President Trump’s DEI backlash: should HR be worried?

The backlash against diversity, equity and inclusion policies has gathered pace since Donald Trump’s inauguration but talent and inclusion businesses in the UK are unruffled by the development, explaining to Adam McCulloch how policies have evolved away from the simplistic approach that had riled some political figures.

After another day of polite, sophisticated and delicately curated conversation about the world’s issues at the World Economic Forum annual meeting at Davos, Switzerland, Donald Trump’s session-closing address was somewhat jarring. It felt as if the rude boy at the back of the class, who hadn’t been listening to anything that had come before, had suddenly decided to blurt out his random thoughts.

Of course, nobody would expect anything less from the disruptor-in-chief, and nobody has ever quite got to the bottom of what they need to take seriously and what can be ignored.

But on one issue, DEI, Trump’s message was hard to shunt aside. He said he would “cancel all discriminatory diversity equity and inclusion nonsense”, adding that the policy of the United States was that there were only two genders, male and female. Not much room for nuance there.

But delegates knew what to expect; executive orders had been issued earlier in the week, and in the US the backlash against DEI seemed to have got under way in parallel with businesses introducing fresh anti-discrimination and equality policies after the unprovoked killing of a black man, George Floyd, by a white police officer.

In recent months a wave of US firms has scaled back, ended or rebranded their schemes to adjust to the new politics.

Did something go wrong?

But what is really going on? The diversity session at Davos queried how companies could rollback initiatives in the face of evidence that they were working. Quoting a McKinsey report, session chair Jochen Wegner said: “Diversity initiatives in many companies have been highly successful, playing a key role in their overall performance, but for some reason this evidence-based statement seems strange this year – for a huge backlash to happen there must have been a lack of progress. Did something go wrong?” “Not really,” the session’s eminent speakers’ agreed.

Katy Talikowska, CEO of disability at work partnership The Valuable 500, told the meeting that the backlash was partly caused by fear: “There’s a lot of fear about language. We need safe spaces where people can say what’s on their mind. People are fearful of being cancelled.”

In any case, said Brazil’s Luana Génot, executive director, Identities Institute, why does everyone have to follow the US’s lead? “We should look beyond the US. For example, in Japan there are fresh initiatives to address the gender gap there. This is a global topic with local nuances.”

It was left to Duncan Crabtree-Ireland, the US executive director of Screen Actors Guild-American Federation of Television and Radio Artists, to state the obvious: “What went wrong is the politicisation of DEI. All the folks who need better inclusion in the workplace are all of us … there’s no reason why it should have become a political football. There’s nothing wrong with the concept. Smart companies are realising they can opt out of this weaponisation by using different language such as avoiding ‘woke’.”

Is the economic case for DEI watertight?

The most recent McKinsey Diversity Matters report (Diversity Matters Even More, December 2023), appears to prove the Davos speakers’ point. It found that companies committed to diversity showed “a 39% increased likelihood of outperformance for those in the top quartile of ethnic representation versus the bottom quartile.” Similarly, “companies with representation of women exceeding 30% (and thus in the top quartile) are significantly more likely to financially outperform those with 30% or fewer.” High ethnic diversity showed an average 27% financial advantage over firms with low diversity.

So the case is proven isn’t it?

No, says Alex Edmans, a professor of finance at London Business School, who has a very hawkish eye when it comes to studies full of confirmation bias. He tells Social Science Space when it comes to diversity producing better financial results, “that’s something that I would love to believe, as somebody who believes in the importance of sustainability. I’m an ethnic minority, so I have personal reasons to want that to be true.

“And there’s tons of studies out there by luminary organisations such as McKinsey, or BlackRock, even a regulator like the Financial Reporting Council, claiming there’s a clear link between board diversity and financial performance. But when you look at those papers, there’s a huge amount of flimsiness to this, the evidence does not at all support the conclusions.”

Companies must be more analytical on DEI

Davos could have done with Edmans’ input, as it could Professor Binna Kandola, who runs inclusion consultancy Pearn Kandola. Far from being downcast about the DEI backlash, he embraces it as an opportunity, not that he’s in favour of Trump’s language or actions such as sacking federal DEI staff. He tells Personnel Today: “This general rollback on DEI needs to happen, even though Zuckerberg’s comments are disgraceful.” Mark Zuckerberg, head of Meta, had said corporations had been “neutered” by femininity and needed more “masculine energy”.

In many cases, companies, in any case, were not doing DEI properly. “People always come up with targets,” says Kandola. “If targets were the solution why are we doing all this research? Targets divide opinion. People who like them are usually the beneficiaries of them. Other people feel ‘what about me?’ and feel disenfranchised by diversity and inclusion.

But won’t the language used by Trump and his “tech-bro” peers lead to more blatant discrimination in the workplace? “Legislation still exists and people do care about DEI so there shouldn’t be bad consequences. But Zuckerberg’s comments risk an increase in sexual harassment and prejudicial decisions. That will just lead to trouble for his organisation” – not a climbdown by other companies on discrimination.

Diverse talent pools

Raj Tulsiani, founder and CEO of talent business Green Park, concurs broadly with Kandola. The DEI agenda is now bound up with culture and talent, it’s no longer about performative policy, tick boxes and superficial identity. He tells Personnel Today: “Who among our clients has ever said, ‘We have too many women on our board’ or ‘We don’t want to expand our leadership options’? None. Not a single one. No client has ever claimed they’re so confident in their retention, pay equity, or employee value proposition that innovation in talent strategy is unnecessary. Why? Because they understand the competitive reality of the next few years. They know that securing an optimal share of the talent pool and leveraging diversity to increase representation may well define their success as leaders.”

He agrees with Luana Génot at Davos that the position of the US is not global policy. “The world’s leading organisations respect the influence of the US but remain steadfast in their commitment to growth and productivity. Diversity, equity, inclusion, well-being, and belonging aren’t just moral imperatives; they’re business drivers, essential to fostering advocacy and trust among competitors, colleagues, and customers.”

Tulsiani says firms that turn their backs on inclusion will in today’s world become less competitive. “Leaders who truly understand business recognise that without modern management techniques, like driving productivity through inclusion and engagement, their brands risk falling behind.

Inclusion is an integral part off culture and engagement, he says: “The cheapest way of dealing with productivity is to increase engagement – and you cannot do this without increasing inclusivity. It’s really binary. Some firms have been playing at DEI and they’re not going to play anymore – fine.”

What even is ‘diversity’?

Professor of organisational psychology and director of the Corporate Research Forum Rob Briner points out that the doubts about DEI that had already surfaced were because “People were just throwing lots of stuff at it, worried about appearance. It was like Live Aid – just giving money won’t work. It’s a misunderstood problem.” He points out that even the word “diversity” is impossible to truly pin down. “If you say you want ‘diversity’ what does that mean – there are so many types of diversity. Some forms of diversity are good in certain roles, others a bad for outcomes … the data is mixed.”

This echoes a point made by Professor Kandola, that diversity is impossible to pin down. He says: “Older people face a lot of discrimination – they are being told they don’t have potential. They are often undervalued and disrespected and made to feel they are hanging around. So why not older people? Why are targets so often just applied to white women?” There is also obesity discrimination, wage discrimination, and discrimination on the basis of faces that are considered good-looking, Prof Kandola says. The list appears endless.

The UK dimension

On a more practical level, many organisations in the UK will be watching developments in the US with interest. Companies such as McDonald’s may be rowing back on its DEI initiatives but closer inspection reveals that the core objectives may remain in place and just the language, the branding and a few subsidiary projects have changed – an approach that Duncan Crabtree-Ireland alluded to at Davos. And, as Apple recently discovered, not all shareholders go along with the backlash.

Matthew Newnham, employment partner at Birketts, reminds us that while in the US the Supreme Court effectively ended affirmative action in its June 2023 ruling in Students for Fair Admissions v Harvard thus encouraging the DEI backlash, there is no appetite in the UK for rolling back court rulings and legislation.

Newnham says: “The legislative framework in the UK, under the Equality Act 2010, places obligations on employers to take certain positive steps in favour of those employees (or prospective employees) with ‘protected characteristics’ and employers may increase the risk of future litigation if they row back on their current approach. Not only is there a legal risk of non-compliance, but the risk of bad publicity and damage to reputation cannot be underestimated.

UK legislation

“The recent introduction of the new statutory duty on employers to take ‘reasonable steps’ to prevent sexual harassment, in force since 24 October 2024, has made it even more important for employers to proactively consider what can be done to reduce incidence of sexual harassment, with significant financial penalties for a failure to comply. Under the government’s recent Employment Rights Bill, this duty looks set to be further strengthened in the future.”

He argues that turning back on DEI would expose UK employers to more tribunal claims and would further risk their talent pipelines.

The UK government, in any case, is going further to protect policy around discrimination against minorities. Under the Equality (Race and Disability) Bill, measures such as extending pay gap reporting to ethnicity and disability for employers with more than 250 staff and extending equal pay rights to protect workers suffering discrimination on the basis of race or disability, will be introduced.

Lucy Fullwood, operations director at Insight Global, an international recruiting and professional services company, feels, like Newnham, that UK companies should remain committed to DEI, while focusing on its tangible benefits: “We predict UK companies will remain steadfast in their commitment to promote diverse, equitable and inclusive initiatives in the workplace, not only as a moral imperative, but as a business advantage. A representative workforce provides unique perspectives, approaches, and diversity of thought that fuels success. As a global provider of talent solutions, we recognise organisations must be able to attract and recruit diverse talent, and commit to creating a culture of belonging to retain employees.”

Perhaps the headline-grabbing announcements in the US are just further red meat for the “war on woke” foot-soldiers and an opportunity for the tech-bro oligarchs to ingratiate themselves with Trump, leaving businesses to get on with acquiring talent as best they can.

It would be no surprise if reality collides with forceful words, or that Trump’s allies get into a muddle. As Trump admirer Sarah Palin, the former Alaska governor, said when welcoming the anti-DEI crusade – without irony: “Well, I think President Trump is following the science and there are only two genders. God created man and woman.”

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