The diversity, equity and inclusion backlash, explained

When George Floyd was murdered, many Americans wanted to do something. Some protested; others pushed to defund the police. The business community, looking to do its part (and receive favorable media attention), went on a diversity, equity and inclusion (DEI) hiring spree, bringing on highly-paid executives – mostly racial minorities – to create programs to make their workplaces more attractive for minorities.

But then the economy began to slow. Want to guess what happened next?

According to a recent report from HR consulting firm Revelio Labs, DEI executives were terminated at a much higher rate than all other executives in 2022. Amazon, Applebee’s and Twitter were among the corporate giants that made significant investments in their DEI executives amid a surging economy fueled by rising household wealth and pandemically-bored consumers buying their products.

But the pandemic is over, and the economy is no longer surging. So, they have fired many of those same DEI executives. These companies are not alone in rethinking their investment in DEI managers. Revelio reported that more than 300 DEI professionals left their roles in the last half of 2022 at firms affected by layoffs, and entire DEI departments “were likely eliminated in the bloodbath.”

After Floyd’s murder, DEI job postings rose by 123 percent. That didn’t last long. In fact, DEI job listings, according to a Bloomberg report, have fallen 19 percent over just the past year. The same goes for overall DEI investments (which are mainly salaries).

According to a survey from job site Glassdoor, investment in DEI programs increased to 39 percent in 2020 and peaked at 43 percent in 2021. That number then fell to 41 percent in 2022 and is expected to fall further in 2023.

Does that mean businesses have lost their concern for racial justice? That they don’t desire diversity? Not at all. I talk to countless business owners and managers every year, and I can’t identify a single executive who doesn’t desire diversity. They appreciate the value that workers from different cultures, countries, races and genders can provide to their organizations. They want to give others an opportunity to grow and succeed. They understand that U.S. demographics have changed and want their company to reflect that change.

In 1960, white Americans comprised 80 percent of the U.S. population. By 2020 that number had fallen to 62 percent. Our Black population has grown by 88.7 percent since 2010, according to the U.S. Census Bureau. But these changes have occurred over decades. Hiring diversity is happening and will continue to happen. But it won’t happen overnight no matter how much money you throw at it. Business executives are now learning this fact. They’re not cutting back on their DEI investments. They’re changing how they’re investing. They’re doing this because of a slowing economy and a few years of evaluating the return on investment in their DEI executives.

In my hometown of Philadelphia, the average DEI executive earns between $126,605 and $158,742. According to Salary.com, the average chief diversity officer salary in the United States earns $235,900, with the range typically falling between $203,500 and $279,700.

More than 40 chief diversity officers at some of the country’s largest firms earn more than $300,000 per year. Some universities pay their DEI executives as much as $430,000 per year. That’s just for one person and does not include the compensation paid to the teams of diversity officers and administrators they supervise.

But companies are discovering that they don’t need a highly paid person, much less a dedicated team, to devote themselves fully to DEI initiatives, because there are better ways to achieve those goals.

These initiatives are very important, but many will justifiably argue that they’re no more or less important than other HR initiatives, such as workplace culture, complaint resolution and recruiting strategies. Yes, employees need to be more culturally receptive, racially aware and gender-sensitive, just like they need to be more mindful of discrimination and harassment. And yes, recruiters need to meet diversity goals while balancing skill sets.

All of this is good for business. But businesses exist to create value for their shareholders. So, each investment must have a reasonable return on investment. Hiring someone of color to run a DEI program may look great in the media for a company that wants to show the world that it cares about racial equality. But after a while, that person – like all others in an organization – needs to prove their worth. And if that worth can’t be shown, or if what that executive is doing can be done by someone else at a lower cost, changes will be made.

Gene Marks is founder of The Marks Group, a small-business consulting firm. He frequently appears on CNBC, Fox Business and MSNBC.