The DEI Rollercoaster—Why Some Companies Are Stumbling
Remember 2020? Companies raced to pledge millions to diversity, equity, and inclusion (DEI) amid global protests. Fast-forward to 2024, and the vibe has shifted. Budgets are tightening, DEI roles are disappearing, and headlines ask, “Is DEI dead?” Spoiler: It’s not. But the approach is evolving. Let’s cut through the noise. Let’s explore why some organizations are backtracking. We will see how others are thriving and what your company can learn from both.
The State of DEI: A Reality Check
In 2023, the Society for Human Resource Management (SHRM) reported that 35% of companies cut DEI budgets last year. Additionally, 20% removed dedicated roles. Yet somehow, 68% of employees consider DEI a “must-have” in workplace satisfaction (Edelman Trust Barometer, 2023). What gives?
Case Study: The Impact of Cutting DEI
Take TechCorp (a pseudonym for a Fortune 500 company). In 2022, TechCorp reduced its DEI team by 50%. Employee turnover then spiked 18% within a year. This change disproportionately affected women and people of color. Contrast this with companies like Salesforce, which doubled down on DEI investments, tying executive bonuses to diversity metrics. Result? A 32% increase in underrepresented talent in leadership roles since 2021.
The takeaway: DEI isn’t a trend—it’s a thermostat. Companies that unplug it risk cultural and financial fallout.
DEI Strategic Planning in 2025: Where Are We?
Some recent reports detail how DEI programs accelerated after the social justice movements of 2020. Now, many companies are scaling back. Almost half (42%) of organizations have cut DEI budgets, citing financial limitations, according to 2024 research from SHRM. However, research from McKinsey continues to find that demographic diversity leads to better profitability and innovation in teams.
Even with budget reductions, some institutions are determined, recalibrating their DEI initiatives to be more focused and data-driven. This change implies that DEI is shifting, not dying.
Why Backpedaling on DEI Hurts More Than It Saves
Case Study: Starbucks Closing Stores for Bias Training
Starbucks closed 8,000 stores for a day in 2018 to educate 175,000 employees on racial bias in the wake of a high-profile incident. Critics called it a PR stunt. But the data tells a different story: By 2022, Starbucks reported a 12% rise in diverse leadership hires and a 40% drop in reported discrimination incidents.
The lesson? Visible commitment—even if imperfect—builds trust.
Legal Pitfalls: The Cost of Complacency
Ignoring DEI isn’t just culturally risky—it’s legally dicey. Title VII of the Civil Rights Act bans discrimination, but lawsuits frequently arise from systemic discrimination, not just the acts of individuals. This led to a class-action lawsuit against a retail giant in 2023 for $10M after they scuttled an internal audit alerting them about the issue. The kicker? The previous year, their DEI budget had been slashed.
As employment attorney Lydia Alvarado notes, “DEI isn’t optional compliance theater. It’s a shield against liability.”
The True Cost of Reducing DEI
Reducing DEI budgets might look like a cost-saving strategy, but it comes with its risks. Companies that put DEI on the back burner frequently find:
- Higher turnover: Employees from underrepresented backgrounds are more likely to walk away when they feel unsupported. According to a Deloitte study, companies with strong DEI programs see 22% less turnover.
- Legal and reputational risks: Discrimination lawsuits and public backlash are expensive. A major tech company faced a class-action lawsuit for allegedly ignoring workplace discrimination after slashing DEI programs in 2023.
- Missed opportunities for innovation: Diverse teams generate new ideas. According to Harvard Business Review, companies with above-average diversity in leadership see 19% higher revenue from innovation.
Translating DEI Into Where Business Has Gone Now
1. Moving Beyond Broad Training Programs
DEI was once something many businesses checked off on a list. Now, companies are moving beyond performative gestures to genuine, results-focused action. Organizations have shifted from broad training programs with little engagement to targeted interventions, such as:
- Developing underrepresented employees into leadership roles.
- Sponsorship programs that connect high-potential talent to hiring decision-makers.
2. Embedding DEI in Business Decisions
DEI cannot live in a vacuum. The most progressive companies are integrating inclusive practices into daily business operations. Some examples include:
- Salesforce is linking executive bonuses to DEI goals.
- Fair business partnerships, where organizations embed DEI metrics into supplier diversity programs.
3. Using Data to Drive Change
Forget vague pledges. Leading organizations are supporting DEI initiatives with measurable outcomes. Some examples include:
- Pinterest’s “Inclusion Labs” experiment with algorithms to reduce hiring bias, boosting underrepresented engineering hires by 30%.
- Unilever ties supplier contracts to diversity benchmarks, influencing 60% of partners to adopt DEI goals.
“Metrics force accountability,” says Dr. Maya Patel, a DEI strategist cited in Harvard Business Review. “Without data, DEI becomes performative.”
What HR Leaders Can Do Now
If your organization is reevaluating its DEI investment, here are several proactive measures HR leaders can take:
- Focus on retention and internal mobility: Beyond diversity hiring, organizations must focus on keeping and promoting diverse talent.
- Advocate for measurable goals: When DEI is connected to business outcomes, it’s harder to justify slashing the budget.
- Foster top-down support: Senior leaders must show their commitment to DEI to keep it on the agenda during challenging periods.
What Sustained DEI Looks Like: Lessons from the Frontlines
1. Embed DEI in Business Goals, Not HR Silos
Patagonia’s DEI team works directly with product designers to guarantee inclusive marketing campaigns. Their “Worn Wear” initiative, highlighting diverse customer stories, drove a 14% sales bump in 2023.
2. Train Managers as DEI Advocates
A financial services firm revamped its manager training to include real conversations about bias. Post-training, promotion rates for Black employees rose 22%.
3. Let Employees Lead
Adobe’s employee resource groups (ERGs) influence product features. Their LGBTQ+ ERG advocated for pronoun settings in software, which 80% of users adopted within six months.
Straight Talk: Why DEI Still Matters (Even If Your CFO Disagrees)
Yes, economic headwinds are real. But consider:
- Companies with above-average diversity generate 45% of revenue from innovation (McKinsey, 2023).
- 74% of Gen Z workers would decline a job offer from a company with poor DEI (Deloitte, 2023).
As entrepreneur Arlan Hamilton bluntly puts it, “Ignoring DEI is like ignoring your customer base. It’s not activism—it’s bad business.”
Final Thoughts: No More “Checklist DEI”
The companies winning at DEI aren’t those with the flashiest slogans. They’re the ones weaving it into daily operations—hiring, product development, and customer engagement. They’re listening to employees, not just lawyers.
So, is your org staying invested? If you’re hesitating, ask: Are we building a workplace that mirrors the world we serve—or one stuck in the past? The answer will define your next decade.
