CEOs wage war against Diversity, Equity, and Inclusion

Major names including Elon Musk are rejecting business diversity initiatives - and UK SMEs are following suit.

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Written and reviewed by:
Helena Young

Elon Musk has conjured up yet another storm on X (formerly known as Twitter). This time, the world’s richest man has taken aim at the implementation of diversity, equity and inclusion (DEI) recruitment strategies within companies.

On Wednesday, Musk, who employs thousands of people at Tesla, SpaceX, and X, derided DEI as “just another word for racism” in a post to his social network. Other business leaders, such as Lululemon founder Chip Wilson, have also spoken out against the concept, while experts have leapt to the defence of diversity.

Exclusive Startups research has shown that UK company leaders are less likely to prioritise DEI investment in 2024. Startups recently surveyed 546 small business leaders about their top priorities for the year ahead.

The results found just 6% of respondents said that DEI would be their main business priority in 2024, instead putting efforts into strengthening revenue or investment.

The DEI debate

DEI is a people management framework. While it aims to create organisational cultures and environments where everyone feels welcome and valued, some critics argue that it can prioritise identity over individual skills or achievements.

Musk’s comments first came after the resignation of Harvard University's first Black president, Claudine Gay earlier this week. Having previously challenged her focus on diversity, Musk then argued that DEI is unfair to white males like himself in business.

The X CEO’s posts have refreshed an ongoing debate in the culture wars about the term DEI – which has its roots in the 1960s civil rights movement – and its application in corporate settings.

Arguing for the initiative, Mark Cuban, owner of the Dallas Mavericks, took to X on Wednesday. He highlighted DEI's role in uncovering talent that can be obscured by traditional, often exclusionary, hiring practices.

“I take it as a given that there are people of various races, ethnicities, orientation, etc that are regularly excluded from hiring consideration”, he wrote.

DEI sidelined in troublesome economic climate

Whichever side entrepreneurs are on, the DEI debate has certainly heightened in today’s poor economic climate. Amid cash flow challenges, UK firms are increasingly scrutinising their spending and DEI has emerged as one of the first victims.

Often viewed as “non-essential” expenses by company accountants and finance directors, initiatives like DEI and sustainability can be tempting targets for cuts due to their less-tangible return on investment (ROI).

Our own survey results suggest that many UK business leaders are making the difficult decision to deprioritise DEI. Instead, diversifying revenue streams (24%) and acquiring funding (20%) given as the top two responses.

Expanding workforces came joint second in the list of priorities – which may sound a note of caution for best hiring practices if DEI is seeing little focus.

Primary business priority for 2024% respondents
Diversifying revenue streams24%
Expanding workforce20%
Acquiring funding20%
Investing in AI14%
Focusing on Environmental, Social, and Governance (ESG) initiatives6%
Enhancing Diversity, Equity, and Inclusion (DEI)6%
Advancing Corporate Social Responsibility (CSR)5%
Strengthening cybersecurity5%

DEI derision spells danger for talent wars

With one-fifth of our survey respondents reporting they plan to expand their workforce in 2024, companies must be wary of the potential pitfalls of short-sighted cuts.

Research suggests that DEI and sustainability efforts can be key to hiring right, by reducing employee turnover and opening doors to new markets and talent pools.

This is particularly relevant given today’s notable labour shortages. Without DEI investments, companies might find their recruitment process is hampered by a smaller, less diverse pool.

Reinforcing this perspective is Danielle Bowman, founder of Found by Few (a specialist diverse hiring firm) and guest judge for Startups 100's DEI shortlist.

Bowman emphasises that even in this economic climate, investing in DEI is “more important than ever” for businesses. “It's not just about customer buy-in,” she asserts, “but about hiring and retaining the best talent. You can't grow without either.”

Lululemon’s culture logjam

Another vocal detractor of DEI has been Chip Wilson, the founder of the popular gym wear firm Lululemon. In an interview with Forbes earlier this week, Wilson derided the idea of encouraging brand inclusivity.

“I think the definition of a brand is that you’re not everything to everybody,” he said. “You’ve got to be clear that you don’t want certain customers coming in.”

Wilson’s decision to shun DEI is strangely timed. As the business world becomes globalised, companies operate in an increasingly diverse landscape. Catering to new audiences has become crucial for improving market reach and preserving brand reputation.

While he might turn his nose up against the value of DEI for business performance, Wilson’s own views have done much to devalue Lululemon in the eyes of investors and customers.

In 2013, after he said the company’s leggings don’t work for some women’s bodies, thousands of Lululemon customers reacted in anger. The firm was forced to post an apology on X, saying that Mr Wilson’s remarks were not reflective of the company’s stance.

Public figures associated with a brand can significantly impact its image and organisational culture. When such figures express views deemed offensive or discriminatory, it can alienate customers and damage brand trust.

Written by:
Helena Young
Helena is Lead Writer at Startups. As resident people and premises expert, she's an authority on topics such as business energy, office and coworking spaces, and project management software. With a background in PR and marketing, Helena also manages the Startups 100 Index and is passionate about giving early-stage startups a platform to boost their brands. From interviewing Wetherspoon's boss Tim Martin to spotting data-led working from home trends, her insight has been featured by major trade publications including the ICAEW, and news outlets like the BBC, ITV News, Daily Express, and HuffPost UK.

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