Performance vs. Pronouns

Debunking the DEI bunkers

Is there a world in which shareholders in Apple, Microsoft, JP Morgan Chase and Costco believe their companies are underperforming?

Here are the stats from the last 10 years:

• JPMC + 514 % (far outpacing its competitors in financial services).

• Costco + 716%,

• Apple + 785%,

• Microsoft + 1000% under CEO Satya Nardella

The S&P average over the same period? An increase of 173%.

One thing the top performers listed here have in common is a robust commitment to DEI.

So it should hardly come as a surprise that McKinsey’s latest survey of 1,265 companies in 23 countries found that those with strong DEI programs overperform by an average of 35%. The authors of the report sum up their findings as follows: “The business case for DEI not only holds, it continues to grow even stronger.”

Hard numbers like these would seem to be persuasive, to shareholders above all. Yet the National Center for Public Policy Research, the right-wing think tank leading the charge against corporate DEI initiatives, has come up with the counterintuitive idea of trying to persuade shareholders to require the companies they invest in to investigate and report “potential risks that diversity programs could pose to profits.”

Really?

These misguided efforts got a boost on Jan 21, when the one-day old US administration released an executive order requiring regulatory agencies to “identify the most egregious and discriminatory DEI practitioners” and propose potential legal and regulatory actions in response. Like NCPPR, the new administration appears to believe that DEI is undermining corporate performance, as well as discriminating against the demographic that actually holds 91% of top leadership positions in Fortune 500s and 80% of all household wealth. No need to name that demographic.

I’m not a numbers person, but the numbers clearly show that the anti-DEI crowd has no business case to make at all.

Instead, ideology is driving this particularly ill-timed effort to reverse one source of America’s recent ramped up competitiveness, which has been especially noteworthy in the wake of the pandemic. As I noted last week, other countries are now getting the message that both gender and ethnic diversity are good for business, and therefore desirable to pursue.

And they’re getting on board just as the new US administration, and the various think tanks and “influencers” who support it, are urging companies with historic levels of profitability to abandon their leadership on DEI.

Some organizations are responding to the challenge with cosmetic changes to their language. The Society for Human Resource Management, the world’s largest association for HR professionals, has rather cluelessly suggested switching the letters around to IED.

Others, including Harley Davidson, Meta, Molson Coors, Caterpillar, Boeing, and Tractor Supply, are proactively dismantling or cutting back on their commitments.

But others are not backing down. The companies whose numbers are cited at the top of this newsletter, as well as others with long-standing programs and shareholders who don’t particularly want to rock a very profitable boat, have firmly proclaimed their commitment. As JP Morgan Chase CEO Jamie Dimon responded when queried about anti-DEI activists on CNBC: “Bring them on!”

Those who, lacking a business case, remain exercised about the supposedly malign effects of DEI appear to have little but ideology to fall back on. Which is ironic given that the social media activists (I will not name them) leading this charge are doing so in the name of destroying “woke ideology”– a phrase that’s starting to sound as embarrassingly out-of-date as groovy, man.

As even programs that have demonstrably succeeded come under attack, let’s take a moment to remember that DEI, D&I, I&D, or whatever you choose to call it, is less a manifestation of political correctness than a commonsense and ultimately profitable response to a demographic imperative.

To wit:

• The global talent pool has become increasingly diverse

• People from outside the traditional leadership mainstream have shown themselves to be desirable employees because they bring fresh perspectives and view old problems with outsider eyes

• People from outside the traditional leadership mainstream are also more likely to feel– and to be–excluded

• As a result, they may struggle to bring their best talents to work

• If this struggle persists over time, they are likely to disengage or simply leave

• Their organizations will lose the potential benefits of their contributions

• Their colleagues may start to question whether they belong

• Suppliers, contractors, clients and customers that maintain their commitment diversity and inclusion may decide to take their business elsewhere

This is reality. And it’s a reality that can be most fruitfully addressed by doing what it takes to create cultures of inclusion. The programs that support these efforts do not always meet their goals. Nor has their heavy reliance on efforts to surface unconscious biases been especially effective, as we will be discussing in the weeks ahead. But the evidence seems clear that Apple, Microsoft, JP Morgan Chase, Costo, and other overperformers will continue to reap the benefits of DEI.

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