Not too long ago, Diversity, Equity, and Inclusion (DEI) and the Environmental, Social and Governance (ESG) policies that undergird it, were generally accepted as being good for business and for the greater good of society. The NYSE and Nasdaq also began to implement ESG and DEI protocols under SEC guidance. Then something changed, and it wasn’t just the Supreme Court decision to remove race as a factor in college admissions. We are now experiencing issues regarding DEI in retail and in some corporate cultures along with some pushback in its level of importance in overall corporate cultures. What happened?
Today’s diversity leaders are taking a seat at the table to weigh in on new product development, marketing efforts and current events that impact how workers and consumers are feeling. And that exposes where DEI needs to balance advocacy with profitable business development.
As adoption of DEI evolved, it sometimes set up a friction between employees defending their personal beliefs and employers who were following best practices in conforming to new policies adopted by the majority of U.S. public corporations. For example, some employees found it was not enough to follow DEI guidance; they also had to subscribe to the philosophies that underlie it, or risk being sidelined in their careers or even terminated. This created an ethical dilemma for both employees and employers.
Companies also started to turn these policies outward toward customers as inclusive marketing positioning in addition to implementing them to govern internal operations and build corporate culture. Disney, Target, and Budweiser are among the high-profile companies that have suffered from consumer backlash. It was a moment of Newton’s Third Law of Motion at work in a social context – for every action, there is an equal and opposite (and today, noisy) reaction.
Shifting Sands
Now many companies are reassessing, even retreating from their previous policies and DEI initiatives as pressures mount. The conservative America First Legal group has filed a number of Equal Employment Opportunity Commission complaints against corporations claiming they are “illegally engaging in discriminatory employment practices that penalize Americans based on race and sex.”
While such complaints don’t require the EEOC to investigate – necessitated only for filings from impacted employees – they do provide a public relations platform for companies to manage. Among the brands and retailers AFL have called out are Yum! Brands (Pizza Hut), Starbucks, McDonald’s, Kontoor Brands (Wrangler and Lee jeans), Hershey, Anheuser-Busch, Dick’s Sporting Goods, Mars, Nordstrom, Unilever, Kellogg’s, Macy’s, Mattel, Hasbro, Nike, and Disney.
And the New York Post just published a critical piece against Neiman Marcus and CEO Geoffroy van Raemdonck, alleging it hires “‘mostly gay or European men’ and ‘white and Asian women’ for top posts.” No wonder companies are nervous from public pressure.
Revelio Labs, which tracks workforce trends, found DEI staffers are getting laid off at a significantly higher rate than those working in non-DEI positions – 32 percent versus 21 percent – in a study among 600 companies with recent layoffs.
Amazon, Applebee’s, Nike, and Wayfair rank among the companies with the largest DEI job losses. And Revelio states that because DEI departments tend to be small in size with a median team of three employees, these layoffs could impact the company’s entire diversity team.
The Wall Street Journal announced that senior diversity executives are headed for the door at Netflix, Disney, and Warner Bros Discovery. And in retail, Walmart’s chief belonging officer, Denise Malloy, just left the company. The circumstances surrounding her resignation are unclear – a request for comment went unanswered – but it could signal that Walmart may be dialing back its inclusive belonging efforts.
DEI Is in the Eye of the Beholder
A majority of American workers (56 percent) believe that corporate DEI programs are a good thing, 28 percent are in the middle, and only 16 percent are against it, according to a Pew Research Center survey conducted last year among 6,000 workers, including nearly 5,000 who are not self-employed. Further, another majority (54 percent) say their employers are paying the right amount of attention to DEI; only five percent said they are paying too little attention to it.
A majority of all demographic segments view DEI as a good thing, but female (61 percent), Black (78 percent), Hispanic (65 percent), Asian (72 percent) workers and the youngest demographic ages 18 to 29 (68 percent) are even stronger advocates.
Building Consensus
Employees from both political affiliations are remarkably close in how they view their current employers in terms of their DEI initiatives. Some 50 percent of Republicans and 57 percent of Democrats believe their companies are doing DEI right. That’s a positive consensus for retailers to build corporate culture around.
The gray area arises when DEI programs get out of the newly named “people operations” lane where they are tasked to build workplace culture, improve work conditions, and guide hiring and promotion decisions. The WSJ notes that today’s diversity leaders are taking a seat at the table “to weigh in on new product development, marketing efforts, and current events that have an impact on how workers and consumers are feeling.” And that exposes where DEI needs to balance advocacy with profitable business development.
Benchmarking DEI in Retail
Academic business management professors Nicolai Foss of the Copenhagen Business School and Peter Klein of Baylor University took an in-depth look at the progressive diversity, equity and inclusion trend in business through the lens of critical theory, a postmodernist philosophy advanced in the 1920s by the Frankfurt School philosophical movement. The philosophy prioritized personal experience over objective data and often resulted in a lack of consensus among those with different experiences and belief systems.
Foss and Klein distinguish current corporate DEI policies as distinct from 1960’s-style affirmative action programs. Beyond affirmative action’s goal of creating a more diverse and inclusive workforce or a more equitable pay structure, the new incarnation of DEI initiatives “seek to change how people interact, to reduce the power of ostensibly privileged groups, to ‘center’ the ideas and activities of marginalized groups that make it part of a broader movement that supports radical structural, social, and economic change,” they argue.
Further complicating things, DEI initiatives have largely evolved from the ground up, rather than driven from the top down. “DEI programs generally lie outside the expertise and experience of executives, and they carry the risk of negative publicity from insufficient commitment to social justice,” the authors observe.” For these reasons, top managers delegate responsibility for DEI programs to those who profess superior knowledge in these programs.” That may also be a statement about the emotional quotient (EQ) of some leaders who are out of touch with their workforces. As we know, empathy is the new leadership quality that younger employees expect.
Measuring DEI
DEI specialists have created relevant benchmarks for high performance. Measures such as contributions to diversity or social justice are distinctly different from traditional performance metrics like profitability, market value, or other financial performance measures. To date DEI policies have not caught up with the rigorous benchmarks of testing and analysis of other corporate activities, such as organizational design, strategy formulation, marketing, operations, finance, and traditional human resource management practices. This is new territory for many organizations and there is no clear roadmap.
“Commitment to DEI as commonly practiced today is not usually a government requirement, but a set of beliefs and practices created by companies and encouraged by external parties such as the media and universities,” the authors write.
Policy Building
Despite the lack of quantitative proof that DEI policies improve corporate financial performance, companies believe in the good they can do. A recent survey conducted by Littler, a law firm specializing in employment matters, found that among 300 C-suite executives across diverse industries and company sizes, 57 percent of those surveyed remain committed to DEI and have increased their level of activity.
Building a valuable set of DEI initiatives begs corporate leaders to evaluate ways to do the best good for the company, its employees, customers, investors, and other stakeholders without regressing or doing harm.
Diversity of Voices
DEI can be a touchpoint for conflict and controversy – the very issues it was supposed to address. Ex-Levi’s president Jennifer Sey made news when she pulled back the DEI curtain to reveal her experience in her book, Levi’s Unbuttoned: The Woke Mob Took My Job, But Gave Me My Voice. After 23 years at Levi’s rising through the ranks from senior marketing director to president and CEO heir-apparent, Sey resigned over the macro issue of the corporation’s position on free speech, dramatizing the line between personal and professional opinions.
Sey’s book reflects the potential conflicts that corporations need to be able to navigate. At Levi’s in 2020 she put her role as mother before that of her title when she spoke out against the Covid school closures seriously impacting Levi’s rank-and-file employees and their children. Her personal opinion on school closures didn’t align with the then Levi’s leadership position. In her words, “I didn’t violate my employment agreement. I followed every policy we had, like getting vaccinated, and I never publicly criticized our own policies. It was all about the children.” After leaving Levi’s, she moved on to have a successful Substack blog, “Sey Everything,” and is working on an upcoming documentary, Generation Covid.
Reflecting on what she would do if she had the opportunity to lead a company again, she said, “One of my core beliefs is ‘great ideas can come from anywhere.’ There is great business benefit to having a culture where people feel comfortable speaking up. I stress this not just of because of my personal beliefs, but in the interest of product excellence and best-in-class business performance. I’d attempt to steward a return to ‘normie’ capitalism.”
For the record, normie capitalism is based on profits through principles and an individual’s right to his or her personal beliefs and free speech. It is hallmarked by:
- Delivering product excellence and price products fairly
- Marketing those products in a way that is truthful and appealing
- Being inclusive, to draw the largest possible customer base
- Treating employees with respect, pay them a fair wage, and give everybody an opportunity to succeed
- Not lying about the company’s primary mission, which is to be profitable
DEI and Retail
Granted, corporate DEI initiatives are complex, fraught with conflict and potential misalignments. EEOC commissioner Andrea Lucas warns the recent Supreme Court decision on affirmative action in higher education makes it time for companies to “take a hard look at their corporate diversity programs.”
To be effective, they should be carefully evaluated and changed if necessary to protect and support true diversity, inclusion and equity across gender, ethnicity, and sexual orientation. And above all, especially with a highly vocal, social justice-focused next-gen workforce, different voices are positive, but all voices need to be heard. In that way, DEI programs can accrue to the company’s bottom line.
