(FORTUNE Magazine) – HAROLD EPPS, who runs the Digital Equipment Corp. plant that makes computer keyboards, manages the work force of the future. The Boston factory's 350 employees come from 44 countries and speak 19 languages. When the plant issues written announcements, they are printed in English, Chinese, French, Spanish, Portuguese, Vietnamese, and Haitian Creole. According to the Bureau of Labor Statistics, annual work force growth in the U.S. will slow dramatically, from 2% a year for the 1976-88 period to 1.2% for the span between 1988 and the year 2000. That's because the bulge of baby- boomers are aging, with no boomlet of new workers behind them. Only 32% of the new entrants will be white men. Their share of the total labor force will shrink from 51% in 1980 to 45%. Women will make up about 47% of workers, and minorities and immigrants will hold 26% of all jobs, up from 22% now.

The buzzword for recruiting, training, and promoting this new rainbow coalition of workers is ''managing diversity.'' It has become an urgent issue for top executives, as well as a growing business for consultants. Companies from Goodyear to Hewlett-Packard to Procter & Gamble are hiring managers with ''diversity'' in their titles. Conferences on the new work force are rife, and consultants' practices are booming. Says Jill Kanin-Lovers, a vice president with management consulting firm Towers Perrin: ''For the first time at many companies, human resources is a strategic issue.'' To survive the population shifts and to prosper amid them, companies are training workers to be more tolerant of language and cultural differences, to identify and reject any racial and sexual prejudices, and to be more accommodating to the handicapped. Corporations are also launching literacy programs, allowing more flexible work schedules, and providing child care -- even in such unlikely places as the Miami airport. The object: to keep workers happy -- sometimes just to keep them. Says James E. Preston, CEO of Avon: ''We understand that managing diversity is not something to do because it's nice but because it is in our interest.'' That's exactly what makes managing diversity different from affirmative action. While government pressure can be shrugged off -- federal law requires companies only to make a good-faith effort to hire minorities and women -- demographics cannot. The shrinking work force gives the diversity issue a level of urgency that affirmative action never had. CORPORATE affirmative action programs, which aim to correct the past exclusion of women and minorities, have brought people through the door. But many companies concede that they have not done enough to move these people up the management ranks. According to the Equal Employment Opportunity Commission, the percentage of managers who are women has grown from 17% in 1978 to 27% in 1988 (vs. 67% for white men). Minorities have moved even more slowly, from 7% to 9.5%.

Still, affirmative action of the Seventies can be a springboard for the broader work force issues of the Nineties. Says Roosevelt Thomas, president of the American Institute for Managing Diversity in Atlanta, a consulting firm that is affiliated with Morehouse College: ''Affirmative action addresses issues in a temporary way, providing some short-term relief against discrimination. Managing diversity deals with why we have these problems and how we make the system work for everybody.'' King-Ming Young is the project manager for the Managing Diversity Program at Hewlett-Packard, whose U.S. work force is 19% minority and 40% female. ''Managing diversity has given affirmative action a new vitality, new objectives, and new language,'' she says. ''The focus of diversity is not on women; it is on the interface between women and men. It is not on blacks; it is on the interface between blacks and whites. In the past the attention was on minorities as a problem, on women as a problem. Now people should not be stuck with being blamed or feeling guilty.'' TO MANAGE the changing work force successfully, consultants contend that companies must revamp their corporate cultures. How? By exposing and deflating negative assumptions about minorities and women, changing the ways workers relate to one another, and transforming some relationships with suppliers and customers. Says Thomas: ''Diversity is a way of doing business.'' Here are some of its principles. -- Cast a wide net for workers -- that's the only way you'll get enough. Procter & Gamble says it has been able to recruit minority and women engineers at a higher rate than they are represented at the undergraduate level (10% for minorities, 15% for women). How? By doing what other companies do -- sending current employees to recruit on campus -- but with greater effort. Some companies try to get to minority talent even sooner. McDonald's provides summer corporate internships and year-round restaurant management programs for minority college students. The young people learn about the company while they get valuable job experience -- and managers can look prospects over before they make an offer. In the seller's market, what prospective employees hear about your place becomes very important. ''Companies that don't have a reputation for a level playing field are going to have a tough time recruiting,'' says Avon CEO Preston. Xerox gives minority prospects reprints of a Black Enterprise article rating the company as one of the best places for blacks to work. Hewlett- Packard talks to women candidates about its high rating as an employer in Working Women. The companies say that such magazine endorsements -- and word of mouth -- help recruitment. To draw mothers and retirees into the work force, many McDonald's and Burger King outlets offer flexible hours. Connecticut's Union Trust Bank solved its 70-branch teller shortage by tailoring a schedule for mothers of young children so that they can have school holidays and summers off. National Medical Enterprises, one of the largest hospital companies in the U.S., recruits nurses from Ireland and Scandinavia but still has a tough time filling all its jobs in the U.S. Company officials heard that many Chinese health care workers learn English as part of their training. After nine months of negotiations, interrupted by the revolt in Tiananmen Square, 25 Chinese began working at nursing homes in the Boston area last fall. Under an agreement with the Chinese government, the workers will spend 18 months in the U.S. before returning home. Alan Ewalt, a senior vice president at National Medical Enterprises, says the company is so pleased with the results that 35 more Chinese will be coming this year. -- Learn to recognize and appreciate individual differences. The old ideal of a monolithic corporate culture is out. Greater tolerance of differences is in. ''With the changing demographics, there's no way companies can impose an Anglo male culture,'' says Lewis Griggs, a Stanford MBA and co-founder of Copeland Griggs, a firm that produces videos on cultural issues both domestic and foreign. Says Jesse T. Williams, a vice president at Goodyear: ''Managers are going to have to learn more about women, more about minorities.'' Copeland Griggs has produced a series of seven 30-minute videotapes titled Valuing Diversity with funding from 50 corporations, including Hewlett- Packard, Xerox, US West, and P&G. Hundreds of companies and organizations have bought the tapes (at $600 for each title), and many have used them in training sessions. Through interviews with corporate executives and dramatizations, the tapes convey the message that all sorts of people make up corporate life; don't prejudge them; listen to their ideas; make sure they're a part of your formal and informal networks. Workers from various backgrounds and ethnic groups may have unorthodox styles and different values, but they also bring fresh ideas and perspectives that can help your business. In one scene, an Asian American employee makes a pitch for a managerial job. When his boss asks him why he should get the position, the employee becomes vague and uncomfortable. The boss interprets his hesitation as a lack of aggressiveness. The narrator explains that many Asian cultures consider chest- beating unseemly. His suggestion: The manager should monitor the applicant's work to see if he can handle promotion. Some of the tapes try to show how to recognize stereotypes. The narrator asks the viewers what they assume the topic of conversation to be when they see a group of blacks or women or white men talking in the office. If the respondents said that the blacks were talking sports, the women were discussing their families, and the men were settling work issues, they would be wrong. As the camera moves within earshot, the black and women employees turn out to be discussing business matters, while the white men are talking about their families. The tapes suggest that the successful manager will have to navigate through individual sensitivities and cultural pitfalls. If that sounds overdrawn, consider again the polyglot DEC keyboard plant. When a young man from one country tried to give a present to a female co-worker from another, mutual misunderstanding precipitated a crisis on the shop floor. In the man's culture, accepting the gift signaled a romantic interest. The woman didn't share his feelings, but her society considered turning down a gift an unforgivable act. Plant manager Epps says supervisors had to explain the missed signals to both parties to defuse tensions. -- Be willing to train -- you will be happier with the new workers' performance and they will be more loyal to you. After applications for clerical jobs dropped more than 40% in a year, Aetna Life decided to train its own filing, word-processing, and secretarial employees. The Hartford company launched classes for inner-city residents in basic office skills at its Aetna Institute for Corporate Education in 1988. The crash courses in clerical and analytic skills can last up to 14 weeks. Applicants, who tend to be 19 to 27 years old, need to pass an aptitude test to be accepted in the program and must be able to do basic math, write a memo, and compose a business letter by the time they finish. Aetna has hired all 47 who have completed the course. (One person dropped out.) Badi Foster, a former professor at the Harvard School of Education who runs the institute, warns that programs like his can't make up for the educational meltdown of the inner cities. ''We're dealing with the cream of the crop,'' says Foster of the black and Hispanic men and women selected. ''They've got to be drug-free and have positive self-esteem. If they have kids, they have someone taking care of them.'' Donald Stewart, president of the College Board, expects companies to shift more and more of the $80 billion a year they spend on training to remedial education -- that is, helping workers learn to read and write. Ford spends over $200 million a year on a variety of remedial and in-house training programs. -- Once you land those hard-to-get workers, learn to keep them. Corning found that between 1980 and 1987, black and women professionals left the company at roughly twice the rate of white men. Chairman Jamie Houghton appointed teams to figure out why. Corning's management committee declared that retaining workers would become an integral part of the company's highly regarded quality-control effort and put group president Richard Dulude in charge as the company's first equal employment opportunity executive. Last year Corning started a diversity training program for managers and professionals to sensitize them to issues of race and gender. The company says that the attrition rate for both blacks and women has declined. Digital Equipment also found itself more successful at attracting minorities and women than at keeping them. But its team-building programs have helped show each person how valuable he or she is to the entire enterprise. The company assigns a trainer for perhaps ten weeks to a ''core group'' of eight people who work together on projects or assignments. The trainer puts the group through a series of exercises that try to teach them to trust one another. In one exercise one employee blindfolds another and guides him around the building. DEC won't provide any specifics but says the program has improved the productivity of both manufacturing and field sales groups. (Many companies refuse to share their successful diversity management techniques -- they consider them competitive information.)

Avon encourages employees to organize into black, Hispanic, and Asian networks by granting them official recognition and providing a senior manager to act as mentor. These groups help new employees adjust and provide direct feedback to management on problems that concern the groups. For example, when the Hispanic network decided its members needed a leadership seminar, the head of the group went to the chief of human resources to get it. Preston meets at least once a year with each employee group. The cosmetics company once had a women's network, but it disbanded years ago. With women holding 79% of management positions at Avon, the group became unnecessary. Says Preston: ''My objective is an organization where people don't feel a need for a black network, a Hispanic network, or an Asian network, just as women decided they didn't need their network.'' Providing child care is one way to keep women employees -- and some men too. When AT&T settled its negotiations with its major unions last year, a key clause in the agreement was a comprehensive family care package that included a $5 million allocation to explore ways to provide community-based child care. Drugmaker Johnson & Johnson is building its first on-site day care center in New Jersey. The building, designed by architect I. M. Pei, will accommodate 200 children and include an isolation ward for sick youngsters. Retailer Dayton-Hudson is spending $8 million to help train home care providers so its employees can hire qualified, responsible babysitters. The company expects to train 8,000 over a three-year period. IBM recently committed $25 million to child care and elder care programs. Most of it will go to increasing the number and quality of child care providers in communities where IBM workers live. Citing ''the changing social environment,'' Chairman John Akers said his company wanted to give employees the flexibility to ''advance their careers while minimizing the impact on their personal lives.'' New York City schools chancellor Joseph A. Fernandez has proposed putting satellite learning centers on corporate premises so parents can be close to their children. Fernandez experimented with the concept when he ran the schools in Miami. One center he set up at the Miami airport has a kindergarten, a first grade, and a day care center. Spokesmen at the center say that parents act as teachers' aides during their time off. A satellite school at the American Bankers Insurance Group headquarters in downtown Miami not only keeps employees, it also helps recruit them. Philip J. Sharkey, a senior vice president, claims that 25% to 30% of American Bankers' employees said they accepted jobs there because of the satellite school and day care center. Among workers with children at the satellite school, absenteeism has been cut 30% and job turnover has been reduced 4% to 5%. -- Don't forget the new work force at promotion time. Xerox identifies ''pivotal jobs'' that lead up the corporate ladder and tries to make sure that women and minorities get a shot at them. This widens the pool of eligible candidates when openings occur. And it makes for impressive recruiting. Xerox has 26 black and 17 women vice presidents, out of 270. A. Barry Rand, the black president of Xerox's U.S. marketing group, is one of the six senior executives who report directly to CEO David Kearns. At P&G every management employee gets a regular career assessment: what skills he or she needs, how and where to get them, and what that employee's next job should be. When the company noticed high turnover among black and women managers at a plant in Georgia, it set up a mentoring program that paired 23 minority managers with a senior employee of their choosing. P&G says the tactic reduced turnover considerably. Robert E. Cannon, the senior vice president who oversees diversity programs at P&G, says that career planning is the test of a company's rhetoric about diversity -- ''It's where the rubber meets the road.'' -- Be prepared to bend your rules. McDonald's encountered a puzzling problem: Some inner-city teenagers would work a few months and then quit. San Francisco consultant Ronald B. Brown investigated and found that many kids worked toward a specific goal (new clothes, a boom box, prom costs) and then stopped working. The company began to focus on ways to make the jobs more attractive -- even more fun. In some parts of the country, franchise operators have allowed workers to pick the music in work areas and changing rooms. They also let the youngsters wear school sweatshirts or their own clothes on certain days instead of the maroon-and-white uniform. Pat Harris, staff director of affirmative action at McDonald's, says the company and its independent operators are satisfied with the results so far. -- Successful diversity programs need strong commitment from top management. Xerox Chairman Kearns, Avon's Preston, and US West's Jack MacAllister, among other top executives, preach the connection between diversity and success. When some managers at Xerox wondered whether the Reagan Administration's free- market policies were a sign that they could back off corporate affirmative- action targets, Kearns sent out a strong memo reminding his managers that the diverse work force remained a business goal. MacAllister has supported what he calls ''pluralism'' ever since he saw discrimination against a black teammate on his college football team. Says he: ''The marketplace today is a diverse one. To be competitive, our work force needs to be diverse as well.'' According to company officials, 21% of the 300 or so highest-paid executives at US West are minorities and women. MacAllister, whose telecommunications company covers several Southwestern states, contends that having a Hispanic as head of his small-business operation means that the burgeoning Hispanic market won't be ignored.

Avon's Preston can illustrate both the pitfalls of homogeneity and the benefits of a diverse staff. In the 1970s Avon slipped badly, he says, because its mostly male management staff failed to notice the massive shift of women customers from the home to the office. By handing unprofitable inner-city markets over to black and Hispanic sales managers, Avon turned that business around. Now, says Preston, ''the most productive markets for us in the U.S. are in the inner city.'' FOR 20 YEARS U.S. corporations, pressed by law and conscience, have made uneven progress toward integrating their work force. Now globalization, a shrinking labor pool, and the evolution of ethnic markets at home have further spurred the process. In the rest of this decade and beyond, the companies that come out on top will be those that have learned to attract -- and keep -- the best workers in the rainbow of talent.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: CHANGING WORK FORCE As the growth of the U.S. labor market slows, women and minorities, particularly Hispanics, show the strongest gains. White males will make up only 45% of workers in the year 2000.