"No matter who you are, you're going to have to work with people who are different from you. You're going to have to sell to people who are different from you, and buy from people who are different from you, and manage people who are different from you," says the thin, balding, black guy at the front of the auditorium, who demands to be taken seriously. "This is how we do business. If it's not your destination, you should get off the plane now."

This is management hardball, as well as gripping theater. Even though it's 9 PM (13 hours into their workday), the 60 newly promoted or recently hired first-level managers at IBM Learning Center, in Armonk, New York, are rapt. They understand that they underestimate J.T. "Ted" Childs Jr. at their own risk.

At least twice a month, Childs, IBM's vice president of global workforce diversity, lays some version of his stump speech on managers who have flown in from across the country. The speech is not standard corporate fare. Childs's lectures, uninterrupted and captivating, last for two hours. He brags, harangues, warns, and chides. During the third hour, he typically takes questions — then leaves his trainees to buzz among themselves into the night.

His lesson? Accepting, encouraging, and promoting diversity at IBM and beyond is good business. "We've moved beyond the moral imperative to the strategic imperative," he instructs. "What I want most is what's hardest to get: for business to see the link between diversity and competitiveness. Because if we don't understand that, we're not going to win."

Ted Childs is perhaps the most effective diversity executive on the planet. IBM has long been lauded for its progressive employment policies. And for just as long, it's also been known as a place where mostly white guys in mostly starched shirts hold all the cards. Since 1995, though, IBM has acquired a different look, largely because of Childs's strategic campaign to overhaul the company's practices pertaining to hiring and promoting women, ethnic minorities, and other groups that are underrepresented at IBM.

Between January 1996 and December 1999, the number of women executives at IBM worldwide has soared from 185 to 508. By the end of 1999, the number of minority execs working for IBM in the United States hit 270, up from 117 in 1995. "I'm intensely proud of that," Childs says. Both women and ethnic minorities are still scarce among the company's top 50 managers. But in March, for the third time in 15 years, Catalyst, an advocacy group for women in business, awarded IBM with a corporate-achievement award.

Childs, 55, grew up in Springfield, Massachusetts. He aspired to study at Amherst College, but his mother, a schoolteacher, and his father, a chemical analyst, insisted that he enroll at a predominantly black school, as they had. "You need to be in a dormitory with black boys," his mother said. "You need to have that experience at least once in your life." Childs went to West Virginia State College, which is largely black, but he ultimately helped integrate the school's racially divided social life by inviting both black and white bands to perform at the annual homecoming dance.

These days, Childs sports a purple baseball cap with his monogram and the initials of his college fraternity, Omega Psi Phi, on it. Above his coat pocket are three adornments: a fraternity pin, a red AIDS ribbon, and a multicolored orb that symbolizes global diversity. Together, they reflect what is most important to him — the essence of Ted Childs.

Childs spoke with Fast Company about the importance of corporate diversity and about his strategy for changing the face of IBM.

What's the tough-minded strategic case for diversity?

I've been trying to refashion the discussion about diversity and equal opportunity. This started for me back in 1980, when I took a leave of absence from IBM to work as executive assistant to Benjamin Hooks, who was head of the NAACP at the time. That was a very profound experience for me. I watched executives from large consumer companies meet with Ben and kiss his ring. They'd get photographed with him, then send those pictures to magazines like "Ebony" and "Jet."

Eventually, I came to understand what those executives were up to: All communities — African-Americans, Hispanics, women — have purchasing power. In America today, the number of women-owned startups is increasing faster than the number of startups in general. Minorities in the United States have $1.1 trillion in buying power, which is roughly equivalent to the world's seventh-biggest GDP. By 2050, the United States will be 50% white; 25% Latino; and 25% Asian, black, and other minorities. So it's not a bad thing if those communities view a company as a good place to do business.

When I returned to IBM, people patted me on the head and said, "That's nice, Ted." Back then, we were selling big boxes to big companies, so we didn't really touch consumers and small businesses. But personal computers started getting us into people's homes and into small businesses — many of which were owned by ethnic minorities, women, gays and lesbians, and the physically handicapped. That evolution presented an opportunity to have a different sort of discussion about diversity.

IBM does business in more than 160 countries. And global companies like IBM won't do very well for very long if its employees all look alike. Diversity of thought and culture and geography and race and gender enables us to bring the best solutions to our customers. If we don't reach out and make diversity a competitive advantage, it will become a liability. If customers go inside our company, they should see people who look like them at all levels.

So this is about protecting jobs. But it's also about getting and keeping talent. This insatiable hunger for talent must be reflected in our diversity effort. Workforce diversity is all about getting talented people from every group to work for you. We have a great opportunity. We can't afford to keep people out.

I had seen the opportunity in diversity long ago, and about four or five years ago, I took that message to two plants in North Carolina to see how white men there would react. Those men had never heard diversity discussed that way before — as something that they could benefit from and that would protect their jobs if they supported it.

Most people think of IBM as a historically "button-down" culture. Is it hard to make your arguments in the context of such a conservative past?

That straight-laced reputation is a misconception in many ways. I can look back 75 years and find an appreciation for the power of diversity inside IBM. In 1924, company president Tom Watson Sr. created the first Quarter Century Club — a club for people who had worked at IBM for at least 25 years. Among the 42 eligible members were three women, all of whom had worked at IBM since at least 1899 — 21 years before women's suffrage. One African-American was also in the club, having been an employee in 1899 — 10 years before the founding of the NAACP. Our hiring policy for professional women in 1935 was equal pay for equal work. We had a woman vice president in 1943. We hired black salesmen — salesmen! — in 1946.

When Tom Watson Jr. became CEO in 1956, he hosted a meeting of senior managers in Williamsburg, Virginia. He had recently received a letter, which was more than four pages long, from a man who wanted to be an IBM salesman but couldn't get hired. The letter said something to the effect of "I'm a graduate of a big-10 university, and I have a law degree from an Ivy League school. After several interviews, I finally said to the last man who interviewed me, 'Look, can you tell me why you fellows won't hire me? Because I have to give my wife an explanation. Is it my Jewish name?' And, of course, the gentleman said, 'No, we just think you're overqualified.' "

After reading the letter to senior management, Mr. Watson said that he never wanted a person's race or religious beliefs to factor into who gets hired and who doesn't. He just wanted people who could do the job. He told the managers in the room, "I want to know who on our team was involved in this situation, because whoever was shouldn't work here anymore."

That heritage was the foundation for what we're doing now.

Heritage is one thing, but progress is another. You've spent five years on a campaign inside IBM …

Real change takes time. In 1995, eight executive task forces were assembled — one each for African-Americans, Asians, disabled people, gays and lesbians, Hispanics, Native Americans, white males, and women — to look at IBM through the eyes of that constituency. Executives from each of the groups led their respective task forces. We also assigned a senior vice president — one of the CEO's direct reports — to sponsor each group.

The task forces were charged with answering three questions: What is necessary for your group to feel welcomed and valued at IBM? What can we do, in partnership with your group, to maximize your group's productivity? What can we do to influence your group's buying decisions, so that IBM is seen as a solution provider? I chose July 14, Bastille Day, as the task-force launch day because it's considered to be a day of social disruption. We were looking for some constructive disruption at IBM.

Lou Gerstner began the first meeting of task-force chairs. He spoke for 20 minutes about what he wanted, reinforcing his commitment to Team IBM. He said that he didn't want anyone to create divisiveness. Then he left. When I was sure that he was gone, I said, "Look, you're all here because I handpicked you. And you all know I fought for this, so I don't want any misunderstandings. I want to remind you of something. Many of you have bitched to me privately, saying such things as 'I'm a woman, and I had to go through this,' or 'I'm black, and I have to live with this.' Well, now you've been given a license to help us all understand those issues. And if nothing else, be motivated by what you've encountered during your career that you didn't think was fair. Make this a better place for the kids who will be your predecessors, so that maybe they won't encounter those same problems."

How have you encouraged people to represent their constituencies without turning IBM into a collection of special-interest groups?

We've taken steps to minimize that possibility. We continue to talk about the concept of Team IBM, and, once a month, I lead a meeting of all task-force chairs, during which I ask, "What are you working on? What are your issues?" I say, "Look, I want these meetings to be substantive. I want everyone to know what everyone else is working on. Because we need to be going forward as Team IBM, not as the black group, not as women, and not as gays and lesbians. We need to be going forward as a team with recommendations that will make this a better company. So think about what we can do to make IBM a better place for your constituency — and a better place for all people."

Because these executives were senior people in the company, they had enormous credibility. I knew that they weren't going to drive this project off a cliff. But at the first meeting, the chair of the white-male task force made a telling comment: He said that his group's members had concluded that their primary objective was to make sure that the other seven groups didn't see them as the problem. He made the comment humorously, so everybody laughed. But we also saw the value of his comment, and we knew that the guy who spoke was very thoughtful. He also said, "We recognize the issues here, and we want to be part of the solution. And part of our vision of the solution is that there will be more people who don't look like us in senior-management positions." That provided a foundation for enormous thought — and enormous cooperation.

What have these groups accomplished?

We scheduled their preliminary presentations for December 1, the anniversary of Rosa Parks's refusal to give up her seat on a bus. The groups each came back with two or three things that they thought were important for the company to address. Consistent throughout was a focus on the talent pipeline, employee development, and making sure that we had good, detailed recruiting strategies in place. That our development programs and our mentoring programs were at work. That we were sending crisp, clear messages to people about how they are valued. That we were sending clear messages to men that work-life is an issue for everyone, not just for women.

The white-male group presented a wonderful agenda. First, its leader said, if we are serious about diversity, then we need to take more ownership of it — ownership at the senior levels of the business. Second, if we are serious about the universal pertinence of work-life issues, then we need to start having discussions that address everyone, instead of just women. Third, if we are serious about diversity, then we ought to address the subject on a nationwide basis, not just within IBM.

One presentation that I was particularly eager to hear (to find out how it would be received) was the one from the gay and lesbian group, because I knew that its members' most important issue involved domestic-partner benefits. I thought it would be a benchmark discussion because some of the other constituencies had difficulty with those issues. But nothing exploded.

You were expecting more controversy?

When IBM was thinking about offering domestic-partner benefits, I was the one who led a discussion among senior management. Some employees worried that such a benefit would bring in more AIDS cases, which would drive up the cost of our premiums. So we had an outside firm examine our insurance expenses. And that company discovered that the cost of treating a catastrophic illness, such as cancer, or of dealing with a serious accident is typically higher than the cost of treating someone with AIDS. We pointed out that what increases medical costs most at IBM is childbirth.

We also pointed out that the group with the most education, the highest computer-literacy rate, and the largest disposable income, as a whole, is the gay community. So do we want to ignore that kind of a market? The diversity game is played from the neck up, which means that you have to use your brain.

In 1996, IBM announced that it was adding domestic-partner benefits, after which I spoke at an employee meeting. It was the first time in my career that I had been heckled, which actually intrigued me. People were upset about this policy. Finally, I said, "I think you guys are right. We shouldn't hire gays, and we shouldn't sell to them either. We should just walk away. It's a matter of principle. Walking away is going to cost some jobs, but the principle is important. Now, which one of you wants to be first to give up your job?"

Of course, no one moved.

Honestly, though, it's hard to imagine that those task forces have had an impact on something as complex, something as human, as barriers to diversity inside a company. What's the connection between their work and genuine results?

Let's take the women's task force, for instance. The senior-executive sponsor for that group was Ned Lautenbach, who at the time was senior vice president for worldwide sales and distribution. That's a major chunk of IBM's employee population. Before those task forces, Lautenbach's staff members would give him a slate of candidates from which they wanted him to choose someone to fill an executive position. He would generally approve the slate.

Well, he stopped doing that; he started rejecting the slates. He would ask, "Why are no women on the slates? I want to see women on the slates. And if these women are qualified to be on the slates, what's going to happen if we pick them for executive jobs? Is something bad going to happen?" He would ask logical questions to find out why people thought that a man would be best qualified for a particular job. And frequently, there wasn't a reason.

Somebody in power who was reviewing jobs had to push for fairness, and that person was Lautenbach. Before the first Global Women Leaders Conference, in 1998, Lautenbach wrote a letter to general managers around the world. He told them, "I want you to get back to me by September with your strategies for addressing our global-diversity challenges. And to help you, we're going to host our first Global Women Leaders Conference."

I added a couple of sentences to the letter, and after Lautenbach signed it, I got nervous. I went back to him and said, "I want to make sure that you read the entire letter, that you didn't just trust me and sign it." And I pointed out my addition, which read, "I want you to talk to our women leaders about the barriers to their advancement. I don't care about the opinions of the men." He said, "I read it. It's going to put starch in some collars, isn't it? But we've got to let these guys know that we're serious."

I wanted the men to understand that they were not going to determine what the issues were. They had to allow themselves to be influenced on the issue of the advancement of women by the views of the women. And that has happened. Since 1996, we've gone from one to 13 women executives in Asia; and we've gone from 5 to 46 in Africa, Europe, and the Middle East. Men are listening to women.

In 1998, I spoke about diversity to a group of employees that IBM had just contracted with. A few weeks earlier, women from that group had set up a women's network. I told them, "That's great, and I'm going to announce it at the town meeting." The women were worried because they thought that it would upset their male bosses. They wanted to keep it quiet. I said, "Trust me."

At the meeting, I said, "I'd like to congratulate the women here who have established a new women's network. And I'd especially like to congratulate their managers, who had the foresight to let this happen. You embody the values that we stand for at IBM." And I never heard about any problems.

IBM still isn't very diverse at the top. Why not?

That's true. Among our top 50 executives, we have only 2 African-Americans, 3 Asians, one Hispanic, and 4 women. But change is under way. Glass ceilings exist here. But they exist at the entry level. If you fill the pipeline with qualified, talented people, they will break through. We have an extraordinary pipeline, but we have to focus on that pipeline. We have to look down, not up.

The task forces are continuing their work. This year, each one will hold an executive forum. About 150 women are expected to attend this year's Global Women Leaders Conference, in July. In May, 700 people participated in an IBM Women in Technology Conference. Plans are also under way for a black-executives forum, a disabled-executives forum, a gay-and-lesbian-executives forum, a Hispanic-executives forum, a male-executives forum, and a Native American-executives forum. I recently went to Japan to speak to 1,600 women IBM leaders, at their second meeting. That's historic stuff for Japan. Pre-1995, that never would have happened.

I think this train is moving. We can argue that the pace is too slow. But I've been to a lot of places that I wouldn't have visited 10 years ago — including Lou Gerstner's office and the Oval Office. We're on a journey. It's not over.

Keith H. Hammonds (khammonds@fastcompany.com) is a Fast Company senior editor. Contact Ted Childs by email (childsjt@us.ibm.com).