Why DEI is Not Dying in 2024

To respond to investor needs, pro-diversity legislation and shifting demographics, many larger global firms have been resourcing diversity, equity and inclusion (DEI) plans for decades. The business case for DEI is well-known and accepted for firms with global visibility to shifting trends. More often, DEI work poses different challenges for smaller organizations. Yet, smaller and local businesses will have increased pressure to adopt DEI practices given new legislation and external pressure.

• California became the first state to pass legislation requiring venture capitalist firms to release data on the diversity of the founders they are investing in by March 2025.
• Requests for proposals (RFPs) and investor criteria are increasingly shifting to include aspects of DEI, including DEI strategy and goals, representation numbers and pay-equity audits. They see the lack of diversity (especially at senior levels) as risky and not as profitable, even for smaller organizations.
• For growing organizations, the Nasdaq recently upheld the diversity requirement of at least two “diverse” board members, including at least one female board member and one member who is from an underrepresented minority group or identifies as LGBTQ+.

In an interview with Dr. Kristen Liesch, co-founder of Tidal Equality , “smaller businesses do not have the same excess revenue to fund DEI, nor do they have as many people internally skilled to lead DEI work. At the same time, they are not feeling the same social pressure that larger, more visible firms face.”

She adds, “smaller, local businesses have a close touch to the communities they serve. With more accessible DEI tools, they could embed DEI as they grow, making deeper impacts on a local level.”

How do these smaller or local businesses lean into DEI?

1. Be proactive, not reactive.
2. Start with inclusion before diversity.
3. Have a DEI road map for success.

Be Proactive, Not Reactive

People are very attuned to authenticity in DEI. When an organization hasn't traditionally spoken about issues of diversity and inclusion and suddenly starts speaking out, people question it. Was it the events of the summer of 2020? Is it because of the latest SCOTUS ruling?

It's important to address DEI issues before they become larger social issues so that they appear more genuine. That means DEI efforts need to align with the organization's purpose, and people need to be clear on why this is important to the organization, now and in the future. Ultimately, it's a competitive advantage to proactively prioritize DEI work when it's not in the news cycle or used as an effort to gain short-term visibility.

Start with Inclusion Before Diversity

It's tempting to start doing DEI work by hiring diverse talent. But diversity doesn't work without inclusion because people with diverse backgrounds will not stay if they don't feel included. That's why it's important to start with the culture first and make sure the organization has an inclusive work environment so that diverse talent is attracted and wants to stay long-term. The cost of turnover is, on average, 33% of a given salary , so not getting inclusion right can be costly.

Have a DEI Road Map for Success

Investors will commonly ask for representation numbers, as well as DEI goals. It's critical that business leaders have answers to those questions proactively. It's obvious when leaders are scrambling to pull their demographic or employee-engagement statistics. If it's the first time pulling together the data and looking at it through a diversity lens, it can be shocking.

Most organizations fail to mirror the communities they serve due to the lack of diversity, especially at the leadership levels. Even if the representation numbers aren't where leaders want them to be, having clear goals to get better is critical. For example, promotion, retention and hiring rates of those with diverse backgrounds can help show a greater commitment to improvement.

It is important to be clear about what historically marginalized groups the organization is committed to engaging more—people of color, women, those with disabilities or those in the LGBTQ+ community. DEI road maps also include initiatives like education and cultural celebrations or ERG support to show a clear commitment to investments in DEI. This shows a willingness to see DEI as a long-term strategy, much like investors do.

DEI legislation and investor pressure will persist. Organizations that are proactive versus reactive, start with inclusion before diversity and have a strong DEI road map are more likely to have success long-term.

Interested in learning more? Connect with me at NextPivotPoint.com .