Ensuring DE&I Investments Drive Significant Business Impact

In 2020, the Black Lives Matter and #MeToo movements created a groundswell of activism. Customers and employees pushed companies to accelerate progress toward achieving diversity, equity, and inclusion (DE&I) goals and publicly scolded laggards. As a result, companies held listening tours, appointed DE&I leaders, set more aggressive targets for hiring and retaining a more diverse workforce, and invested in their communities. In the 2021 edition of The CMO Survey, marketing leaders of U.S. for-profit companies reported increased spending on DE&I-related advertising and other programs by 8.9%; this number grew to 10.7% in 2022. As leaders responded to public activism and stakeholder demands, it seemed corporate America was taking strides toward building a more inclusive business world.

DE&I Investments Decrease Rapidly Year-Over-Year

Flash forward to the present day. Economic and political uncertainty have eroded market conditions this past year, buffeting businesses globally. As a result, we find that investment in—and growth of—DE&I initiatives are rapidly decelerating. In the most recent edition of The CMO Survey, marketing leaders report growth in DE&I spend has slowed to 2.3%–a drop of 79% from one year ago. Likewise, only 41% of marketers expect DE&I to be a marketing priority over the next five years, down from 59% in 2021.

One reason for this sharp and sudden decline may be leaders’ view that DE&I is not delivering the desired results. As the chart below indicates, the return on DE&I investments appears to have weakened across employee, customer, and financial outcomes. As a result, leaders who want to use DE&I as a lever to drive business outcomes are likely disappointed and experiencing challenges gaining new budget for these initiatives.

How DE&I Investments in Marketing Have Paid Off

Generating Returns on DE&I Investments

Various factors could be causing leaders and teams to deprioritize DE&I in marketing decision making, including growing political polarization, economic uncertainty, legal challenges from recent Supreme Court rulings, and even the war for talent. Although this topic is worthy of discussion, we thought it was more instructive to focus on the question of which companies are getting stronger returns from DE&I investments.

Our view was that for companies to commit to and sustain high-ROI DE&I actions, they require more than strong goals and hyped spending. Instead, we theorized that these leaders would need to develop a process or set of processes for making decisions using DE&I criteria and goals.

To test our theory, we asked marketing leaders to “rate the degree to which your company has developed an inclusive approach to marketing decision making, meaning you have established steps to review and/or evaluate marketing decisions from a DE&I perspective.” Leaders assessed their approach to inclusive decision making on a seven-point scale, where 1 = “not at all,” and 7= “very highly.” The average score was around the scale’s midpoint (3.3), consistent since 2021. However, our interest was not in assessing whether the average score for this metric was increasing. Instead, we wanted to know if companies that scored higher on this metric also achieved stronger employee, customer, and financial returns than those that reported low scores.

To do so, we rank-ordered the 316 companies that participated in The CMO Survey and created two groups: one that is above the median on the DE&I process measure (“strong”), and another that is below the median (“weak”). Using these two groups, we calculated the average payoff of DE&I marketing investments on six performance outcomes. The table below shows the mean performance level for each outcome for companies with strong and weak DE&I decision-making processes. Importantly, our analysis of these differences indicates a statistical difference in performance for these two different types of companies. Consistent with these findings, when asked to rate the top barriers to bringing DE&I into the firm’s strategy, 50% of leaders included “lack of good DE&I decision making processes to drive strategy.”

ROI Differences for Companies With Strong and Weak DE&I Processes

Critical readers will ask about other drivers. Why not include DE&I investments? We ran the same analysis and included the company’s DE&I marketing spending level (percent of marketing budget spend on DE&I). Results indicate that spending is not predictive of DE&I business outcomes while our DE&I process remains a strong significant predictor even accounting for this spending level. Process trumps spending when it comes to the business impact of DE&I spending in marketing.

Six Ways Companies Architect Inclusive Decisions          

So, what does an inclusive approach to marketing decision making look like at companies today—in other words, how can companies ensure they are reviewing and evaluating marketing decisions from a DE&I perspective? We offer several options, pointing to their pluses and minuses.

1. Infusing a DE&I review into standard decision-making processes: This approach is efficient as teams simply add a new step to a well-established process. However, it has less objectivity, especially when the decision makers have convinced themselves that the strategy is a good idea.
   
   
2. Having an independent group perform the DE&I review: This group operates independently of the strategy group, acting as a safeguard to ensure that decisions meet the DE&I standards of the company. Walmart established a DE&I review board of 100 volunteer marketing associates who use this approach to make decisions. Board members review marketing strategy, campaigns, and creative work before decisions are made.
   
   The value of an independent body is objectivity. This group sits outside of the strategy group and has an impartial view of the DE&I of a strategy. The downside is that they may work in strategy fantasyland—meaning they are focused on DE&I principles without considering corporate strategy goals, constraints, and nuances.
   
   
3. Train on using the DE&I perspective to make decisions: Companies can train their entire marketing organization on adopting a DE&I lens to make decisions to solve common problems. This bottom-up, practical approach seeds knowledge in individuals, so that they can increase their use of DE&I criteria in decision making. The challenge with this approach is that this may not occur—especially at the beginning when decision makers are learning the DE&I ropes. Companies can boost use of criteria by adopting a final process step that asks decision-makers to evaluate the DE&I impact of their decisions.
   
   
4. Embracing DEI-relevant feedback: Cultivating a culture of feedback regarding DEI strategy from both internal and external stakeholders of the firm to recognize areas of improvement. This ongoing “inflow” of information can reveal underlying obstacles that may be reducing DEI’s business impact.
   
   
5. Selecting and cultivating leaders who care about DE&I: Leaders who prioritize DE&I can steer their teams to use these criteria in decision making. This top-down approach puts more emphasis on the individual. As a result, it succeeds or fails depending on that leader’s strengths and weaknesses.
   
   
6. Ensuring decision makers are diverse: Building a group of diverse decision-makers at all levels of authority assumes that this group possesses diverse viewpoints and will approach decisions with more inclusivity and equity.
   
   This approach was used at Salesforce. As founder and then-CEO Marc Benioff reported, “…less than 29% of Salesforce’s total employees were women, and they made up only 14% at the leadership level. To make sure talented female employees were being considered for leadership roles, I’d announced that going forward, at least 30% of the participants at any meeting, from a large management session to a small product review, should be women.”

Why Leaders Will Continue Prioritizing DE&I Investments

Many companies view DE&I through multiple lenses: as a corporate responsibility, to build diverse teams and serve communities more effectively; a talent strategy to recruit, retain, and develop diverse talent; and a new lever to drive business outcomes. To keep and win C-suite approval and secure the budgets they need, marketing teams need to demonstrate how DE&I criteria positively impact business results. And since funding is not infinite, these results need to be on par or outperform other strategy levers.

As our results indicate, marketing leaders and organizations that have a defined process for including DE&I criteria in decision making significantly outperform peers that don’t, providing results that the entire C-suite cares about. CHROs will value the ability to attract and develop diverse talent and create a great workforce culture. CMOs will appreciate how DE&I helps them win and retain top customers. And CEOs will closely measure the impact DE&I decision making has on revenue growth and stock prices.

Marketing teams can achieve better outcomes with DE&I-influenced decision making by adopting one or more of the five process steps outlined in this article. By so doing, they’ll find the right mix, bring greater consistency and discipline to their decision making, and achieve results that contribute to their companies’ outperformance in the marketplace.

The CMO Survey is sponsored by Deloitte LLP, the Fuqua School of Business, and the American Marketing Association. Reports from the Fall 2023 edition, which is based on responses from 316 U.S. marketing leaders at for-profit companies, can be found on https://cmosurvey.org/results/. You can also opt-in to participate in future surveys at https://cmosurvey.org/participate/ to participate.