The Hidden Cost of Shrinking DEI Budgets
Recent news of Microsoft laying off their Diversity, Equity, and Inclusion (DEI) team wasn’t a big surprise. Many companies are cutting costs, and DEI programs are also impacted. These cuts may be helpful in the short term, but they can also have unintended consequences. One problem is that the diversity work shifts even further to Employee Resource Groups (ERGs), placing additional stress on the employees these programs are meant to support. Despite financial constraints, companies can still back DEI efforts and ERGs without overwhelming underrepresented employees.
The Rise of ERGs as a DEI Pillar
ERGs are a key part of many companies' DEI strategies. These voluntary, employee-led groups focus on inclusion, support underrepresented employees, and drive diversity initiatives. While they play an important role in creating an inclusive culture, ERGs often operate with minimal resources. This means employees—especially those from underrepresented groups— take on extra work outside of their main roles. This added responsibility, often called the "diversity burden," can affect their well-being.
The Diversity Burden: An Unintended Consequence
Even with reduced budgets, the expectation to work on diversity and inclusion remains. ERGs and their members generally fill the gaps, often with fewer resources. This disproportionately affects employees from underrepresented groups, who may feel a responsibility to keep DEI activities alive, because of their personal connection to the topic.
This creates a difficult situation: While these employees care about advancing DEI, they may end up overwhelmed, leading to stress, reduced productivity, and disengagement. Ironically, employees who are most impacted are the ones, which companies are trying to retain through their DEI efforts. In the long run, this burden can undermine DEI programs and hurt the company’s reputation as an inclusive employer.
DEI Is Still a Business Imperative
DEI is essential for building a culture that fosters respect, belonging and innovation. Attracting and retaining the best talent is essential, especially during difficult times. Even with limited resources, there are ways to work on DEI without over relying on voluntary employee groups or making the best out of the available resources.
Maximizing ERG Impact with Limited Resources
So, how can companies support DEI and ERGs in tough times? The key is to make better use of existing resources. One approach is to strengthen the connection between ERGs and company leadership. When senior leaders recognize and support ERGs, it shows the company continues to value DEI.
Additionally, rewarding ERG members for their efforts—whether through formal recognition or other incentives—can encourage continued involvement. ERGs can also collaborate with other departments like HR, marketing, or communications to share resources and keep programs running efficiently.
Practical Steps for Leaders
Here are a few practical ways they can help reduce the diversity burden:
Involve Senior Leadership: Active support from senior leadership shows commitment to DEI, and does not require a large budget.
Recognize Key Members: Simple gestures, like sending a message to recognize an ERG member’s efforts, can go a long way.
Use Resources Creatively: Remember the basics and find creative ways to connect people, rather than repeating what might have worked in the past.
Focus on Quality, Not Quantity: Fewer, well-executed programs or events are more impactful than frequent, routine ones and will help reduce costs.
Measure Beyond Budgets: Track success through employee engagement and inclusion, not just financial metrics.
Conclusion: DEI Programs in Challenging Times
Lower DEI budgets doesn’t have to end meaningful diversity work. By being strategic about how they support ERGs and addressing the diversity burden, companies can continue to advance DEI and set themselves up for long-term success. Essential to this is for leaders to recognize the hidden costs of neglecting DEI and build sustainable programs that can thrive—even during economic challenges.
