With many experts anticipating an economic slowdown in 2023, there is a lot of uncertainty in the world of work right now.
When uncertainty sets in, many organizations go into recession-proofing and budget-cutting mode – and must make decisions about where to reduce spending, what efforts they will continue to prioritize, and how to face the challenges of an economic downturn. For some, Diversity, Equity, and Inclusion (DE&I) initiatives might be pushed down on the priority list or put on pause until the economy stabilizes.
In these cases, HR and DE&I leaders must make it clear that completely de-prioritizing all DEI initiatives is short-sighted thinking. Whether the economy is good or bad, maintaining some degree of focus on DE&I strategy is a business imperative – not a “nice to have.” Evidence suggests that continuity in DE&I efforts, even during a recession, will pay off in both the short and long term.
So, what’s the right approach for your company? Here are three arguments to consider:
1. History shows investing in DE&I during a recession may have financial benefits.
While there is much we don’t know about the economic challenges of 2023, we can look at historical data to see what successful companies did during the Great Recession, despite the setbacks and challenges they faced.
A recent report from Great Places to Work looked at data from 2006 – 2009 and found that DE&I “efforts represent[ed] a potent source of strength for organizations as they weather[ed] tough times.“ The report goes on to examine key employee groups – such as women, people of color, and front-line workers – to see how they performed when met with inclusivity, innovation, fairness, and integrity. And while overall, the “S&P 500 suffered a 35.5 percent decline in stock performance…companies whose key employee groups had very positive experiences posted a remarkable 14.4 percent gain.”
But it didn’t stop there. Even after the recession ended, those same companies saw their stock performance continue to increase by “35 percent, while the S&P 500 had just a 9 percent gain. That’s nearly 4X outperformance.” These numbers speak for themselves and should be considered when determining whether to continue prioritzing DE&I efforts, or slow them down.
2. Stepping back from DE&I could have a negative impact on talent retention and attraction.
Most companies drummed up their DE&I efforts in 2020, stating they would prioritize inclusive values and commit to building a more equitable workforce. And while these grandiose promises were mostly made in good faith, it was also a necessary step if companies wanted to recruit and retain top talent.
That’s because, over the past 18 months or so, Maslow’s hierarchy of needs has essentially flipped on its head, and HR leaders everywhere needed to reevaluate their company’s employee value proposition and what they were offering their current and potential employees. Things like high pay and benefits were outweighed by people wanting to feel valued and have a sense of purpose – and they wanted to know just how committed their employer was to creating an equitable and inclusive workplace for all. In fact, according to a CNBC poll, 80% of employees want to know about a company’s DE&I strategy during the interview process.
Even if organizations are hiring less during recessions, they will still need to retain their best talent. And if companies now start to backtrack on those promises made in 2020 – or say one thing externally, but fail to carry it through internally – top talent will start to notice, and a lack of trust will set in. Remember, in both good and bad economic times, people are an organization’s greatest asset. And it’s critical that leaders focus on what will keep them engaged, motivated, and productive.
3. The work to embed DE&I in the E2E employee experience is still a work in progress.
DE&I is about more than just recruitment, training, and cultural celebrations. It’s about creating a more inclusive and equitable culture that touches every part of the employee experience – from the first time a candidate sees a job posting to their exit interview. And for many, there’s still a lot of work to go on this front, but it’s critical.
Regardless of available budget or resources, leaders can still look at the entire employee lifecycle journey and audit where they need to make key improvements around inclusion. Do job ads and careers pages need to be updated to include inclusive language and photos? Where can DE&I be further embedded into the overall business strategy and ways of working? Do managers need further training around what inclusion looks like when done well? How can the desired behaviors and actions be implemented? These are just a few of the questions to ask when starting to embed DE&I across the entire employee experience and company culture.
Ultimately, business strategies will not stop during a recession, they will simply shift – shouldn’t DE&I efforts do the same? Knowing that organizations that prioritize long-term thinking during recessions are the most resilient and poised for success, it’s important that HR and DE&I leaders position DE&I as an imperative business strategy.