While companies across the U.S. are scaling back their inclusion, equity and diversity (IE&D) efforts, a new survey of 445 HR leaders by software firm Capterra revealed that many others have actually invested more heavily in IE&D in 2023.
The report found that over half (58 percent) of HR professionals with a dedicated budget for IE&D claim their companies are placing even higher importance on these efforts this year than previously. A majority of respondents (65 percent) say their budget actually rose in 2023.
"After seeing reports and speculation about DE&I cutbacks last year … and given the uncertainty around the economy, I fully expected businesses to report a decrease in DE&I budgets and prioritization in 2023," Brian Westfall, principal HR analyst at Capterra. "Instead, I found the opposite."
Among HR leaders surveyed:
- 86 percent agreed that the Supreme Court's decision to overturn affirmative action puts more pressure on employers to improve and monitor IE&D.
- 67 percent said they're investing more in dedicated IE&D headcount and diversity recruiting resources.
- 8 percent said their company's IE&D budget fell in 2023.
Why Are Inclusion and Diversity Budgets Growing?
Capterra researchers cited several factors that have influenced a rise in IE&D budgets.
The layoffs of inclusion and diversity staff in the tech industry didn't impact other private-sector employers. The report noted that the most significant IE&D cuts are set to take place in the public sector, where large state employers such as Texas and Florida passed legislation to eliminate such programs at public colleges and universities.
"I think the economy not spiraling as expected is playing a significant role" in employers keeping their inclusion staff, Westfall added.
In 2022, companies across the U.S. instituted hiring freezes, cuts to bonuses, and travel budget reductions as a way to "wait and see" what would happen with the economy and to start preparing for the worst, he said.
However, as Westfall explained, "when the clouds cleared and the chances of a recession dwindled, I think companies felt confident enough to keep spending on their important talent priorities, like DE&I.
"Despite the prevailing narrative that businesses are struggling right now, we find that companies are actually doing pretty well for the most part," he added. "A rising tide raises all ships, and that includes DE&I."
Three Ways to Elevate IE&D Programs
The report found that just 30 percent of HR leaders strongly agree that their company won't sacrifice IE&D during an economic downturn.
"I think DE&I programs got lucky that the economy didn't crash as expected," Westfall said. "But that doesn't mean they'll be safe from cuts if a recession actually takes place."
Westfall explained that organizations can emphasize IE&D's importance in three ways:
- Add rank-and-file employees to your inclusion and diversity leadership teams.
- Promote IE&D goals to all employees, not just managers and executives.
- Communicate IE&D benefits, events and progress more frequently.
Reports have indicated that investing in inclusion and diversity supports recruitment and retention efforts. Many employees, particularly young professionals, want their companies to commit to IE&D:
- A 2023 study showed that 44 percent of Generation Z and Millennial employees report having previously resigned from a job because the company's values—including those related to diversity and inclusion—did not align with their own.
- Another 2023 study, focused on corporate IE&D, revealed that 66 percent of employees believe their company should commit more time and resources to IE&D initiatives than they currently do.
"It's become abundantly clear that employees want their companies and leaders to invest in DE&I," said Janeen Speer, chief people officer at software company Benevity in Calgary, Alberta. "And there are real consequences that businesses face when they choose not to do so."