It must surely be snowing in hell.
SHRM – the largest and most prominent HR organization in America – hit the news recently when it revealed it was dropping the “Equity” plank from DEI.
It said it was moving away from equity language to ensure no group of workers appears to get preferential treatment.
Make of this what you will, but the move is the most recent example of diversity efforts being downplayed in the wake of the Supreme Court’s ruling eliminating Affirmative Action.
Employers of note that have scaled back their DEI initiatives include the likes of Ford, Molson Coors, Harley Davidson, rural retailer Tractor Supply, Brown-Forman (maker of Jack Daniel’s), heavy equipment manufacturer John Deere and home improvement retailer, Lowes.
Why diversity?
The origins of DEI in the workplace can be traced back to the mid-1960s.
Passage of the Civil Rights Act and the introduction of equal employment laws marked the beginning of workplace diversity training.
A growing belief starting in the 1980s and 1990s that diversity was not just a moral imperative but a key driver of business success led to the emergence of dedicated diversity professionals within organizations.
By the 1990s it was taken for granted that diversity was a corporate mandate.
Reaching a zenith
The movement arguably reached a zenith in 2021 when the SEC approved NASDAQ’s requirement that publicly listed companies on the exchange had to have one at least one woman director and one who is a member of an underrepresented racial or ethnic minority.
The impetus for this was a study from McKinsey & Co. Published in 2015, the study claimed to have found a statistically significant relationship between companies with women and minorities in their upper ranks and better financial performance.
The study claimed that the most-diverse firms had 39% higher profit margins than the least-diverse.
The fly In the ointment
But a moment of thought prompts the realization that the conclusion defies logic.
If companies could increase profitability simply by increasing diversity then the least profitable would only have to promote more women and minorities to catch up with the more profitable ones.
Deeper analysis showed the study had a fatal flaw.
McKinsey’s approach was to measure diversity in a company’s leadership at the end of a period of profitability.
The only conclusion that can be drawn from this is that increased profitability leads to increased diversity, not the reverse.
While there are clear benefits to society when companies promote women and minorities into leadership roles, there’s no reason to believe that it has any impact on financial performance.
McKinsey claims to have corrected the flaws in its research and has still reached the same conclusion, but no one has been able to replicate the results.
McKinsey won’t share its data and keeps secret the name of companies where it got the data, so one suspects the researchers were handed a conclusion and told to find data to support it.
As any researcher in the social sciences knows – with enough massaging and cherry picking of data, just about any conclusion, no matter how absurd, can be supported.
Strangely, McKinsey confuses correlation with causation – claiming repeatedly in its studies that a strong correlation exists between diversity and organizational success.
But correlation is not proof of causation.
Take, for example the fact that Europeans in the Middle Ages believed that lice were good for health since the bugs were rarely found on sick people.
Doctors of the time reasoned that people got sick because the lice left.
The real reason is that lice are highly sensitive to body temperature and even a small increase, such as in a fever, causes the lice to look for another host.
The thermometer had not yet been invented and so increases in temperature were rarely noticed. Observable symptoms appeared later, creating the illusion that the lice had left before the person became sick.
The correlation between the absence of lice and sickness was very strong, but it was definitely not causation.
One would think that our capacity for not confusing correlation with causation has advanced beyond that which existed in the Middle Ages.
Then again, it’s only been five hundred years since the Middle Ages.
What’s changed?
Evidence that diversity contributes to organizational success is virtually non-existent.
Claims that DEI initiatives have a positive financial impact have failed to hold up.
Investment funds focused on diversity have provided disappointing returns.
The performance of investment funds with names like USA Gender Diversity ETF have lagged the market by as much as 70%.
Funds that track the London Stock Exchange’s Diversity and Inclusion index have never done better than the market average.
But the bigger reason for employers backpedaling on DEI has been legal rulings against the discriminatory effects of Diversity.
DEI programs have been challenged in 8 US Courts of Appeals and in all cases the courts have agreed that individuals that participate in discrimination, i.e., corporate decision makers supporting racial and gender goals or preferences, are liable for any harm caused.
States have also enacted laws holding company officers and directors personally liable for knowing violations of anti-discrimination law, including having any racial quotas and preferences in hiring, recruiting, retention, promotion, and advancement.
Public enthusiasm for DEI has also declined.
Surveys from Pew Research, the General Social Survey, YouGov, and others show that interest in diversity and concern for racial and gender issues has dropped precipitously.
A recent survey by Gallup found that less than half the respondents think businesses should be involved in racial and gender issues.
This is hardly a surprise, because continued support for aggressive DEI programs requires suspending belief that there’s been a lot of progress on race and gender issues.
It’s like watching wrestling. After a while all but the most die hard fans get tired of it.
Incidentally, attendance and viewership of wrestling has also been declining in recent years. So maybe if people watched more wrestling there would be increased interest in diversity. Someone should ask Hulk Hogan to weigh in here.
What’s next?
While DEI isn’t about to disappear, diminishing interest creates an opportunity for less controversial programs to emerge.
MEI, short for merit, excellence and intelligence – is one.
Proponents of MEI say that it means hiring the best candidates for open roles without considering demographics.
MEI frames diversity as a byproduct of good hiring, not a goal in itself.
Perhaps the most telling statistic regarding DEI is that mentions of it and related topics are increasingly rare in the popular media – major newspapers and magazines.
In 2020 there were 2.5 mentions per million words.
By the end of 2023 that had fallen to 0.4 per million.
That’s food for thought, isn’t it?