For Paul Graves of Schering-Plough, managing diversity is about much more than hiring minorities — although that's certainly part of it. It's really about helping people from very different backgrounds communicate with and learn from one another without getting defensive. But he doesn't mean just African-Americans and whites or women and men; he's talking about research scientists and marketing pros, financial types and manufacturing workers, even Schering-Plough employees and people working for their partner companies.

"That's diversity as far as we're concerned," says Graves, vice president of global staffing, global diversity and inclusion strategies, and public affairs for the Kenilworth, N.J.-based pharma. Graves is referring to the company's Customer Centered Product Initiative (CCPI), which is intended to speed drugs to market by replacing the traditional step-by-step pharma pipeline with an integrated structure that gets everyone working together at a much earlier stage.

"The CCPI process brought all of these partners and stakeholders together very early — it was less sequential and more collaborative," Graves explains. But getting an MBA and a PhD to communicate productively can be tough, he adds, and that's where diversity management comes in. "We have to be able to suspend our judgment, we have to be able to learn from one another," he adds.

The company is putting training programs in place to give people the skills to cope with working with others in a diverse environment, and is also making the hiring of people with experience in multicultural settings a priority.

The initiative demonstrates the new, more flexible yet also more complex way that life science companies are looking at diversity. Having labs, sales staff, and management teams representing a rainbow of ethnicities and backgrounds is not in itself a recipe for success. In fact, scholars of diversity now generally agree this kind of mix can bring innovation and productivity to a grinding halt if it isn't managed properly.

"You can't just put a bunch of people together in a room and say 'OK, you're diverse, I expect you to do well'," says Robin Ely, an associate professor in the Organizational Behavior unit at Harvard Business School in Boston. Diversity of thought is essential for industries like pharma and biotech where innovation is key to survival, and it's also a labor market imperative given the growing heterogeneity of the workforce in the United States and worldwide and the unstoppable march of globalization, Ely and others concur. But leveraging diversity with effective management is necessary to reap these benefits, they also agree, and much easier said than done.

This is because the same elements that make diversity a wellspring of innovation can also make it a source of conflict and emotional distress, says Nancy DiTomaso, chair of the Department of Management of Global Business at Rutgers Business School in Newark, New Jersey. "The biggest mistake is to assume that diversity brings harmony and that the benefits will be evident and immediate," she explains. "Many organizations have diversity officers and diversity programs and diversity training and so on and so forth, and probably think there's nothing else they need to do. I don't think there's enough attention given to the managerial skill and organizational development that needs to be done to manage the positive elements of diversity."

Rajvinder Kandola, senior partner and head of diversity at London-based occupational psychology practice Pearn-Kandola, agrees. "The structural things are necessary but not sufficient - to go beyond that what you're really looking for is to address how people operate in organizations."

Ely co-authored a 2003 article with Thomas Kochan of MIT that questioned the conventional wisdom that diverse teams produce better results. Kochan, Ely, and their colleagues in the Diversity Research Network, a consortium of researchers from several universities, looked at four firms to gauge the effects of diversity on performance. What they found, Ely says, was "very controversial" at the time: racial diversity had positive effects on performance, for example helping to boost a company's business portfolios, increasing sales, or pumping up group bonuses. But this only happened when management fostered diversity as a resource for innovation and learning, for example by making sure group members and leaders had training in group process issues, particularly problem-solving and communication among diverse teams. Diversity actually worsened performance in some cases, the researchers found, for example by making teams less likely to meet goals. This effect was exacerbated in businesses where teams were highly competitive with one another.

The researchers also found that gender diversity seemed to have less problematic, more positive overall effects than racial diversity. "Some people have wanted to say that therefore there is no business case for diversity," Ely adds. "No, there is a business case, it's just not as simple as people would like it to be."

The key to leveraging diversity is building an environment where team members feel they can learn from one another, Ely and others found. And managing diversity isn't about being sensitive and not stepping on people's toes, says Ely, for example making sure not to call women "girls." "A lot of people sort of focus on that as the primary issue," she adds. "I think the mistake is there's no way you could ever learn all the quote-unquote rules."

Kandola argues that managing diversity effectively also means examining one's own biases and knowing how to work around them. "We all have bias — nobody can assume to be bias-free. It's actually understanding that bias."

Instead, creating an environment where diversity can be leveraged involves giving people the skills to handle it when they step on someone else's toes — or someone steps on theirs, Ely explains. "What usually happens is that people get defensive and start blaming and judging — that's the most destructive thing. It's really developing those skills for having these difficult conversations and building the wherewithal within yourself not to get defensive, because once you're defensive you can't learn anything, we know that."

Not paying enough attention to diversity can also lead to loss of intellectual capital, not just when hiring scientists but especially after they're on the job, DiTomaso says.

For scientists, the definition of competition is narrow, resources for development are scarce and valuable, and the benefits of such resources are cumulative. This means that failing to ensure that all people get an equal shot at these resources can have particularly harmful results, DiTomaso notes. "You can create all kinds of inequalities where some people are fostered in terms of their ability to perform and other people are kind of left in the shadows," she explains. "In science and engineering, it's very important to pay attention to the allocation of those kinds of resources."

Another key aspect to making diversity pay is to measure the effectiveness of diversity efforts (see "Getting Results," p. 44)-which is, again, much easier said than done. To help measure the effectiveness of its CCPI efforts and other new strategies that were initiated when CEO Fred Hassan took Schering-Plough's helm three years ago, the company surveyed all 33,000 of its employees, which required translating the survey into 30 languages. Graves said the company's just starting to crunch the numbers, and not willing to share them with the world just yet. But these sorts of surveys will be essential as the company begins to fine-tune its diversity efforts, he adds. "It'll be a very interesting set of data to look at."