowa lacrosse team. Stokes concluded that he could make a real difference only by starting his own company. So in 1995 he founded Alliance with NFL great Walter Payton, whom Stokes had met at an Allied sales meeting.
For two years Alliance was run out of an office tower in affluent Oak Brook, Ill., an address most start-ups would covet. Stokes hated it. Finding employees was difficult at that location, and everyone who applied for a job was white. "A luxury high-rise didn't recruit the type of people I wanted to employ and didn't establish the image I wanted in the industry," Stokes says. He decided to move Alliance to the inner city, where rents were low and the workforce was diverse. Payton, who disagreed with plans for the business, took the opportunity to sell his piece of the company to Stokes for $10,000. (The former Chicago Bear died in 1999 at the age of 45.)
So in 1997, Alliance established offices in Chicago's West Loop, a shabby neighborhood whose narrow streets are often blocked by trucks backing up awkwardly at warehouse loading docks. Stokes -- a registered Republican who nonetheless refers to Clinton as "my boy" -- relished being an urban pioneer at a time when urban pioneers were becoming fashionable. After learning about the Clinton administration's new welfare-to-work programs, he quickly bought into the concept. By 1999 he had two former welfare recipients on his payroll.
Successful welfare-to-work programs often hinge on retention and good training, and training is a Stokes specialty. As quality manager and later vice-president at Allied, he had supervised the reeducation of the kinds of employees who were most likely to damage sofas. Stokes's solution was ingenious: he ordered the construction of a full-scale model apartment with furnishings that the crews would move in and out, in and out, until they got it right.
Despite his training expertise, Stokes admits that learning to manage welfare-to-work employees took time. The hardest part was persuading workhorses like VP McElhany, whom Stokes hired away from Allied, to be patient and make accommodations. One employee, no longer with the company, angered McElhany by asking to leave work before 5 p.m. because her "brain hurt." "I told Herb that he needed to let the person go," McElhany recalls.
Stokes didn't take the advice. "Diane, here's this woman who has been collecting welfare and watching soap operas for three or four years," Stokes told McElhany. "Now she's sitting in front of a PC all day, entering data. You think her brain don't hurt?"
Another challenge was ensuring that Stokes's welfare hires didn't compromise the quality of the company's service -- the second defining theme in Alliance's culture after diversity. From Allied, the founder had imported the idea of tying pricing to performance benchmarks, which he tracks using Gallup surveys of his customers. Under the system, if a client's employees complain about Alliance's service, for example, Alliance will reduce its bill. If the employees rave, however, Alliance charges a premium. Because the movers' rate of pay is tied to the marks they earn on each move, that quality ethos pervades Alliance.
By 1998, Stokes had assembled an ethnically mixed team for Alliance that provided top-quality service to customers. But Stokes had made little progress toward his other goal -- promoting a diverse workforce in the industry as a whole. So that year he launched Alliance Training Education and Development Inc. (ATED), a nonprofit that solicits government grants for welfare-to-work training projects. Under ATED, Stokes taught a handful of people -- mostly women -- how to pack goods on trucks and operate a call center. Former ATED students now work at several moving companies with which Alliance has partnerships.
Leveraging the small-scale success of ATED, Stokes persuaded Allied Van Lines to donate $100,000 to the Welfare to Work Partnership, a nonprofit based in Washington, D.C. After the check arrived, Stokes's currency skyrocketed, and he became an executive-on-loan to Chicago BizLink, one of the partnership's flagship initiatives. "I think Herb's one of the best things since sliced bread," says Thressa Connor-McMahon, vice-president of Chicago BizLink. "His business acumen is very valuable to us."
At BizLink, where he labors alongside executives from corporations like Sears and Marriott, Stokes considers how best to deliver training to former welfare recipients and other low-income workers. "A lot of small-business owners don't have time to help a program like ours, because they're too busy turning their small business into a large business," says Rodney Carroll, president and CEO of the partnership. "Herb Stokes is unusual."
In another sense, though, Stokes is very usual. Like any other CEO, he wants to make money. "Economics drive this," Stokes says. For his next venture, the CEO plans to start a for-profit consulting company for corporations grappling with diversity issues. He has already talked to AFC Enterprises Inc., the parent company of Popeyes, about setting up a training program at one of its inner-city franchises and has advised Kmart on its urban staffing needs. "Everything I'm doing now is gratis because I'm developing the knowledge I need to be confident I know how this works," Stokes explains. "At some point I'll charge a fee."
But before Stokes can thrive as a diversity consultant, there's one detail he'd like to nail down.
Stokes's support for the welfare-to-work programs promoted by the Clinton administration has boosted his profile in Washington.
In the supplier-diversity movement, minority entrepreneurs who want to sell to big companies are first advised to seek certification, which is awarded by minority-business-development councils across the United States. Certification assures corporate customers that the entrepreneur is not merely a figurehead at a company owned by somebody else. So far, the Chicago Minority Business Development Council (CMBDC) has refused to certify Alliance. "Political bullshit!" Stokes rails.
According to Stokes, at issue is how he financed Alliance. The CEO's former employer, Allied Van Lines, lent him $500,000 to start the company, and Allied agents, including Berger Transfer & Storage Inc., agreed to cover Alliance's accounts receivable until the fledgling business generated positive cash flow. Neither company took equity. Stokes says Allied supported him because he was a quality expert, and because Allied CEO Mike Fergus wanted to foster diversity in the industry. An Allied spokesperson confirms that statement.
Altruism aside, Allied and Berger had a financial reason to back Alliance. Stokes's company doesn't own a single truck: it supervises customer service and pays other companies to do the physical moving. Under that arrangement, Alliance retains less than $1 million of its gross revenues, while more than $5 million flows directly to haulers like Allied and Berger. "It is accurate to say that Alliance is an independent sales rep for Berger," says David DeWitt, a Berger executive vice-president.
Maye Foster-Thompson, the executive director of the CMBDC, declines to comment on Alliance, except to confirm that the company has not been certified by her organization. A letter from Foster-Thompson to Stokes cites Alliance's "dependent relationship" on Allied as one of the reasons certification has not been granted. "The reason I can't get certified in Chicago is that people do not like that I got a loan from Allied," Stokes says.
For minority suppliers, lack of certification has financial consequences. By withholding its blessing, the CMBDC automatically bars Stokes from full membership in the National Minority Supplier Development Council (NMSDC), a nonprofit at the forefront of the supplier-diversity movement. The NMSDC acts as a formal liaison between minority-owned small businesses and large potential customers. Without certification, Stokes can't partake of NMSDC's services as fully as he would like to.
Alliance has, in the past, won certification from less demanding authorities in Cook County and is applying for certification from the Small Business Administration. The company has also formed partnerships with African American entrepreneurs to set up independently owned and locally certified sales offices in California and New Jersey. (Stokes is negotiating to open a third affiliate, in Atlanta.) But even those deals have complicating elements. For example, Stokes says he persuaded a local Allied agent to pay the salary of one of his "independent" partners for the first year that the partner was supposedly out on his own.
Although Stokes argues that his "30 years in the business" is his certification, he still wants the CMBDC's stamp of approval. To help win it, he's paid back $350,000 of his Allied loan, and he hopes to knock off the remainder this year. "In a couple of months I'm going to reapply," he says. "I think this time I'll get it."
Although stokes's critics may challenge his methods, nobody seems to question his unswerving support for struggling minority business owners. For every meeting in which he drums up business for Alliance, Stokes attends a gathering like the one at Bob Chinn's, where helping minorities is the priority. In addition, Stokes personally mentors about 10 African American entrepreneurs, including the owners of a technology consulting company, an art gallery, an Italian restaurant, and a start-up designer of men's loungewear. He pushes his own customers to buy from those young companies and has even goaded corporate contacts, such as Brian Lacey, vice-president of franchise services at Popeyes, into reviewing business plans for start-ups that Stokes would like to fund through a minority-business incubator he has in the works.
Such start-ups, if they are successful, will demonstrate the business reasons for promoting minority representation. And that is critical. If companies don't see diversity through the prism of profit, experts argue, they are likely to abandon it when times get tough. "As the years have gone by, people are grappling to come up with a business case to justify a diversity agenda," says Tammy Borman, cofounder of the Workplace Diversity Network. "The social-justice argument has just not swayed a lot of people."
Stokes's philosophy, of course, happily embraces both social justice and the bottom line. His mission now is to convince the rest of the business world that diversity isn't just the right course to pursue -- it's also the wise one.
Mike Hofman is a senior staff writer at Inc.
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