A recession will test the firms which used diversity plans merely as a way to look good

By Sascha O'Sullivan

Elon Musk made a series of redundancies at Tesla earlier this year. (Photo by Michael Gonzalez/Getty Images)

When the going gets tough, cultural roles get going. In June, Elon Musk told Tesla employees that 10 per cent of the workforce was going to be cut, as a result of his “super bad feeling” about the economy. Amongst those let go were Tesla’s LGBTQ+ community President and several diversity and inclusion programme leads.

Mass redundancies have ripped through organisations as global economies brace themselves for a recession; tech companies laid off seven times as many employees in May as they did in the first four months of this year combined. The steep economic downturn and soaring inflation have spurred widespread belt-tightening. On a mission to bring down costs, business leaders (and their investors) are putting company expenditure under the microscope, assessing them for priority and performance.

In times of recession, initiatives like D&I are often first on the chopping block. Employees and schemes that add direct and tangible monetary value are typically prioritised, while roles related to company culture are deemed expendable, as luxury business components irrelevant to profit margins.

This thinking is misguided and short-sighted. Every aspect of company performance is shaped by diversity and inclusion: growth, culture, talent acquisition, employee churn, reputation, leadership potential and readiness to embrace innovation. A lack of diversity is the first indication that a company isn’t run as a meritocracy. Equitable employers outpace their competitors by understanding the needs and potential of their employees, in turn earning their trust, commitment and the competitive advantage of diverse ways of thinking. None of that sounds like a luxury.

During periods of hypergrowth, it’s easy for companies to make hires that “look good”. However, in the wake of financial turbulence, when companies must walk the walk that they’re so good at talking. Many businesses spend time marketing their inclusivity in times of profit, before quickly (and often quietly) pulling the D&I plug the moment market pressure is applied.

There is a key distinction between creating and committing to policy, with true dedication to D&I meaning in sickness as much as in health. If not, it is merely a hollow marketing tool to attract talent and customers with unfounded claims of inclusivity.

Who a company lays off, as well as how they do it, says more about their values and vision than any sparkly manifesto. If the employees really are the “beating heart” of your organisation, this should translate as open communication, considerate planning, generous separation packages and adequate support in helping laid-off workers find new employment.

Truly inclusive leadership demands prioritising D&I, demonstrating to a workforce that such roles are considered indispensable. Knee-jerk redundancies can also have irredeemable consequences for employer brand, made clear by the wave of coverage of recent European tech layoffs. The effects of these cuts will be acutely felt as companies try to retain top talent or re-enter the hiring pool. The consequences of jaded staff, punctured morale and damaged reputation linger long after the door has closed behind the latest spell of laid-off employees.

Between 2018 and 2021, there was an 115 per cent increase in the number of jobs with “diversity” and “inclusion” in their title posted on jobs boards. Despite this sharp growth, the current wave of redundancies has the power to undo years of hard-fought, seminal D&I progress, which has edged us in the direction of an equitable future but is a battle far from won.

Everyone deserves to work in a place where they feel accepted, respected and comfortable; where their opinions are valued and they’re treated as more than just a box or quota to meet. This financial downturn is far from over, and it’s likely that more layoffs will be on the horizon. As business leaders peer into their uncertain economic tea leaves, they’d do well to remember that D&I isn’t a luxury add-on or marketing weapon, but an essential business component, critical to long-term survival and growth.

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