How Companies Got DEI Wrong and What They Can Do About It
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Background
Highlights
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When it comes to DEI (diversity, equity, inclusion) in business, organizations need to focus on the materiality and value creation of optimizing diversity and inclusion in the workplace; make inclusive practices part of the organization’s overall culture; open employee resource groups and mentoring to everyone; base any financial support for or access to extra support and training on income or disabilities rather than ethnicity, gender preferences, or other factors, and recognize that diversity comes in many forms, including people with physical disabilities, mental health, and neurological issues who also have much to contribute.
These are highlights of a recent Enterprise Engagement Alliance YouTube show with Eric Darrisaw, Principal of New York-based Lazarus Advisors, Board Member for the Interfaith Center for Corporate Responsibility in New York and Engagement Officer for the NACP ETF; Dorien Nunez, Co-Founder, The OMNIResearch Group, New Orleans, and Allan Schweyer, Principal, Human Capital, for the Conference Board, New York. Darrisaw and Nunez recently co-authored along with Bruce Bolger, EEA Founder and program host, this article: Here’s How CEOs Got DEI Wrong and What They Can Do About it.
Click here to watch or listen to the show.
Background
In 2021, when the issue of DEI in business was reaching its peak in the wake of the murder of George Floyd, the Enterprise Engagement Alliance published both an article, It’s Time to Focus on the ROI of Diversity, and produced a YouTube show The ROI of DEI. The EEA warned against using the same approach in business utilized to address social inequity issues in government, law, and society. The show and article cautioned that much of the effort in business could be seen as wasteful and virtue signaling unless tied to clear value creation.
The Enterprise Engagement Alliance anticipated the negative reaction to the prevalent approach to DEI in 2021. Our approach focused then and now on DEI as a source of value creation, not as an ethnic retribution or compliance issue.
Highlights
All panelists agree that DEI initiatives will continue almost unabated but with less fanfare, more careful use of terminology, and a focus on value creation and materiality. Here’s a summary of their insights.
Darrisaw. Viewing DEI as a value creation opportunity is not new. Even during the anti-apartheid movement there was a constructive dialog on how to make money without extracting value from the land and the people. He cites the 1977 Sullivan Principles and the 2000 UN Global Compact as early efforts to focus on generating profits through value creation rather than on value extraction from the land and people. He stresses the importance of measuring the financial materiality of diversity, equity, and understanding their impact on corporate profits, as well as on the accomplishment of their purpose, goals, and objectives. He cites the adage: that which gets measured, gets done.
Schweyer. The evolving legal and reputational risks associated with DEI programs are coming from the new presidential directives, the Supreme Court ruling, and the current communications climate. Companies are free to continue with efforts to increase the diversity of their stakeholders provided they are inclusive of all people and do not set quotas, although he advises organizations to work with internal or external counsel to assess their DEI initiatives and understand the risks involved. Schweyer does not see any signs of a pullback on DEI investments but rather a greater focus on addressing material issues. DEI, he says, suffers from the same issue that continues to plague human capital in general: it is not valued because it does not appear on any balance sheets.
Nunez. He contends that the responsibility for DEI starts at the board level and should not be treated as a mere compliance issue. He emphasizes the importance of corporate culture and the role of boards in fostering an inclusive environment. He highlights the need for boards to understand the value of DEI and to educate themselves on best practices. He points out that successful DEI initiatives require a focus on both business outcomes and social impact. He agrees with the other panelists on the need for more research on the actual impact of diversity on business outcomes.
Bolger. It is generally the responsibility of business leaders to optimize returns by tapping the broadest possible viable markets for their products and services. It is very difficult to do so unless the company's leaders, employees, distribution and supply chain partners, reflect the markets they are trying to tap. At the same time, employee resource groups can be far more effective at harmonizing the interests of all stakeholders if they focus on fulfilling the purpose, goals, and objectives of the organization instead of segregating people. The best way to create a culture of inclusivity is to work and socialize together. Likewise, if organizations need to develop new talent, there is nothing stopping them from providing that extra training or mentoring support based on income, initiative, capabilities, etc.
Enterprise Engagement Alliance Services
Celebrating our 15th year, the Enterprise Engagement Alliance helps organizations enhance performance through:1. Information and marketing opportunities on stakeholder management and total rewards:
- ESM Weekly on stakeholder management since 2009. Click here to subscribe; click here for media kit.
- RRN Weekly on total rewards since 1996. Click here to subscribe; click here for media kit.
- EEA YouTube channel on enterprise engagement, human capital, and total rewards since 2020
Management Academy to enhance future equity value for your organization.3. Books on implementation: Enterprise Engagement for CEOs and Enterprise Engagement: The Roadmap.
4. Advisory services and research: Strategic guidance, learning and certification on stakeholder management, measurement, metrics, and corporate sustainability reporting.
5. Permission-based targeted business development to identify and build relationships with the people most likely to buy.
Contact: Bruce Bolger at TheICEE.org; 914-591-7600, ext. 230.
