Corporate DEI: An update and guide to move forward
After 2020’s racial reckoning, many organizations made commitments to diversity, equity, and inclusion (DEI). Since then, however, companies – especially those in tech – have come under fire for cutting DEI programs and disproportionately laying off corporate diversity teams. This blog will explore the latest trends in DEI recruiting and hiring, the case for continued DEI investment, and how businesses can move forward. It incorporates feedback from a number of DEI officers and senior leaders at top organizations.
DEI Recruiting and Hiring Trends
As of July 2022, all the Fortune 100 had made public commitments to DEI, with each including DEI initiatives on their websites. According to LinkedIn, chief diversity and inclusion officer positions grew by 168.9% from 2019 to 2022, with peak growth in 2020 and 2021. From 2021 to 2022, those C-level diversity and inclusion hires began to decline. That downward trend is picking up speed across all levels.
The VP of DEI for a large U.S. media agency noted that many companies started thinking about DEI only in 2020. She added that some organizations that are not seeing results and giving up on DEI simply did not know how to make it a part of their organization. They failed to put the measurements in place to understand the impact of DEI programs on business, talent, and corporate culture.
DEI positions overall have been hit disproportionately by recent layoffs, with DEI roles seeing a 33% attrition rate at the end of 2022, compared with 21% for non-DEI roles. In some cases, especially in tech, which faced mass layoffs and budget cuts, DEI departments have shut down altogether.
Rich Rubino, Complex Commodity Manager at a leading global shipping organization, explained, “Many companies have seen a good deal of budgetary issues due to the slower economy. Those economic conditions are having enterprise effects at firms. Many programs and projects are being impacted due to the economy.”
According to a DEI leader of a multinational communication agency, when DEI programs aren’t tied to an organization’s bottom line and viewed as ‘nice to haves,’ it is easier to cut them quoting economic uncertainty.
Adding to this, the Supreme Court’s June decision to ban Affirmative Action in the college admissions process has left corporations scrambling to determine how this could impact their DEI initiatives. The decision could make it more challenging for companies to recruit diverse young candidates, as fewer BIPOC students could be accepted at top universities. And, conservative legal activists and politicians are targeting corporations such as Amazon, Comcast, and Starbucks, alleging race-based favoritism and warning them to end racial preferences in hiring.
This is despite the fact that, since 1972, the ratio between the Black and white unemployment rates has consistently been about 2-to-1. And, in 2019, the median Black worker earned 24.4% less per hour than the typical white worker. This is an even larger wage gap than in 1979, when it was 16.4%. And, when it comes to total household wealth, white households have four to five times as much as Black households, according to data from the Federal Reserve.
Given such drastic disparities and policy changes, according to one of the DEI officers we talked to, people are now looking at corporations – and not our polarized government – to take a stand and do right by their employees.
The Case for Remaining Committed to DEI
DEI investment is the right thing to do; it also will lead to better business outcomes. A diverse workforce will enrich a company’s culture, drive innovation and creativity, strengthen your talent pipeline, and boost overall performance. Here’s how:
- Improved innovation and creativity
More diverse companies see more creative, out-of-the-box thinking. Such innovative mindsets are critical for keeping up with consumers’ rapidly shifting preferences and the world’s rapid pace of change. Companies that are more diverse enjoy 19% higher innovation revenues and 9% higher EBIT margins.
- Better financial performance
A diverse executive team increases the likelihood that a business will outperform the competition financially. According to Great Place to Work, the 100 companies with the largest gaps between the experiences of white employees and minorities had significantly lower revenue growth than the 100 companies with the smallest disparity. When it comes to the bottom line, companies in the top quartile for executive-level ethnic diversity outperformed those in the bottom quartile by 36%. Rubino’s experience reinforces this trend, saying, “We remain committed to what we do with diverse suppliers, and 2023 looks to be on track for our best year ever.”
- Talent attraction and retention
According to Glassdoor, more than 75% of job seekers and employees say a diverse workforce is crucial when evaluating companies and job offers. Sixty-three percent of employees believe their employer should be doing more to increase workforce diversity, and 32% of job seekers wouldn’t apply for a job with a company that lacks workforce diversity. Great Place to Work research shows that more inclusive organizations – those in which employees feel they and their colleagues will be treated fairly regardless of race, gender, sexual orientation, or age – have employees who are 5.4 times more likely to stay a long time with the company.
These trends are likely to become more entrenched as demographics shift and workers strive to align their values with their careers. Almost nine out of ten Gen Z and Millennial employees say they would quit their jobs if they could work somewhere more in line with their values. And, almost half of Gen Z identifies as non-white. As a senior leader of DEI at a multinational agency said, “By 2045, more than half of the population in the U.S. will be people of color. To quote businessman Mark Cuban: ‘You can call it [DEI] whatever you want – I call it good business.’ The companies that strive to create inclusive teams will be the best-positioned organizations for today and tomorrow.”
- Customer engagement
As of 2020, almost 40% of Americans identified with a race or ethnic group other than white. This will only increase in the coming years. Increasingly diverse customers want products and services that fit their unique needs and they want to see them delivered by people who look like them. Customers want to see themselves reflected in what they see and hear. This can be done best with a diverse workforce.
- Corporate reputation
Recognition as a DEI leader leads to increased loyalty and trust from customers and employees, alike. And, with the higher growth that comes from a commitment to DEI, investors are sure to be pleased.
Moving Forward with DEI
Promoting DEI is not just a business strategy; it is a commitment to social responsibility and ethical leadership. As we look to the future, it’s clear that diversity will continue to be a driving force in shaping the success of corporations worldwide. Companies can ensure success by following a few best practices.
1. Start with the C-Suite – top leaders must support and commit to the effort. They can set the stage for the whole program by actively participating in and championing DEI.
2. Establish and communicate goals – Goals for your DEI program should be specific and achievable. They should have target timelines.
3. Ensure policies, practices, and procedures are inclusive and equitable –This includes recruitment and hiring practices, promotion and compensation policies, and measures to prevent discrimination and bias. Make sure that these policies are communicated clearly to all employees.
4. Training and education – Deliver DEI training and education to all employees, from the boardroom to the factory line. Training should be ongoing and tailored to different levels of the organization.
5. Communicate progress and setbacks regularly – Communicate your DEI program’s progress and impact regularly and transparently. Share successes, challenges, and any changes in direction with all employees. Create open channels for feedback and ensure that employees feel comfortable reporting incidents of discrimination or bias.
In recent months, we’ve seen DEI programs cut at the state and federal levels. In this environment, corporations have an opportunity to play a leading role by embracing DEI. Those that do are more likely to thrive. Corporations that stay committed to DEI will enjoy more innovation, better decision-making, increased growth and profitability, and improved talent attraction and retention. They’ll emerge as industry and community leaders while helping drive positive social change.
What DEI-centered topics would you like to see us explore in the future? Reach out to us below and let us know.