Three years after companies doubled down on -2-

It's not just the rank and file either. The more truly diverse and independent a board is, the better it is at getting different points of view from members of different professional backgrounds, that report found. Companies that can find and retain that talent are more successful over the long term and help their business outperform more homogenous boards.

"An organization is not truly committed to DEI if its efforts are expendable, being based on the economy or the prominence of inequality and injustice issues in the news cycle," Ella F. Washington, an organizational psychologist and DEI scholar who sits on the faculty of Georgetown University's McDonough School of Business, wrote in her 2022 book, "The Necessary Journey: Making Real Progress on Equity and Inclusion."

Washington argues that the goal is for companies to view their DEI efforts as a core business imperative -- one that is fully bound up with their business and operations.

"Thus, as they do for any other core business strategy, organizations at the sustainable stage are committed to DEI efforts through organizational changes," she wrote. "DEI is integral to their culture."

A model for success

Washington's favorite example of a U.S. company staging a strong economic comeback by understanding the need for a whole new approach to DEI is Denny's (DENN), the fast-food chain founded in 1954. Denny's went from being hit with class-action racial-discrimination lawsuits in the early 1990s to winning awards for its DEI model, thanks to determined leadership.

The suits came after a string of high-profile incidents in which Black people were denied service for hours, while white people were promptly served. The company settled by paying more than $54 million -- then the biggest-ever settlement under federal public-accommodation laws -- and pledging to get its house in order.

It was only then that the company began to understand what it needed to do, with the help of a new approach and its first chief diversity officer, a local Black woman recruited by the mayor of Spartanburg, S.C., where Denny's is headquartered. April Kelly-Drummond, who initially balked at the idea, would go on to play a key role in the Denny's turnaround.

The journey included implementing unconscious-bias training and teaching staff to empathize with customers. It proved vital to move DEI past legal requirements and fully enmesh it in the culture, an effort helped with the appointment of new CEO James B. Adamson in 1995.

Adamson adopted a top-down approach that emphasized that DEI is for everyone at the company. Over the next 30 years, according to Washington, Denny's transformed itself into one of the best places to work using three focus areas: talent (tackling bias in hiring and building a promotion pipeline); supply chain (seeking minority owners of goods and services); and continuous improvement (learning from outside partners' expertise).

Denny's was one of the first companies to sign on to the CEO Action for Diversity and Inclusion coalition in 2017, a group created by Tim Ryan, a Boston native who is senior partner and chair of PwC U.S.

See also:PwC's chairman wants to tackle systemic racism -- and push corporate America not to 'pass the buck'

The company can boast a strong DEI track record today, while acknowledging that the DEI journey never ends. People of color make up a full three-quarters of its employees; 58% of its restaurants are owned by people of color, 56% of board members are people of color, and 44% of board members are women. It has won awards and been recognized as a model of growth and success by civil-rights leaders, community groups and publications, including Black Enterprise, Asian Enterprise, Hispanic Business and Fortune magazine.

The current environment, the anti-ESG movement and the war on so-called woke culture are challenging, Washington conceded. But companies that are truly committed, she said, "should stick to their values and promises made around ESG/DEI."

"The DEI movement has had many ebbs and flows historically so this is not the first time these efforts have been under attack," Washington wrote. "However, what companies do during this time period will serve as evidence of whether they are truly committed or were just jumping on the DEI bandwagon in 2020."

-Ciara Linnane

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04-25-23 0943ET

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