Are ERGs the latest victims of diversity backlash?

The call goes out routinely to employees who are Black, Hispanic, Asian, indigenous, women, LGBTQ: Come and join an employee resource group that's tailored to you.        

Only now, after decades of growth, these popular company organizations are coming in for new scrutiny, along with just about every other diversity initiative in business and academia today.       

Budgets are getting cut. Diversity teams being pared. Priorities are shifting — in some cases, drastically — along with the business outlook. Across corporate America, companies in sectors from technology to industrial manufacturing are cutting jobs as they grapple with rising costs amid stubbornly high inflation and interest rates. 

Some employees are starting to wonder: Will joining these groups, corporate fixtures since the 1970s, really help my career? Or, if the wind shifts, could these affiliations somehow hurt? 

Read more: Is the anti-DEI trend actually hurting diversity efforts?

Major U.S. corporations insist they're as committed as ever to fostering inclusive workplaces. But recent developments — many of them driven by the conservative backlash against diversity, equity and inclusion, or DEI — suggest some businesses are edging away from promises to level the playing field. The proportion of U.S. companies that fund a DEI function — which often oversees ERGs — is set to drop to just 20% by the end of this year, compared with 33% in 2022, thanks to layoffs that disproportionately affect DEI teams, according to Forrester Research. 

ERGs are a big deal for countless U.S. workers. For decades now, these groups have been a key way for corporations to demonstrate their commitment to diversity. For employees, they provided a safe space where under-represented workers could commiserate and strategize within the otherwise homogenous white/male workforce.

How many ERGs are out there? Big companies like Microsoft and Walmart have nine each listed on their website; Amazon has 13. A typical budget for companies with more than 10,000 employees might be as much as $50,000 a year, according to consulting firm The Rise Journey.

The most common groups are for LGBTQ employees, followed by women, then Black, Hispanic and Asian workers. ERGs also extend to military veterans and people with disabilities. The idea is to help members navigate corporate life and foster a sense of belonging. They might meet over sandwiches to hear a guest speaker like the CEO, or help organize an event for the company's Pride or Women's History Month celebrations.

Interest in these groups soared following the murder of George Floyd in 2020. Amid a nationwide deliberation over what it means to be Black in America, one corporation after another issued statements calling for racial justice. One way to prove their mettle was to add new ERG groups, or simply publicize them.

Yet these days, fewer and fewer companies are funding ERGs. In 2020, 78% of all ERGs received money from their host companies, according to The Rise Journey. By 2023, that figure had dropped to 70% — and that was before conservative criticism of DEI at places like Harvard University made news worldwide (along the way, some critics have also accused ERGs of bigotry).

Leaner times on Wall Street and in technology aren't helping. For bosses, DEI looks like a relatively easy place to make cuts. Employees might be unhappy, but business will mostly go on.

Read more: A people leader explains how to push past the 'anti-DEI' narrative

To Matthew Leger, the message is worrying.

"When you pull away these tiny dollar figures during economic downturns, that sends a signal to the employee that it was a smokescreen, the executive never actually cared," said Leger, a researcher and consultant who last year wrote a report on the role of ERGs in workplaces.

"You're telling your employees, 'I don't actually care about opening that line of communication with you, and I don't care about the community that you have,''' he said.

Paulina Rios has seen the shift up close. Like anyone, Rios wanted to feel welcome at work. So, the designer joined several ERGs at Block, the fintech founded by Jack Dorsey.

Today, her hopes of fostering an inclusive workplace at Block have been turned upside down. Rios and several others involved in the ERG for indigenous employees were caught up in recent layoffs. She said the group suffered setbacks and that employees have pulled back from other ERGs at Block, too, given the leaner times there.

"They're dying out because everyone's so freaked out about the potential layoffs,'' Rios said of ERGs.

A spokesperson for Block wouldn't comment specifically on Rios's experience but said that the indigenous employee group remains active among 14 ERGs at the company. The layoffs were companywide and structured to avoid bias, the spokesperson added.

Similar trends appear to be playing out elsewhere.

Since mid-2023, some ERGs have reported that fewer people are turning up for events and stepping into the voluntary leadership roles, said Dumebi Egbuna, co-founder of Chezie, which provides software and support for companies to manage ERG programs. It's become clear that many ERG leaders have been caught up in corporate layoffs, she said.

Most companies still seem to be willing and able to fund employee groups. But Egbuna said a substantial minority — maybe one in five — is showing visible erosion of support. Many higher-ups are reviewing DEI efforts across the board.

"Employees don't necessarily feel safe to participate in ERGs," Egbuna said. DEI professionals are keeping their heads down, she said.

Egbuna pointed to an education-technology company that cut its DEI budget in half between 2020 and 2023. The move coincided with layoffs last year, she said.

Read more: Sage's global head of DEI shares his lifelong quest to understand and implement equality

Reversals like that are particularly disappointing after so many companies rushed to issue we-stand-with-you statements following the death of Floyd, employees and diversity advocates say.

Four years ago, as Black Lives Matter protests swept the nation, Microsoft also appeared to increase internal support for various DEI initiatives, including ERGs, said LaQuana Clary, a former engineer at the tech giant.

Then, that support seemed to waver, Clary said. She belonged to two Microsoft ERGs, one for women and another Black people. Once the protests quieted down, the company began reducing funding for its ERGs and support for members to attend recruiting events, she said. Clary said she had to cover her airfare to attend a 2023 Nasdaq event in New York at which she was a speaker. In previous years, Microsoft would've footed most of the bill, she said.

"We started to get the message that budgets were getting cut," said Clary, who lost her job in a big round of layoffs last year. "So, they would either have to cut back or raise funds. Like, cut meals. Ask people to bring their own food. We couldn't have as many events."

A spokesperson for Microsoft said the company hasn't reduced its overall investment in ERGs, though it is prioritizing funding for events and activities with a higher return for members of the groups, such as mentorship programs.

Since leaving Block, Rios has found work at a gallery in Phoenix specializing in indigenous art. She looks back and wonders how things changed so quickly. The ERG for indigenous employees only had a budget of $2,000. But as part of her job, she occasionally spoke to Dorsey. She says she felt like she was helping people understand different perspectives and build a better workplace.

Seeing how quickly bosses can change course was a tough lesson, Rios said.

"People now may be more reluctant to join ERGs, especially to lead them,'' she said.