The backlash against corporate ESG policies — or “woke capitalism” as some critics are branding it — may be seen within some companies as an excuse to relax already faltering efforts to promote diversity in their workforce.
That would be a serious strategic mistake for the vast majority of businesses. Any company seeking to grow, win more customers, and attract investment should be doubling down on diversity as one of its central metrics for success.
Companies with ethnic and gender diversity have been found to significantly outperform their less-diverse peers. Employers who fail to attract diverse candidates or don’t invest in their success are cutting themselves off from scarce talent and from large sections of customers. Some 76% of job seekers and employees say diversity is an important consideration in evaluating a job offer and one-third wouldn’t apply to work at a company that lacked diversity.
Addressing this is more urgent now than ever because employees and customers have vastly more choices and can quickly switch their allegiances. Business success increasingly depends on innovation, which in turn is driven by diversity of thought, ideas, and backgrounds. Any company that wants to sell products or services to a community needs to have valued employees on board who understand how those people live and think.
So why have companies done so poorly on promoting genuine diversity? The truth is that the social part of ESG was always viewed as the awkward middle stepchild and was the first thing to be jettisoned when the winds changed. The chief diversity officers (CDO) that companies scrambled to hire after the Black Lives Matter protests were among the first to be fired as the job market cooled last year. The attrition rate for DEI roles was 33% at the end of 2022, compared to 21% for other roles. Stunningly, only about 4% of CDOs are black.
The obvious conclusion is that many companies were merely checking a box when they hired chief diversity officers and never made the concerted, systemic effort that it takes to foster genuine diversity. While a growing share of CEOs recognize the link between diversity and performance, a recent survey found that only about a third of companies see it as business critical. The survey found that just 37% of firms have diversity accountabilities and responsibilities spelled out and only 20% measure the impact of actions.
“ Diversity officers need to have buy-in for their work and be empowered to make real changes. ”
Diversity is hard work. What I’m seeing now is many companies becoming disillusioned because their well-meaning efforts to hire more diverse candidates have fallen flat. That’s because it takes a lot more than hiring a CDO or posting some jobs on LinkedIn.
Diversity officers need to have buy-in for their work and be empowered to make real changes. Employers should be using networks and organizations to connect more deeply with the communities they want to start looking more like. They need to establish a track record of developing and giving opportunities to diverse staff to make it clear they aren’t just paying lip service to DEI. If diverse talent sees that few people who look like them are succeeding in a company, they’re likely to take their skills to a different environment where they know they’ll be supported.
Companies struggling to expand diversity should re-evaluate their DEI programs to understand what factors are holding them back. How do their scorecards on diversity — if they have them — look compared to commitments they made three years ago? They should then seek to define what success in diversity looks like for their customers, shareholders, and other stakeholders and put a plan in place to get there.
Related:U.S. gender pay gap barely budged over the past 20 years. Why not?
Success in diversity requires two crucial ingredients — leaders who are genuinely invested in change and transparency around the tracking and reporting of that change.
Leaders need to consistently reward and encourage steps toward greater diversity, ensuring that it isn’t just the flavor of the month. Without full transparency and accountability, diversity programs risk withering on the vine, as many sadly have. Only by gathering data at a granular level and holding managers accountable for hitting diversity metrics will companies be able to measure their progress and understand where things are going right and wrong. This also enables companies to share their commitment to DEI publicly and show potential employees that they are committed to supporting their success.
Despite the political noise right now, ESG isn’t going away. Companies’ reputations and opportunities will increasingly be determined by how investors, customers and talent view their progress on these goals.
Michael D. Brown is senior managing partner at Global Recruiters of Buckhead.
More: When workers are an employer’s No. 1 priority, stockholders benefit too
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