The Dangers Of DEI Non-Compliance
Financial Damage
In the 2021 financial year, 34.1% of all complaints to the Equal Employment Opportunities Commission (EEOC) related to racial discrimination. This was the highest proportion of race-based complaints since 2016. When people believe they have been discriminated against, they can turn to the EEOC and federal and state courts for redress. If found guilty, the employer may need to reinstate the aggrieved person and be ordered to pay monetary and punitive damages. The financial penalties for breach of anti-discrimination laws can be hefty. For example, in 2020, Jackson Life Insurance was found guilty of racial discrimination in its hiring and promotion practices and ordered to pay $20.5 million in settlements. In 2015, BMW
and Patterson-UTI Drilling Co were found guilty of discrimination against minority employees. The former introduced criminal background checks for its logistic workers and, as a result, fired 56 Black workers. The latter assigned lower-level jobs to minority workers and refused development opportunities to Black and Hispanic employees. The costs borne by this recalcitrance were huge, with BMW paying $1.6 million and UTI Drilling Co ordered agreeing to pay $14.5 million in settlements. These figures pale compared to the financial impact of discrimination at Coca-Cola in 2000. While the company did not admit liability, it agreed to pay $192 million in settlement to Black employees who claimed that they had experienced
disadvantages in hiring, remuneration, and career advancement practices.
Reputational Injury
However, organizations that conduct discrimination not only suffer financially. They also lose the confidence of their employees, shareholders, and customers and take a considerable hit on their public profile. iii In 2000, bus-loads of protestors, including the Reverend Jesse Jackson,
called for a boycott of Coca-Cola products. The claims and criticism of the company were plastered over all major news outlets, including CNN, the Washington Post, and The New York Times. The reputation damage that Coca-Cola suffered was enormous and was hoped to
“serve as a wakeup call to other companies.” Management instigated an independent panel to
remain for five years to ensure compliance with race discrimination laws was maintained. They
could not afford another failure of equity.
Similarly, the reputational damage sustained by Jackson Life Insurance was seen to be a clear and compelling “message to the whole financial industry.
” While Jackson Life Insurance did not cede liability, they recognized that prolonging the negative publicity would damage their
the organization even further and settled so that they could move on and concentrate on repairing their public image. As noted by Deloitte Risk Advisory, just one discrimination can create a significant backlash and place the company in a very tenuous position, especially if another
crisis ensues.
Missing Opportunities
The previous examples show clearly how organizations are penalized when they do not take DEI seriously. Leaders who are cognizant of and committed to not only the “what” but the “why” of the law, vii can avoid these risks but can also gain an added advantage. They can harness the proven power of diversity to create significant value for their people and communities. Research continues to show that companies that have high levels of diversity also have:
- More innovation. Engaging people from various backgrounds and life experiences means you have a mix of perspectives and talents to apply to problems and product developments. In addition, when people feel included, appreciated, and valued for who they are, they are more likely to be engaged in the organizational goals and undertake innovative work behaviors. These factors result in around 19% higher innovation revenues
than those organizations with above-average diversity. - Superior reputation and brand image. Companies that achieve authentic diversity and belonging appear friendlier and more socially responsible. These characteristics help boost a company’s reputation not only among consumers but also among job seekers.
- Enhanced decision-making. Research undertaken by Clover-pop found that inclusive teams make better business decisions up to 87% of the time and that teams that follow inclusive processes make decisions in half the time and with 60% better results.
- A leading position in the war for talent. In the latest Glass-doors survey It was shown that almost one-third of job seekers (32%) would not apply to a job at a company where there is a lack of diversity among its workforce. Moreover, most job seekers (76%) consider diversity an important factor when evaluating job offers. Diversity is a competitive advantage in attracting and retaining top talent.
So, if you are not actively developing a workplace that cares for and creates a sense of belonging for all people, you are also forgoing the benefits diversity brings. As the previous list shows, the opportunity costs are vast and could mean the difference between surviving and thriving in tough business conditions.
Minimizing Risk And Maximizing Opportunity
By contravening anti-discrimination laws, organizations face many risks, including significant financial damage and injury to the company’s reputation and brand image. Financial penalties can break a business, and the reputational cost can take years to repair. However, just as important as the risks of non-compliance are the opportunities missed through a lack of honest commitment to DEI. In fact, as the research shows, by not investing in effective DEI initiatives, the company is placed at a significant disadvantage regarding innovation, financial performance, reputation, decision-making, and attracting and retaining top talent. In this way, DEI is shown to be beyond more than just compliance and actively lifts an organization and its people into higher realms of performance.
Dallas Diversity 24/7 Is Here To SUPPORT YOU
Effective DEI programs require leadership – bold, brave leadership. Dallas Diversity is here to support you to achieve your full potential as a leader and, in doing so, enable your organization and your people to reach theirs. We can help you achieve exceptional outcomes.
Dallas Diversity 24/7 is a premier full-service management consulting firm specializing in leadership development, executive coaching, management, diversity, equity, inclusion and belonging consulting, training, and facilitation of core learning skills. We help organizations drive growth. Founder Pat Parrish is a nationally recognized DEI trainer, speaker, and diversity, equity, and inclusion consultant. She is a specialist in devising real-world solutions that drive real organizational growth; her 20-year career has been spent at Dallas’s vanguard of business consulting services and business coaching. She has worked in the public and private sectors, developing diversity initiatives and providing solutions to help organizations achieve
sustainable business results through a consistent, integrated talent management process for fortune companies. Ms. Parrish is passionate about building more inclusive workplaces where more of us can feel welcomed, valued, respected, and heard. Whether you’re looking for
complete leadership development, business consulting services, or our core learning training, our team of experienced professionals can help you chart and steer a new course. Book your free 30-minute assessment call to get started.
