As organizations prepare for a post-pandemic world, restructuring and reorganization to account for lost revenue in 2020 likely will be on the radar for many in 2021. Employers should be careful, though, not to backtrack on progress made last year toward diversity, equity and inclusion (DE&I).
"Organizations have become increasingly vocal about committing to diversity and inclusion (D&I) as core priorities, but the reality of impending cuts and restructuring has HR leaders concerned that hard-fought gains in these areas are at risk," said Michael E. Brewer, chair of Baker McKenzie's global employment and compensation group.
"Companies are trying to navigate a path forward that balances the complexities of D&I goals alongside plans to redistribute and reallocate their workforces—it can be a tall order," he said in a statement announcing the results of the global law firm's new Global Employment Market Survey.
A majority of the 250 HR leaders and employment law attorneys it surveyed are concerned that marginalized groups will be impacted in the wake of reorganization or restructuring. The September 2020 survey was conducted in Asia, Europe, and North and South America across six sectors—industrial; consumer; energy and infrastructure; financial services; health care; and technology, media and telecommunications.
Respondents' companies had annual revenue of between $100 million and $5 billion. Questions about diversity, equity and inclusion were one component of the survey.
Downsizing has already started, 17 percent said, and 66 percent said staff reductions are planned for the next two years.
"The lessons from previous crises tell us there is a very real risk that inclusion and diversity may now recede as a strategic priority for organizations," consulting firm McKinsey & Co. wrote in its May 2020 report Diversity Still Matters.
"This may be quite unintentional: Companies will focus on their most pressing basic needs—such as urgent measures to adapt to new ways of working; consolidate workforce capacity; and maintain productivity, a sense of connection, and the physical and mental health of their employees."
Many businesses "literally won't be able to keep their doors open" post-pandemic if they don't reorganize, Brewer said. Organizations must consider the risk to their reputation and any social backlash if reorganizations are not properly handled, he pointed out. Assessing the potential impact of restructuring becomes critical.
"We're in a world where—restructuring or not—companies are held accountable for their diversity, equity and inclusion efforts," Brewer stated. "As they reconsider their workforces, senior executives must be hyper-vigilant about interrupting potential bias in decision-making, particularly with regard to promotions, redundancies, compensation changes, work arrangements and related issues."
The first step, he told SHRM Online, is using surveys and analysis to understand diversity at one's organization and making sure it is maintained in the face of restructuring and reorganization.
"The companies that recognized that women and minorities have, over time, been disproportionately impacted during layoffs ... will have a better lens to look at future restructuring, layoffs and risk," he said. "It's a mindset issue where D&I are an integral part of the business."
Company leaders must ask themselves, for example, who is managing layoffs.
"If all the decision-makers are white males in their 50s, those [restructuring] decisions are going to be different than if the decision-makers are a group of inclusive, diverse leaders. One question I ask clients: Is the chief diversity officer involved in the restructuring? Sometimes I get, 'No, I hadn't thought of that.' "
Conducting an in-depth analysis of the objectives for restructuring and the rationale for certain actions, can offer a more complete picture of the effect those decisions have on factors such as race, gender, age and seniority, so organizations can plan accordingly.
[SHRM members-only toolkit: Avoiding Adverse Impact In Employment Practices]
One strategy for employers is to conduct an adverse impact analysis to determine if certain protected classes would be disproportionately affected by hiring, promotion, or training and development practices, as well as transfers and layoffs. Most companies use these analyses to discern whether there is a statistically significant disparity based on race, gender or age, Brewer said.
"For instance, a company says we need to cut costs and we are going to reduce our workforce by selecting the highest-paid employees in a particular department; chances are, you're going to have an age problem because of the correlation between age and salary," he noted. "Many companies engage an economist expert, or consultants in this space, who can run the adverse impact report."
Dawn Frazier-Bohnert is executive vice president, global DE&I officer, at Liberty Mutual Insurance, which has won numerous awards for its DE&I work. She noted that DE&I should not suffer during reorganizations if it is part and parcel of the business, not merely an initiative.
"Do an assessment," she advised. "Is DE&I looked at as this extra 'thing'? Is it built into your talent practices? Is it built into your strategy?
"If it's not integrated," she said, "it's likely to be put on hold for a while, but if your leadership is saying, 'This is truly how I'm going to run my business,' then it's not easy to separate or take apart [from the rest of the company]. It's building that business case."
The post-layoff phase also sometimes gets ignored, Brewer observed. Employers should consider how their DE&I programs will continue to flourish, and make sure all appropriate stakeholders are involved.
When focusing on executing cost-cutting measures, a company may get everything right in preparing for that next phase, Brewer said, but "what is the effect or what will be the effect of the restructuring on the company's D&I program? How do they measure and analyze it? Include that in any plan."