What’s Next for DEI Initiatives — and How Companies Can Capitalize

For any business, bottom-line results and profitability are paramount. Achieving this requires collaboration, innovation and hard work.

Corporate leaders can get caught up with their need to influence public perception, shaping consumer opinion can take on a pronounced importance, which can be distracting. Diversity, equity and inclusion (DEI) is one such dynamic that can contribute to profits or be polarizing.

Politics plays a vital role in determining corporate strategy, and especially where DEI is concerned. In June 2021, President Joe Biden signed the Executive Order on Diversity, Equity, Inclusion, and Accessibility in the Federal Workforce, designed to “cultivate a workforce that draws from the full diversity of the Nation.”  As the largest employer, government traditionally feels the need to model behaviors, promoting inclusion and removing barriers – essentially mandating DEI practices, and requiring reporting. A focus instrumental in the growth of DEI programs.

There is speculation that President Donald Trump’s administration will challenge DEI policies. In June, the Dismantle DEI Act of 2024 — aimed at preventing “racism in the federal government” — passed the U.S. House Oversight Committee. And there is an already existing movement to defund DEI programs.

If DEI programs support corporate profitability, are federal mandates truly needed? Shouldn’t the value the programs bring be enough to sustain them?

Moving Away from Traditional DEI

One reason corporations are moving away from traditional DEI programs is because they tend to fall under the “nice to have but not essential” umbrella. With shrinking corporate profits, such “nice-to-have” initiatives tend to be phased out, leaving the focus solely on profitability. This impacts staffing and supply chains.

Some companies, including John Deere, Harley-Davidson, Ford and Molson Coors, have recently stated their intentions to no longer adhere to principles of total inclusivity.

This is a sign of the times. And it implies several things: One, that the cost of program administration outweighs its value, and two, that regulated reporting can be complicated and problematic. It does not mean that companies want to exclude specific groups, but it does mean that they do not see the value in the required oversight and scrutiny.

Why DEI?

Diversity and inclusion initiatives were intended to break down artificial social barriers that limited employment based on race, religion and gender. The impact is reflected in the current employment landscape.

By removing willful discrimination and creating policies, procedures and laws, protection and equal opportunities are provided for applicants and employees. Competition and profitability should drive companies to hire and retain the best and the brightest workers and suppliers. Customers who want the best products will not abandon a trusted brand because of internal policies and practices (no matter how much the advocates complain).

The profit pyramid is simple when competing for government contracts. Companies are required to demonstrate that they have DEI reporting. Satisfying government reporting requirements creates the need for DEI programs, creating a competitive advantage. Yet with the change in administrations, demonstrating a DEI focus might be a short-lived strategy.

But for companies not vying for government contracts, the business value of DEI can be less clear, especially with inclusion goals that are internal and aspirational. For these companies, the impact of DEI on profitability can be blurred — and while the costs are quantifiable, the value of maintaining a DEI program with required reporting is not.

DEI Brings More than Profitability

Creating a culture of inclusion should be the goal of DEI. It should be measured, specifically because what gets measured gets managed. With profitability being the key driver, hiring should be designed to select the most qualified applicants.

Effective DEI programs can create an evolved work culture where all employees belong and where compensation is based on results. Reinforcing the message of inclusion should be engrained in the corporate culture, supported by structured training. Shouldn’t this be the end of formal DEI programs and required reporting?

Building a diverse workforce — bringing together people with a variety of backgrounds, sharing of different perspectives —­ is just the beginning. Harnessing the benefit of their wide and varied experience comes from open, honest collaborations and conversations in a safe supportive environment.

I’ve learned this firsthand. My business partner and I couldn’t be more different, describing ourselves as yin and yang. Our experiences give us vastly different perspectives. We share a passion for diversity, integrity and honesty. Because we respect each other, share openly, listen actively and learn, we produce ideas we would not have developed alone.

Embracing our differences has led to creativity, innovation and out-of-the-box thinking. This is the business value power of DEI.

Gaining a Competitive Advantage

Nothing speaks louder than success. By changing the dialogue, challenging the 1940s belief that “behind every great man there’s a great woman,” we have recognized the value of gender equity. Simultaneously, we need to systematically remove stigmas about ethnicity, combating ignorance with knowledge, and replacing hate with understanding. People are and should be individuals ­— like snowflakes, no two are alike.

Having an open inquisitive mind, asking the right questions, and welcoming different opinions sparks creative magic. Creating diverse teams with a common goal produces business value. Once businesses recognize there is a correlation between inclusion and profits, they will focus on creating inclusive workplaces, rather than managing DEI numbers.

What will happen if DEI requirements are defunded? It will give companies that understand the power of inclusion a competitive advantage.

(Image credit: Getty Images/Just_Super)