Diversity Programs Become A Political Football: Why This Could Be Positive

The US Supreme Court decision to ban Affirmative Action in schools kicked off a shouting match among politicians, focused on applying the ruling to corporate diversity (DEI) programs. And whatever position you take politically, I think this activity will make DEI strategies an even higher priority.

First let’s be clear about the issue. While people oppose Affirmative Action in college admissions, corporate diversity and inclusion is a well-established strategy around the world. Hundreds of studies have proven its positive impact and laws against employment discrimination have been on the books since 1964. And DEI programs, regardless of how much you like them, are entirely focused on making sure that hiring, pay, and promotion are fair and merit-based.

What Just Happened?

Building on the Supreme Court decision, on July 13 thirteen Republican attorneys general sent a strongly worded letter to the Fortune 100 CEOs suggesting that Diversity, Equity and Inclusion programs could be legally defined as a form of discrimination. The idea they promote is that “preference” to minorities is discrimination.

The letter, signed by the states of Kansas, Tennessee, Alabama, Arkansas, Indiana, Nebraska, Iowa, South Carolina, Kentucky, Mississippi, Missouri, and Montana warned CEOs that “the Supreme Court’s recent decision should place every employer and contractor on notice of the illegality of racial quotas and race-based preferences in employment and contracting practices.”

This Republican letter makes a case that racial quotas are illegal, quoting the Supreme Court ruling and implying it applies to business. “Playing this ‘numbers game’ is flagrantly illegal: outright racial balancing is ‘patently unconstitutional.’”

This set off a firestorm. In response to the letter, on July 19 Democratic Attorneys General from 20 states and the District of Columbia sent a rebuttal letter to CEOs.  This letter explains the legal precedent for DEI programs and cites many research studies that prove the business benefits of a diverse workforce. Bloomberg Law, a respected legal analyst, similarly concluded that the Republican position was not supportable in court.

Why Is This Debate Taking Place?

The United States has grappled with race issues for hundreds of years. Today, as the US becomes more diverse and we enter one of the most challenging job markets in decades, the need for fair employment practices is more important than ever. And the European Union, which faces a myriad of DEI issues around immigration and national identity, recently passed a number of laws mandating pay equity and diversity disclosures.

The Republican letter argues that Affirmative Action, which was once common in business, is a form of “reverse discrimination.” So the argument, using what George Orwell called “doublethink,” twists the concept of DEI and argues that efforts to create fair representation are discriminatory by nature.

Senator Tom Cotton from Arkansas went so far as to send a letter to 51 of the largest law firms “notifying them” that such DEI programs may be illegal and that the Attorneys General would be taking action.

In some ways this argument is nonsensical. The United States is far from “equal” in the representation of African Americans, Hispanics, and women in business and leadership. The idea that DEI metrics, goals, and training are discriminatory is the reverse of their intention, goal, or execution.

Even Affirmative Action, which is the predecessor to DEI programs, did the country a lot of good. I worked at IBM when Affirmative Action was widely used and witnessed its value in promoting women, blacks, and others to prominent positions in the business world. I had an African American manager in 1982 and worked for a middle-eastern female branch manager for almost ten years.

While it has become unpopular, Affirmative Action was important in beginning our country’s journey towards the elimination of bias in hiring, pay, and promotion.

What Does This Mean to DEI and Business Leaders?

As Republicans and Democrats debate the issue going forward, the likely path is that DEI will become more visible and important than ever.

Why do I say this? Because the more we debate the topic the more clear and focused the strategies will become.

And as we discovered in our study Elevating Equity, when DEI stands on an island and feels like a training program pushed by HR, it rarely achieves its goal. No manager wants to be scolded or insulted by accusations that they are biased.

Similarly, while we all have biases based on our own life experiences, when the company imposes strict directives and says things like “this hire must be a woman,” we all feel uncomfortable that merit-based decisions may be sacrificed.

And whether we like them or not, these kinds of strategies are common. Think about the practice of creating diversity metrics and comparing them among different groups.  If a sales leader hired all male white salespeople while another has a more diverse team, it would be common for HR to point this out. The result may be some type of direction, incentive, or program to improve diversity in the first group. Is this legal or a sound practice? It certainly makes people think.

Consider the practice of creating diverse candidate slates. Many companies ask recruiting teams to build a “diverse slate” of candidates for any open position. This means the recruiter must seek out various racial, gender, or other demographic groups to find a diverse set of candidates. While you may argue against this, many DEI leaders tell me this has an enormous impact on reducing managerial bias.

And how about laws that mandate female representation on boards. Is that a preferential practice somehow forbidden by the Supreme Court ruling? (California has such a law.)

What our research has found is that programs that focus on “representation” – forcing the company to be more diverse – do not always deliver on results. Yes, they create an environment of diversity, but rarely do they build a culture of inclusion alone.

The real key to diversity and inclusion is not metrics or training: it’s a CEO-level focus on equity, psychological safety, a culture of inclusiveness, and awareness that a diverse team will outperform one that is not. And this is what great companies do.

Successful companies define diversity and inclusion as a business strategy. They do not set quotas or push contrived programs that make people uncomfortable. They hire, promote, and pay people fairly – and exemplify a culture of listening, openness, and respect – regardless of race, gender, age, or other factors.

Business Leaders Will Be Forced To Discuss These Programs

While most business leaders do not like to get involved in politics, this debate may force (and encourage) CEOs and CHROs to take a stand. And what we are likely to see is a parade of business and HR leaders explaining what they do, why they do it, and how important these strategies are to their employees, customers, and communities.

I had many discussions about this topic during my time at Deloitte. We discovered from our research that diverse teams perform better, innovate more, and have higher levels of retention. And today, as employee stress and retention issues loom larger and issues like gender identity become important, the value of an inclusive culture is even greater.

In my state, California, we operate with a highly diverse population (37% of California workers are Hispanic, 34% Caucasian, 18% Asian, 6% Black ) so the majority of employers have no choice but to eliminate bias in hiring, promotion, and pay. This culture made the state a destination for innovative, hard-working immigrants from across the globe.  (California’s GDP is the fifth largest of any economy in the world.)

And the rest of the world agrees. Last Fall I met with the King and Queen of the Netherlands and they told me they believe the American diversity debate is a role model for their country. They face many political challenges with immigration and equal opportunity, and the royalty told me they want their country to engage in debates like those we have in the US.

This issue becomes ever more important every day. The birth rate in developed countries is below replacement and our populations are aging. The countries with the youngest populations are all non-white: India, Indonesia, African Countries, and Mexico. Business people are going to be forced into diversity for demographic reasons alone. Why would we threaten business leaders from efforts to accelerate and streamline this process?

Is This The End Of The Chief Diversity Officer?

Our research found an important point. While many companies promote DEI as a strategy, it remains a very difficult topic. Almost 75% of HR professionals feel they are “under-skilled” in this area: DEI rates as the lowest overall capability in our entire HR capability assessment. And that brings me to my conclusion.

This week the WSJ published an article describing the slowdown in Chief Diversity Officer hiring. To me this indicates a healthy trend. Just as most companies no longer need a “Chief Digital Officer” (every company is now a digital business), we may be reaching a point where diversity has become every leader’s job. The job of “Chief Diversity Officer” now belongs to all of us.

Let us hope that politics do not get in the way of addressing this important issue.

Background Research And Education

Elevating Equity: Overview Of Our Research Study (details for Corporate Members)

Elevating Equity: Certificate Course in The Josh Bersin Academy

Background On Diversity Metrics In Business (from USA Today)

The ability of white people to obtain work in corporate America is not a matter of speculation. There is hard data.

Each year, companies are required to send a form to the EEOC, the EEO-1, which counts workers by race, ethnicity, and gender. The EEOC does not release this information to the public, but USA Today obtained most of the forms from corporations in the S&P 100, an index of large U.S. public companies.

There are 533 named executive officers in the securities filings of the S&P 100. These are the top positions with the most pay, power, and prestige. In 2022, white people held 83.3% of these positions, significantly exceeding their 75.5% share of the U.S. population. Conversely, Black people hold just 4.69% of the top executive positions in the S&P 100, even though they represent 13.6% of the U.S. population. 14 companies in the S&P 100 have top executive teams that are exclusively white.

This data does not reflect how much corporate America is still dominated by white men. In 2022, 69.61% of the top executive positions were held by white men, which is nearly double their share of the U.S. population. Conversely, in 2022, Black women held just 1.1% of the top executive positions — six positions — but comprised 7% of the U.S. population. The situation is even worse for Hispanic women and Latinas, who “comprised just 0.4% of named executive officers.” Hispanic women and Latinas are “underrepresented by eighteenfold when compared with their share of the workforce.”

The pattern holds at large corporations even as you work down the corporate ladder. For example, “of the 2,610 employees Amazon classified as executives in 2020,” just 37 (1.4%) were Black women. Overall, in the S&P 500 — a slightly larger index of major U.S. public companies — “white men, who dominate the corporate executive ranks, are almost 8 times as likely as Black women to be an executive.”

Most major corporations still put a disproportionate number of white people in executive positions — and it is costing them money. A 2020 McKinsey report found that corporations with ethnically diverse executive teams were 36% more likely to financially outperform their competitors than corporations with executive teams that lack diversity. More diverse corporate leadership teams are associated with “better decision-making… new approaches to problem-solving and greater levels of engagement.”

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