DEI Budget Cuts? Here’s Why That’s a Bad Idea

DEI work has surged in recent years, yet organizations are bracing for uncertainty in the markets they serve. With this uncertainty comes DEI budget cuts. Here’s why that’s a bad idea and how to push back.

Diversity, equity and inclusion (DEI) work has surged in recent years, yet is showing signs of softening as organizations brace for uncertainty in the markets they serve. With this uncertainty, the pressure to reduce costs often results in DEI budget cuts or eliminating the budget all together. Seen more as a “nice to have” than a “must-have,” organizations are signaling a deprioritization of DEI at the time it is needed the most.

DEI has one of the best long-term ROIs.

Inclusive teams make better business decisions 87% of the time. Firms with more diverse management teams have 19% higher revenues according to Forbes. Gender and racial diversity lifts profitability rates 20-36% according to McKinsey.

What other area of your business can produce these returns?

While there is a clear business case, organizations that are unwavering with their commitment to DEI do it because of the human case. They see people as their competitive differentiator. While products and services can be easily mimicked, culture cannot. People are one of the only remaining long-term competitive advantages. Younger generations also expect DEI and see it as a non-negotiable when evaluating their employment and buying decisions.

Now is the time for accountability with DEI.

The good news is that 95% of CEOs believe diversity, equity and inclusion are priorities. The bad news is that only 44% have actually developed a formal, actionable strategy. As of late 2022, 55% of HR managers have either had their budgets slashed already, or expect them to be cut in the coming months and DEI is usually the first to go. This has led to 80% of companies just going through the motions without holding themselves accountable. 

Accountability is about measurement.

Given the strong ROI, as a best practice, organizations should consistently invest 2-3% of their operating budget to DEI annually. Historically, 80% of that investment has been on education. While training is a foundational piece of DEI, the results are ambiguous because the impact is rarely measured. 

In business, leaders measure what matters. Boston Consulting Group recommends measuring DEI across the employee lifecycle from recruitment, retention, advancement, to representation and pay. It’s important not just to measure representation data, but a holistic view of the employee experience. That is why it is important to get a baseline understanding of where your organization is today, so leaders can be very intentional with how they focus your culture-change efforts in the future.

That is why we partner with Spectra Diversity to help our clients measure DEI with a statistically validated assessment. This assessment goes beyond just representation data to the perceptions of DEI across the organization and at an individual level. 

Consider the following statements – “I take the time to learn how those different from me want to be treated” or “diversity and inclusion efforts are necessary to this organization’s success.” 

How might your organization fare?

Without data, your organization risks doing the wrong DEI activities. More importantly, organizations can measure the ROI of DEI by establishing a baseline and measuring it over time. Our assessment only takes 10 minutes so we can easily be done as a pulse survey before and after key strategies are implemented. It is easy to see if it worked or did not work based on perception shifts.

Want to learn more about how to measure DEI? 

Schedule time with our team for a complementary discovery call. We can learn more about where you are on the DEI journey and share ideas to help support your organization long-term. Or, join us for our next interactive discussion on DEI hot topics with DEI leaders.

At Next Pivot Point we have lots of resources to help you facilitate successful diversity and inclusion training. Schedule some time with our team today to discuss where to start or how to do better. You can also check out: