The Impact of Recession on DEI & What You Can Do About It

The current economic climate resulting from the war in Ukraine and the lasting effects of the pandemic has caused a major economic downturn that has left many businesses struggling to stay afloat as they battle supply chain shortages and high inflation. Unfortunately, this has led to an increase in layoffs and job losses across a variety of industries. Big tech companies have not been immune to this trend, and many have been forced to make difficult decisions about which positions to cut with many laying off over 10% of their workforces.

One particularly troubling consequence of these layoffs is the impact they are having on diversity, equity and inclusion (DEI) within these companies. For years, many Big Tech firms have made public commitments to increase the representation of underrepresented groups in their workforces spearheaded by the creation of DEI departments and the hiring of dedicated staff members to lead these efforts.

However, with the current economic climate, some of these companies are finding it hard to justify the continued existence of these teams with DEI departments are often seen as cost centres rather than revenue generators. 

In recent research by Glassdoor, Workhuman, Forbes, and Bloomberg

have all found that DEI and talent strategy are among the first areas 

of a business to be reassessed/defunded amid economic decline.

This is at a time when we have seen more candidates than ever expecting

to learn about potential employers’ DEI and Sustainability efforts.

In times of financial strain, many DEI jobs are being cut, even as companies continue to publicly promote their commitments to diversity equity and inclusion. While the idea of HR, DEI, and other non-direct revenue-generating departments being leaned down may seem like normal during tighter times, this has a range of effects on the business. 

The impact of this goes beyond just the individuals who lose their jobs in these teams. It makes it harder for them to make progress toward the company’s diversity and inclusion goals. This not only affects the internal progression of women, people of colour, and other minority groups who are regularly penalised for self-promotion (shown in research by Indeed, recently highlighted on LinkedIn and Forbes) but also tends to be a contributing factor to unconscious bias creeping back into recruitment processes and interview panels.

As well as affecting the broader goal of increasing diversity and inclusion within the business and wider tech industry as without the outreach, education, and focus on such topics, the optics of laying off D&I staff can be damaging to a company's reputation, not only to current employees, but also through the perception of consumers and investors if they are seen as backtracking on their DEI promises.

Why is DEI even more important during a recession?

Despite the challenges, maintaining a strong focus on DEI during a recession is critical. Here are some of the benefits:

1. Innovation: A diverse workforce brings a range of perspectives and experiences, leading to increased innovation and problem-solving abilities. In a recession, businesses must innovate to stay competitive, making a diverse workforce even more valuable.
2. Better Decision-Making: A diverse workforce can make better decisions, as people with different backgrounds and experiences bring different perspectives to the table. This can help businesses navigate the challenges of a recession more effectively and understand their audience better.
3. Improved Reputation: Companies that prioritize DEI efforts are seen as more socially responsible and attract positive media attention. This can help businesses maintain a positive reputation during a recession, which is especially important as consumers are more mindful of where they spend their money.
4. Increased Employee Engagement: When employees feel valued and included, they are more engaged and committed to their work. This can lead to higher productivity and better business outcomes, which are essential during a recession.
5. Better Recruitment: For the positions you need filled during recession and that fast-paced growth as the recession ends you will have the engagement with a wider candidate audience and as a result greater access to the skills, talent, and knowledge you need to drive your business forward. 

Maintaining a focus on DEI during a recession requires a strategic approach,

so how can you maintain your DEI efforts during a recession?

1. Prioritize DEI initiatives: Even during a recession, companies must prioritize DEI initiatives. This may mean reallocating resources or finding creative solutions to reduce costs while still investing in DEI.
2. Foster a Culture of Inclusion: Companies must prioritize building a culture of inclusion. This means creating an environment where all employees feel valued, respected, and included. It also means actively seeking out diverse perspectives and input.
3. Invest in Employee Development: Even during a recession, companies must invest in the development of existing employees. This means continuing to provide training and development opportunities for all employees, including underrepresented individuals.
4. Review Hiring Processes: Companies must review their hiring processes to ensure they are inclusive and attract a diverse pool of candidates. This may mean partnering with organizations that specialize in diversity recruiting or investing in unconscious bias training for hiring managers.

Maintaining a focus on DEI during a recession is critical for businesses. While there are challenges, the benefits of a diverse workforce during a recession are significant. Companies must prioritize DEI initiatives, foster a culture of inclusion, invest in employee development, and review their hiring processes to attract a diverse pool of candidates. By doing so, businesses can weather the challenges of a recession and emerge stronger and more resilient.

Foundations knows how important Diversity, Equity and Inclusion are to an ethical, healthy, and sustainable business. So if you would like to discuss how we can aid you in effectively implementing DEI strategies both with your current teams and future recruitment, Contact Us