Years and years of research have found that diverse companies perform better. So why are companies gutting their DEI initiatives?
In the past year, many very profitable tech companies — Apple, PayPal, Google, Meta to name a few — have laid off many people. They have done this to “maximize shareholder value.” I call this the Jack Welch strategy, named for the former General Electric CEO who laid off more than 100,000 employees to increase short-term stock value and created a company that long-term saw its market cap go from $ 450 billion to $ 200 billion.
One of the areas hit first and hardest by these layoffs was these companies’ DEI efforts. At the same time, marketing organizations at major corporations have become less diverse, according to the ANA’s latest report on diversity in the advertising and marketing industry.
Before we get to that, let’s make one thing very clear. Cutting DEI is exactly what not to do if you want to maximize shareholder value. There has been a huge amount of research on diversity in the workplace. It overwhelmingly shows that companies with greater diversity and inclusivity at all levels outperform those with less.
Definitions: Diversity is the presence in an organization of people reflective of the society in which it exists and operates. Inclusivity is a work environment where everyone is treated fairly and respectfully and has equal access to opportunities and resources. Equity is the fair treatment for all people, so that the norms, practices, and policies in place ensure identity is not predictive of opportunities or workplace outcomes.
Diversity is good business
Here is a tiny sample of that research:
- The top 100 Fortune 500 companies have more diverse boards than the other 400 companies. (Forbes)
- Ethnically diverse companies are 35% more likely to yield higher revenue, while gender-diverse companies are 15% more likely to yield higher revenue. (McKinsey)
- Companies with the highest number of women on top management teams have a 35% higher return on equity and 34% higher total return to shareholders than companies with the lowest number. (Catalyst)
It is no coincidence DEI is being cut at a time when reactionary billionaires (some of whom lead or are on the boards of tech companies and/or run tech venture capital funds) are on the warpath against DEI and any attempt by organizations to better resemble the population of the nation. They have funded numerous court cases to block efforts to remediate the nation’s long history of discrimination based on race, gender and sexual orientation. Although difficult to prove, there have likely been ripple effects from these efforts.
Less diversity in marketing
The ANA seems to see the connection.
The “diversity report is especially needed as [DEI] support seems to show signs of wavering, withering under the weight of a recent Supreme Court ruling and the blowback from several transgender marketing dilemmas,” CEO Bob Liodice writes in the introduction to the survey (no registration required).
Last year, ethnic diversity in ANA members’ marketing organizations dropped from 32.3% in 2022 to 30.8%, the same as in 2021, according to the report.
“Ethnic diversity of the advertising/marketing industry remains below the 42.2% diversity of the total U.S. population,” the report states. “And after making progress in 2022, the decline in 2023 is very disappointing. Ethnic diversity remains particularly poor for the African American/Black and Hispanic/Latino segments.”
Losing ground
The number of Hispanic/Latino marketers declined dramatically, from 10.9% in 2022 to 9.5% in 2023. This was true at nearly every job level: At the senior level, it was relatively small, going from 8.2% to 7.8%. However, at the entry level, it went from 11.8% to 10.0%. This “was especially disappointing since the Hispanic/Latino segment skews younger than the general population and we would have expected an increase here.” Overall, ethnic diversity at this level dropped from 34.2% in 2022 to 31.3% in 2023.
The Alliance for Inclusive and Multicultural Marketing (AIMM), which helped author the report, said this drop may be the result of increased outreach elsewhere. “During the last several years, corporate America has prioritized the hiring, development, and retention of Black employees,” AIMM’s team wrote in the report. Corporations have a history of viewing diversity as a zero-sum game. Hiring someone from a marginalized community checks off the necessary box. That person can frequently be spotted in the photos illustrating corporate reports. That’s tokenism, not diversity.
Progress is being made at the top levels of marketing and advertising organizations. Last year, ethnic diversity at this level increased to 27.9% from 27.4%, the second-highest level in the six-year study period. One reason for this is the increase in diversity among CMOs, which hit 17.3% ethnic diversity (up from 14.6%), the highest in the report’s history.
Marketing and advertising have a stellar record in terms of gender diversity. Women comprise 69.5% of the ANA member workforce and 57.7% of senior leadership — both are six-year highs.
Conclusion
Most trade associations are partisan cheerleaders for their industries. Many started touting DEI in 2020 following the murder of George Floyd and the rise of the Black Lives Matter movement, only to drop it within a few years. The ANA has been producing its diversity report annually since 2018. The research and analysis are thorough. It is clear about the problems, offering possible reasons for them and a thorough list of remedial actions that can be taken. We can only hope others follow its lead.
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