SOUTHERN CALIFORNIA JOB MARKET : Avon Calling on Minority Skills : Strategy: For reasons of profit, the company goes beyond affirmative action.

Avon gambled when it launched “Undeniable” by Billy Dee Williams in 1990. After all, it had never marketed a celebrity fragrance, and many star-endorsed scents had flopped.

For Avon--battered by big losses in 1988--the timing was excellent. Undeniable is Avon’s top-selling fragrance and the leading U.S. male-celebrity scent for women--surpassing products endorsed by Julio Iglesias, Herb Alpert and Mikhail Baryshnikov.

Avon is also pleased because Undeniable was conceived, developed and marketed by a team of black women, executives who were convinced that Williams would have cross-over appeal.

In fact, Avon says, Undeniable materialized because of Avon’s “diversity management” philosophy, which tries to use employees’ racial and ethnic backgrounds to boost profits. It also helps lure and retain top-notch minority talent.

Diversity management, which companies apply differently, is a cutting-edge trend in corporate human relations. More companies are said to be examining the concept as they ponder ways to improve competitiveness.

The idea is driven by demographics. The Labor Department estimates that, until 2000, minorities and immigrants will account for 85% of U.S. work force growth. White men are already a minority of U.S. workers, and Asians and Latinos are gaining as a proportion of total population.

Nor is Avon Products Inc. alone. McDonald’s Corp., McDonnell Douglas Corp., Hewlett Packard Co. and BankAmerica Corp. have policies or programs to take advantage of worker diversity.

At Avon, the company actually creates separate project teams based on race and ethnicity to get ideas from all segments of its work force. The groups meet regularly with top managers.

Diversity management is a response to changing attitudes within the work force, said Roosevelt Thomas, executive director of the American Institute for Managing Diversity, an Atlanta-based management consultant.

“The concept of managing diversity assumes that the corporations might have to make some adjustments, instead of the employees doing all the adjusting,” Thomas said.

Like affirmative action, the concept can be controversial. Some critics oppose any race-based remedies to past discrimination. Others, including some minority executives, say diversity management is just a way for companies to skirt affirmative action obligations.

“Managing diversity is the buzzword, and it’s hot,” said Ted Payne, an affirmative action manager at Xerox headquarters in Stamford, Conn. “Companies that are not doing well on affirmative action goals are jumping on this. It doesn’t require you to do very much. . . . It’s just very touchy-feely.”

Diversity management usually involves determining how workplace practices and corporate culture undermine company goals, improving employee-management communications, training managers to appreciate differences among people, and making good use of those differences.

For example, a diversity council is the problem-solving forum at Quaker Oats. The multiracial, multidepartmental committee discusses problems as well as strategies for meeting corporate goals.

The council had a role in developing a new system for evaluating employee performance. It puts more emphasis on one’s ability to work with colleagues to achieve corporate objectives, thus providing an incentive to function better amid differences.

Xerox and Tenneco recently provided financial incentives to executives who excel at developing motivated multiracial departments. Pepsico--aiming to bring more women and minorities into its upper ranks--is putting a senior executive in charge of broadening the makeup of its workplace and business interests.

Many other corporate giants have not yet adopted the concept. A recent report by Training & Development Journal looked at the practices of 121 Fortune 500 executives involved in hiring and personnel development. Although 73% predicted that their company would have an increasingly diverse work force during the next three years, only 15% reported formal policies for managing diversity.

While some U.S. firms question the benefits of diversity management, Avon is among those linking its own program with financial gain. Minorities and women weren’t moving up and contributing adequately at Avon, the firm’s executives have said, partly because the corporate culture didn’t allow for participation outside established channels.

“People would move in and then leave because we were just hiring to do the ‘right thing,’ ” said former Avon spokesman John Cox.

After a 1988 loss of $404.5 million, Avon needed the help, so it began to look for unconventional ways to get more input from minority managers. It developed three support groups for mid-level managers: one for blacks, one for Latinos and one for Asian-Americans.

Meeting separately, the groups discuss product concepts and management strategies. They identity problems and possible solutions. Representatives of the groups regularly share ideas with an executive committee including Avon President James Preston and other members of senior management.

These policies encouraged Avon managers Evette Beckett and Joyce Roche to propose and develop the women’s fragrance Undeniable. Introduced in April, 1990, Undeniable sales exceeded $22 million, more than any other Avon product and surpassing company expectations, said Elaine Benevenuto, an Avon spokeswoman.

Thus bolstered, Avon recorded 1990 earnings of $195.3 million, up 258% from 1989. Industry analysts have said Avon was able to fend off takeover bids in 1990 because of the resurgence. For the first half of 1991, earnings rose 12% to $70.4 million.

Thomas said the Avon experience teaches that more American firms will “reach out to their minority and female employees when they realize that these practices affect the bottom line.”