DEI isn’t about profit, but it makes profit!
When DEI is done right, it’s a win-win. It’s not just about doing the right thing (though it absolutely is that); it’s also about smart business. We’ve seen the studies: diverse companies are more innovative, their employees are more engaged, and their bottom line benefits. It’s not a coincidence. Now, we have seen a deluge of companies, like Disney, facing scrutiny and backing away from their DEI initiatives. It is often forced because of political pressures and debates about the scope and focus of such programs. I would love to see a list of companies that have completely ended DEI initiatives. I have divested many of these companies from my portfolio because it shows poor leadership if your focus on diversity is not improving the bottom line. We have seen companies face lawsuits alleging reverse discrimination in their DEI programs. Yes, these situations are complex and nuanced. This makes it even more important to understand why DEI is crucial and how to implement it effectively. It becomes an integral part of the business, not something easily politicized, discarded or legally challenged.
Think about it: when you bring together people with different backgrounds and experiences, you get a wider range of perspectives. That leads to fresh ideas and solutions—things you might never have considered with a homogenous team. McKinsey’s research supports this, showing a clear link between gender diversity in leadership and higher profitability. This kind of innovation helps companies weather economic downturns and stay competitive, and it also allows them to better connect with and understand an increasingly diverse customer base.
And it’s not just about coming up with new ideas. When employees feel included and respected, they’re more invested in their work. They’re more productive, creative, and collaborative. According to Gallup’s research, a diverse and inclusive workplace actually has significantly higher cash flow per employee. This is what we want from the companies we invest in. Diversity directly affects the bottom line, regardless of the current political or economic climate.
Ultimately, all of this translates to better financial performance. Diverse companies attract and keep top talent, are better at innovating, and are more attuned to the needs of a diverse customer base. Harvard Business Review found that companies with diverse management teams see a real revenue boost due to innovation. These long-term benefits shouldn’t be sacrificed for short-term cost-cutting measures or in response to external pressures.
No one said implementing DEI is easy. It takes real effort and commitment. Often, through trying to be inclusive, we see examples of reverse discrimination instead of accepting the natural culture of your employees and bringing in the best people regardless of background. But here’s what I think is key: First, leadership has to be genuinely on board – that’s crucial. Then, you need clear, measurable goals and ways to track progress. You must build a culture where everyone feels welcome and respected and provide the training and education to make that happen. Too often, companies and their leadership are blind to things outside of their own upbringing. One could almost call them asleep (I wonder what happens when you aren’t asleep any longer.) And finally, you have to hold yourself accountable – track your progress and adjust as needed. This also means being prepared to address challenges and criticisms constructively and to clearly articulate the value and purpose of your DEI efforts while ensuring those efforts are legally sound and compliant.
DEI isn’t just a box to tick. It shouldn’t be a fair-weather initiative or one easily swayed by political winds. It’s an ongoing process. But when it’s done well and embedded in the company’s very fabric, everyone benefits—including the company’s bottom line, especially during challenging times.