Diversity training has ballooned into a billion dollar industry

·3 min read

More than ever, businesses are being pressured — by employees, consumers and shareholders — to fix systemic problems they have helped build.

Why it matters: The top ranks of America's businesses have a huge void of people who look like the Black, Latino, Asian and Native American consumers from whom they collectively rake in billions of dollars each year.

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The big picture: Since the Civil Rights era, companies have been called on to make decision-makers less white and more representative of the nation. The textbook strategies companies tout — diversity training, for one — have largely failed.

  • "There's been a lot of lip service. It's the optics of doing something," says Jennifer Brown, a diversity and inclusion consultant who's worked with at least 1,000 companies.

  • "Even the persuasiveness of the business case for diversity has not been enough to compel companies to view it as beyond a nice to have," says Brown.

Diversity training started to crop up to “protect [companies] against and settle civil rights suits,” Billy Vaughn, who’s studied the history of diversity training, wrote in 2007.

  • It's ballooned into a billion-dollar industry. The sessions are a quick fix (they're rarely longer than an hour) for a problem they alone won't ever solve.

  • "Expectations for what diversity training is going to do is too high," says Stephanie Creary, a management professor at the University of Pennsylvania. "It might teach people about unconscious bias, but it's not going to all of a sudden make people be less biased in their behavior."

Employee resource groups are often "the engine of [a company's] diversity strategy. It's the groundswell ... but it's the most blatant example of a side hustle," Creary says.

  • Black employees at Xerox created the nation’s first ERG in 1970, per Diversity Inc. Now there are other groups for people of color and other underrepresented groups at work.

  • Yes, but: Their efforts are a) on top of day-to-day responsibilities (though a small number of companies are starting to pay these leaders), and b) rarely taken into account when it comes to promotion considerations. Plus, their budgets can be limited.

What's next: In the past year, corporations threw their financial might behind external efforts — donations to civil rights organizations, funding for initiatives to tackle the racial wealth gap and spending with Black-owned businesses.

  • When George Floyd was murdered, companies pledged $50 billion in financial support — though just $250 million has actually been spent or set aside for a specific cause, according to one study.

But, but, but: The money pile mostly doesn't address systemic issues within corporate America that have hampered more inclusion and promotion of nonwhite employees.

  • For instance: Of the 94 Fortune 100 companies that released statements in the wake of George Floyd's murder, 25 explicitly pledged to take steps to address hiring and promotion practices internally, according to an Axios analysis.

The bottom line: “If all you do is write checks and write these really passionate comments about how strong you feel about anti-racism and Black people, but I can't tell when I look at your senior management team, I can't tell when I look at your pipeline, that's garbage,” said Johnny Taylor, CEO of the Society for Human Resource Management, during a recent virtual event.

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