
Diversity, equity, and inclusion (DEI) programs have taken center stage in corporate America, with companies investing billions into these initiatives. But here’s the uncomfortable truth: when poorly managed, DEI becomes a drain on your resources. For many businesses, what started as a well-meaning effort to create inclusion has become a costly misstep with no measurable return on investment (ROI).
The Hidden Costs of DEI Mismanagement
When DEI initiatives are misaligned with business goals, they become performative only and offer little value beyond optics. Ultimately, this leads to a waste of valuable talent and financial resources.
Expensive DEI Training Without Impact
One of the most glaring examples of mismanagement is the tendency to pour money into DEI training without lasting impact. Companies spend millions on one-time workshops and seminars, hoping to check the "diversity" box. But here’s the reality: these efforts don’t create real change. A study by the Harvard Business Review found that diversity training often fails to alter employee behavior. So why are corporations spending so much on DEI training?
The Cost: Beyond the financial expense, ineffective training leads to disillusionment among employees who see these programs as corporate lip service and lacking purpose, resulting in disengagement and lower productivity. Some grow to resent DEI because of how it is represented.
Diversity Optics: When Numbers Don’t Tell the Full Story
Many companies obsess over increasing diversity numbers, believing that more representation automatically equals "inclusion" and, therefore, success. However, without a strategy for harnessing diverse perspectives, diversity becomes a massive financial misstep.
For example, companies may spend heavily on hiring diverse candidates only to see high turnover rates. Performative diversity efforts fail to create an inclusive environment where all employees are seen as valuable and treated like professionals. The lack of respect leads to dissatisfaction, and a cycle of recruiting and replacing talent becomes a costly burden.
The Cost: Turnover is expensive. According to a Center for Human Capital Innovation study, replacing a senior executive can cost up to 250% of their annual salary. The financial burden quickly increases when employees leave due to performative DEI.
ERGs: The Double-Edged Sword
Employee Resource Groups (ERGs) are often seen as a staple of DEI programs, but many companies fail to tie ERGs to broader business outcomes. Instead, ERGs become social clubs with no measurable impact on performance or innovation. They often become a “safe place” for employees to get together and complain about what the company is doing wrong. Worse, they create a siloed environment where diverse perspectives aren’t integrated into the company’s overall strategy.
The Cost: When not properly managed, ERGs consume resources, including employee time away from productive activities and company funding, because they fail to deliver tangible benefits. Companies spend on group activities and events that, while well-intentioned, fail to move the needle on innovation or business performance.
DEI Donations: Misplaced Generosity
Corporate donations to various organizations are another common misstep. While supporting social causes can work for some, most fail to confirm the alignment of values before making large financial contributions. Without ensuring that these causes align with their business mission, the “feel-good” approach backfires.
The Cost: Misaligned donations represent a significant drain on resources, often without any tangible return regarding brand equity or customer loyalty. And frequently, it comes at the expense of the company’s reputation.
The Bigger Picture: How Mismanagement Hurts Business Performance
When companies invest heavily in DEI programs that don’t deliver, the financial burden is just the beginning. Poorly executed DEI efforts can lead to:
Lower employee morale: Disconnected or performative DEI initiatives create division between employees, especially when they realize these efforts are more stunts than strategies.
Decreased productivity: McKinsey & Company research shows that companies with diverse teams outperform their peers by 35%, but only when diversity is leveraged effectively.
Reputation risk: When companies tout their DEI efforts without delivering, they open themselves to public scrutiny and backlash. This risks damaging brand trust and has led to boycotts and negative media coverage.
What’s the Solution?
If your DEI programs drain resources and deliver no ROI, it’s time to rethink your approach. The goal isn’t to spend more but to align DEI with your business strategy.
1. Stop the Performative Acts
Treat DEI like any other business initiative with clear goals and measurable outcomes. Leaders must ask themselves whether their programs are truly driving performance and innovation or just ticking boxes. If it's the latter, it's time for a change.
2. Integrate DEI into Core Business Functions
DEI shouldn’t be confined to HR. It must be integrated into operations, product development, marketing, and overall company strategy. Companies that successfully leverage diversity make it a core part of their business model.
3. Measure and Adjust
Like any business investment, DEI efforts should be measured and adjusted regularly. Track representation, engagement, innovation, and retention. If the numbers aren’t improving, reevaluate your approach.
Don’t Let DEI Drain Your Business
The costs of mismanaged DEI initiatives are too high to ignore. From wasted resources to high turnover, the impact is real. However, with the right strategy, DEI can become a powerful driver of business success. By treating DEI as a business strategy that fuels innovation, retention, and growth, companies can transform it from a drain to a competitive advantage.
The question is, are you ready to make DEI work for you?
My book Black is NOT a Credential: The Corporate Scam of DEI covers all this and more. Get your copy and apply the principles to your business.
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