Cuts in companies’ DE&I plans: it is not only about the money

With rising living costs, ongoing threats to the global supply chain, low retention rates, and a growing skill gap, some companies put DE&I’s investments and efforts on hold. At the end of 2023, HR experts recognised the deprioritisation of diversity and inclusion within firms as one of this year’s main trends. This situation was anticipated last summer by the pushbacks of some big US firms (like Google and Meta) in their DE&I plans, efforts, and investments. Efforts that were boosted just a few years prior, following George Floyd’s murder in 2020.

We are not seeing a lack of interest or a U-turn in the growing (yet still slow) cultural shift toward fairer, successful, and healthier workplaces. Undoubtedly, the cuts from appointed teams to funding give food for thought. If the economic benefits of more diverse teams and the impact of inclusive working environments on companies’ reputations are understood, shared, and acknowledged, lately just a few HR directors and C-suits have put a budget into developing such topics. And overall, investments in DE&I are shrinking.

As reported in January by Barnett Waddingham’s survey, an independent UK consultancy firm, of the 300 HR managers and C-suits interviewed, only 17% confirmed their businesses had introduced and invested in equity, diversity, and inclusion strategies last year.

Why invest?

As is always the case, reality is more nuanced than news titles. Money alone doesn’t paint the whole picture or detail the impact of these subjects on workers’ experiences, to the point that many managers are at least taking some notes. In fact, nearly three-quarters of those surveyed confirmed that employees’ demand for a DE&I strategy was a major concern of their firms. 73% declared that treating workers fairer helped improve business performance, and 70% said employees’ happiness was critical to productivity.

Moreover, companies that continue to or introduced specific DE&I programs did so because they believe it is morally right (40%), because it aligned with their values and purposes (31%), and made financial sense (31%). In broader terms, as previously highlighted in a BCG study on over 27,000 employees from 16 counties, an inclusive environment halves the risk of conflicts in the workplace. The feeling that a company values gender equality, inclusion and diversity boosts satisfaction by 31% and motivation by 25%.

Certainly, positive outcomes show that DE&I is still a priority for many. Nonetheless, the focus is slipping. As reported by Barnett Waddingham, it is losing ground to challenges such as rising operational costs (the reason given by 83% of the interviewees), the resources for the supply chain (80%), and the requests for pay raises (79%). Unsurprisingly, then, aiming to balance needs and demands, the debate among HR professionals and management buzzes. Ultimately, a healthier, more inclusive, and fairer working environment is critical to improving retention and easing talent acquisition.

As Claudio Honegger, sole director of Richmond Italia, confirmed, intervening at the recent Richmond Human Resources forum, a meeting for HR managers and executives of Italian companies. «Gender equality and inclusion play a crucial role inside a company. The aim is to create an environment where everyone feels free to express their ideas in an ecosystem where everyone is involved. In this way, the capability of problem-solving improves, and it becomes easier to retain talents». He also added that «we need a strong and tangible sign of commitment» considering that the feeling of a company’s inclusiveness can cut the trend to leave by up to 120%. It is especially true if we look at the much-needed contribution of women to the economy and society.

An example, from a gender-equal perspective, is represented by the step further the company, which already employs mostly women at all levels, has taken, teaming up with Women at Business. This project was created to valorise female professionals’ talents and expertise through a database of profiles and partnerships with businesses. It also aims to help close the gender gap that still puts Italy at the bottom of Europe. To look at the numbers, in 2022, 45,000 mothers quit working in the country because of the impossible work-life balance they were facing. For most, the most significant driver was the constant lack of childcare structures (41,7%). But for many others, the reasons lay within the company they work for (21,9%.)*

It is not only about the money

Even in those environments where diversity has been a focus for years, new sudden and unforeseeable expenses have easily put into question long-term investments for DE&I plans and teams. In fact, economic downturns have been the most cited reason for many businesses to pull back their commitment. With diversity and inclusion being deprioritised in 2024, it is no surprise that 42% of C-suits and HR rate them as a low priority.

However, the economic implications are not always the only cause of these decisions. At the end of last year, Cpl Talent Evolution Group compiled a list that gives a broader perspective of the situation (at least in the UK). According to their research, the top reasons for deprioritising DE&I are the limited budget at their disposal and the lack of leadership commitment (both at 25%.) Organisational values and culture misalignment are considered responsible for 17%, a lack of understanding of diversity and inclusion benefits for 10%, insufficient training and awareness for 8%, and a lack of belief in diversity and inclusion efforts for 6%.

Indeed, the process toward a shift in companies’ culture is ongoing. But for real progress to happen, diversity must be expanded, and inclusion must become a habit. Thus, more commitment, intentional support from the top, and constant monitoring are required to introduce more efficient and effective lasting measures. A short-term approach that penalises equality and inclusion. Especially in times of crisis, it can affect employees’ satisfaction – therefore their retention – but can also impact a company’s reputation and ultimately can be detrimental to stakeholders’ and clients’ trust.

* The latest estimates were published in February in the Rapporto Censis-Eudaimon 2022.

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