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Companies are pulling back on DEI. What will be lost in the process?

By Bill Peters

If companies get rid of diversity, equity and inclusion programs, deep-seated biases will remain - 'and DEI opponents have no solutions,' one DEI practitioner says

Mita Mallick, an author and diversity, equity and inclusion leader, published a book about workplace inclusion in October. Since then, she said, one company has invited her to its leadership summit, but two others - one of which had already ordered copies of her book - canceled book talks they'd planned with her, telling her that company leaders, suddenly, were no longer comfortable.

"It's either the best or worst time to launch a book like this," Mallick said.

Over the past year, corporations have grown more cautious about following through on DEI efforts as businesses cut costs and conservative activists, lawyers and lawmakers seek to purge the concept from workplace life. That caution, along with the Supreme Court's ruling last year ending affirmative action in college admissions, has created more speculation over how DEI work might change - and what might be lost in the process.

Experts say that as the U.S. population grows more diverse and companies that stick with this work attract a wider range of talent and reap the financial benefits, DEI isn't going anywhere.

But those experts do see a broadening in the scope of DEI, with less of a direct focus on a specific identity or even the term "DEI" and a growing divide in levels of corporate commitment. Responsibilities once held by a chief diversity officer, a position companies rushed to fill after the 2020 murder of George Floyd, could get carved up among multiple departments, they say.

Abenaa Hayes, the founder and chief executive of Elysee Consulting, a firm focused on workplace equity, predicted there would be "changes in nomenclature, versus a pullback in doing the work."

"You're going to see a lot of people talking about programs and strategies that are geared toward employee engagement," she said. "You're going to start seeing people talk about cultivating culture within a company."

But a more diffuse version of DEI raises questions about who takes ownership of what in a company's diversity plans - and risks further diluting and undermining work that was already under-resourced by employers, consultants say.

Companies say they still care about DEI, even as they cut back

Companies are saying they still care about diversity, with a Conference Board survey of nearly 200 human-resources officers finding that none of them "plan to scale back DEI initiatives, programs and policies." It also found that 63% plan to "focus on attracting a more diverse workforce."

But DEI-related hiring has slowed. In January, there were 272 DEI job postings in the U.S. for every one million postings overall on Indeed, according to data provided to MarketWatch by the job-search site. That was down from 323 postings a year earlier and from the peak of nearly 500 in 2021.

J.P. Gownder, an analyst at the market-research firm Forrester, predicted in October that the percentage of companies that invest in a DEI function with a strategy and personnel behind it would fall to 20% by the end of this year, from 27% in 2023.

"As a result, too many companies will default to 'check the box' efforts such as heritage days, leading to performative - rather than substantive - DEI programs," he wrote.

But even as some companies pull back, others are pushing forward and giving their chief diversity officers more say in product development and other strategies, said JT Saunders, the chief diversity officer at the corporate consulting firm Korn Ferry (KFY). A sharper dichotomy is emerging between companies that have spent more time on their diversity goals and those that started only recently, he added.

"With organizations that have been at this journey for quite some time, we're not seeing a lot of difference, because it's embedded in their strategy," he said.

Companies tend to roll out commemorative ads or highlight their investments in Black- or women-owned businesses during Black History Month in February and Women's History Month, which includes International Women's Day, in March. But such increases in spending come alongside cuts to DEI programs at companies like Zoom Video Communications Inc., as first reported last month by Bloomberg. CNBC reported that Meta Platforms Inc. and Google parent Alphabet Inc. also scaled back their DEI pushes last year.

When reached for comment, Meta (META) and Google (GOOGL) (GOOG) said last year's cuts were companywide. They, along with Zoom (ZM), said they were committed to DEI. Google noted new investments last year, including a fund to help women entrepreneurs and financial support for historically Black colleges and universities.

In a memo seen by MarketWatch, Zoom Chief Operating Officer Aparna Bawa said the company needed to change the way it approached DEI, and said it planned to partner with DEI firms that work with tech companies and to embed its values "directly into our people programs rather than as a separate initiative after the fact."

Those cutbacks have come amid a broader battle over what role businesses should play in fighting inequality. Public outrage from multiple angles has cost some companies sales. And corporations, increasingly pressured from within and outside their ranks to weigh in on politics or social injustice, have found the usual PR equivocations no longer work.

From the archives (August 2023): Brands like Bud Light and Target have always tried to embrace social causes. Here's why they just can't win.

Affirmative-action ruling fuels attacks on corporate DEI

Meanwhile, efforts to dismantle DEI in the corporate world are playing out in court more frequently.

When the Supreme Court in June gutted race-conscious admissions policies in higher education, some corporate chief diversity officers initially believed the impact of the ruling would end at college education, said Kenji Yoshino, a New York University constitutional-law professor. But he noted that Chief Justice John Roberts wrote in the ruling's majority opinion that "eliminating racial discrimination means eliminating all of it," and he said he has had to tell those chief diversity officers that change is likely coming.

"It's been my sad task to say the optimists about DEI here are wrong," Yoshino said. "The Supreme Court gave us a really clear window into how it was thinking about equality and discrimination, and you need to worry about this."

Even before that ruling, Comcast Corp. in 2022 settled a lawsuit that alleged a small-business-support program run by the telecom giant excluded white male business owners. Earlier that year, America First Legal, a group run by former Donald Trump aide Stephen Miller, filed a lawsuit against Inc. over a grant program aimed at helping Black, Latino and Native American entrepreneurs start package-delivery businesses that partner with the online retailer. Amazon (AMZN) declined to comment. Comcast (CMCSA) did not respond to a request for comment.

Not every legal attack since the Supreme Court's ruling has been successful: In August, a lawsuit from an investor alleging that Starbucks Corp.'s (SBUX) hiring goals for people of color constituted discrimination was dismissed as frivolous.

America First Legal has also sued Target Corp. (TGT), alleging the company wasn't sufficiently looking out for investors' interests when anti-LGBTQ+ boycotts over its Pride-themed merchandise ate into sales. Target did not respond to a request for comment. The group has taken aim at other companies as well, including IBM (IBM) and Walt Disney Co. (DIS).

Meanwhile, the accounting firm PwC, following pressure from that group, allowed white students to apply for scholarships initially intended to make its workforce more diverse, the Financial Times noted in January.

"We've also reflected on the Supreme Court ruling and applied rigor to advance our diversity commitment in a way that fully accords with the changing legal landscape," the company said in its latest purpose and inclusion report.

How DEI ended up on the chopping block - and how it might evolve

Efforts to undo workplace diversity initiatives existed long before the corporate world's rush to embrace DEI in 2020. Depending on whom you ask, the roots of those efforts lie in generations-old bigotry, decades-old grievances about reverse discrimination or longstanding tensions between corporate profit and social responsibility.

After Floyd's murder, companies raced to say - whether genuinely or performatively - that combating inequality mattered. They published statements. They inundated DEI consultants with phone calls. They hired chief diversity officers.

But those new DEI roles often weren't set up to be effective, consultants say. The budgets, resources and authority to make hires and influence other decisions weren't there. Neither was the training or experience, at times, for the people who moved into those newly created roles, they said. Company leaders often lacked a specific vision for what they actually wanted to do to stamp out workplace discrimination.

So by the time 2022 and 2023 rolled around - amid the anti-DEI attacks and investor agitations for stronger profits - companies that didn't know what they wanted in the first place often targeted DEI-related departments for layoffs and cost cuts, experts say.

"When you don't build inclusion into the business, and you don't have metrics, it's very easy to cut it and say that it didn't work," Mallick said.

From the archives (April 2023): Three years after companies doubled down on DEI, 'the pendulum swings back.' Here's why.

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03-01-24 1544ET

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