While the U.S. is not definitively in a recession, many companies are preparing to slow down hiring, make budget cuts and even let go of some of their workforce — but does that mean
In order to combat record inflation, the Federal Reserve will continue to raise interest rates in 2023, slowing overall spending and economic growth. Employers have already looked for ways to reduce costs in the past year, with 18% of companies reporting that they decreased their investment in DEI, according to recruiting software company Lever. However, this may be one of the worst choices employers can make in 2023, says Jess Green, senior vice president of customer success at Lever.
"DEI is already a place we are seeing companies make cuts," says Green. "And candidates and customers are watching to see how serious a company is about their [DEI] investment."
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Notably, 28% of companies reported remaining consistent in their DEI investments in the past year, despite talks of a U.S. recession. But Green predicts that as more employers look to reduce budgets in 2023, the more DEI will be at risk. This will also reveal which companies only supported DEI on the surface, rather than make deeper changes to how they recruit, promote and retain talent.
"If a company looks at DEI as just an initiative, then it's easy to cut it back," says Green. "But if DEI is part of a company's DNA, it's a lot harder to say, 'We are just going to stop investing here.'"
For Green, one of the most visible ways companies can forgo their DEI efforts is through
"This significantly sets companies back and leaves those in different underrepresented groups feeling like they do not belong," she says. "When making cuts, look at performance instead of tenure, and try to leverage the skills of newer folks. You could redistribute their work and bring their skillset elsewhere within the organization."
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While many companies expect to slow hiring in 2023, DEI efforts can be furthered by who companies keep and promote. Green underlines that retention and DEI go hand in hand; if companies hope to forgo the costs of replacing workers, then they can't afford to alienate or ignore anyone within their organization.
"When the feeling of belonging is high, job satisfaction and retention go up," says Green. "One of the biggest mistakes is not looking at DEI as a long game."
Green also reminds employers that ultimately DEI is good for overall business outcomes. Companies that identify as more diverse are 35% more likely to outperform competitors, while gender-diverse companies are 15% more likely to see higher financial returns, according to McKinsey.
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Even if companies are still hesitant to pour more finances into DEI this year, Green notes that there are plenty of opportunities to
"DEI is not an initiative, but a way of working," she says. "There are a lot of things that don't necessarily cost money, but help you truly invest in the sustainability of DEI efforts. And true change comes from consistency."
Moreover, employees can tell when companies are not actually consistent with their messaging on DEI. Lever found that 62% of employees feel they were interviewed for a job so the company could meet a diversity requirement, while 32% believe their company is less focused on diversity than they appeared to be in the hiring process. This distrust only makes for a less engaged workforce, says Green.
"If you lose the consistency, you lose the progress," she says. "Frankly, you lose the buy-in from your team that DEI is actually important to the company."
