Diversity and inclusion practices look different for every organization. At some companies, diversity and inclusion fall under the human resources department’s scope, while at others, the company creates an independent department to manage the scope of D&I efforts by hiring a Chief Diversity Officer.
In 2023, U.S. companies spent approximately $8 billion annually on D&I initiatives, maintaining the same level of investment as previous years. Notably, organizations like Microsoft and BCG have continued to enhance their focus on D&I, with comprehensive reports outlining their strategies and progress.
Glassdoor indicates that 35% of hiring decision-makers expect to increase their spending on D&I programs compared to previous years. This reflects a growing recognition of the importance of these initiatives in driving business success and fostering a more equitable workplace.
The size and budget of a company ultimately dictate what specific DEI practices will look like. Companies must assess D&I responsibilities and desired outcomes for their unique organization and determine the appropriate budget.
Little to show for surface-level efforts
Recent research and reports indicate that many diversity and inclusion initiatives by organizations continue to face challenges in effectiveness, with some even counterproductive effects. While U.S. companies spend approximately $8 billion annually on DEI efforts, the impact often falls short of expectations. Traditional diversity programs have been criticized for reinforcing negative stereotypes rather than alleviating them, leading to a reduction in diverse representation and counterproductive outcomes.
A report by McKinsey highlights that successful D&I initiatives share certain key factors, such as a nuanced understanding of root causes, clear and measurable goals, accountability from business leaders, context-specific solutions, and rigorous tracking of progress. Companies like Walmart and Schneider Electric have shown that targeted, well-designed initiatives can significantly improve outcomes, such as increased retention and promotion rates for underrepresented groups.
A Pew Research Center survey found that while a majority of workers believe focusing on DEI is beneficial, there are significant demographic and partisan divides. Women and minority groups are more likely to view diversity and inclusion efforts positively compared to men and white workers. Furthermore, many employees feel their companies either overemphasize or underemphasize DEI, indicating a need for a balanced and genuine approach.
For D&I spending to be effective, it requires a deep, sustained commitment from organizations, beyond surface-level efforts. Authentic and well-structured initiatives are more likely to resonate with employees and lead to meaningful cultural change.
The crux is that effective D&I spending requires more effort than what organizations have exerted. So, the surface-level commitment to D&I not only fails to generate impact, but it fails to resonate with employees. The article by LinkedIn summarizes this perfectly: “Doing ‘stuff’ for the sake of doing ‘stuff’ is really obviously unauthentic for the people who work for you.”
Before you open your chequebook and spend large sums of money for the sake of doing so, read this article and follow the best practices outlined. More importantly, however, ensure that you are in the right place to begin the long journey which is associated with a cultural change.
Guide to DEI budget spending and planning
Setting goals and objectives to determine DEI budget
Diversity and inclusion initiatives differ significantly in companies based on different goals and objectives.
Your organization may wish to facilitate business development activities (such as workshops), holiday and culture celebrations, exploring new markets to benefit a core diverse customer segment, improve communications related to diversity, improve supplier diversity and source from minority-owned businesses, philanthropy, and many more. The list of practices that a company can engage in to address diversity and inclusion is lengthy and highly actionable.
Ask yourself what goals or objectives the company has. Does your company wish to improve diversity among employees after looking at your own statistics? Alternatively, does your company wish to benefit society by sponsoring or donating to diversity and inclusion related initiatives in the community? Maybe your company wishes to increase community appeal and organize several social gatherings and cultural diversity celebrations.
When considering the funding towards a specified D&I initiative or program, your organization should look at the business case for diversity in its corporate environment. For example, a more diversified workforce is proven to lead to high employee productivity and retention, as inclusion is placed first and foremost among the management team.
Leaders at companies with established workplace programs related to diversity and inclusion need to support such initiatives by communicating them as top priorities to employees and the business community and by budgeting for diversity and inclusion recruitment and retention initiatives.
A study by the Society of Human Resources Management (SHRM) states that diversity-department budgets at Fortune 1000 companies average around US$1.5mm per year. The range for diversity department budgets was US$30,000 to $5.1mm. Additionally, SHRM’s 2023-2024 State of the Workplace report provides updated insights into how these budgets are being utilized. The report underscores the importance of DEI initiatives, noting that effective programs are deeply integrated into the strategic goals of organizations and require more than just financial investment.
Invest in Employee Resource Groups
Creating and supporting Employee Resource Groups (ERGs) is a strategic way to enhance D&I initiatives. ERGs foster a sense of belonging and provide a platform for employees to share their experiences and ideas, which can drive innovation and improve workplace culture. Allocating budget towards ERGs can significantly contribute to achieving DEI goals by empowering employees and ensuring their voices are heard.
Distributing your budget
Research by Catalyst states that 82% of its member companies have a specific budget for diversity programs and activities. These budgets range broadly from $10,000 to $216mm, with a median budget of $1.2mm. Almost half of the respondents reported allocating the most significant percentage of their overall diversity budget to diversity and inclusion training programs and general administrative costs.
The distribution of your organization’s D&I budget is dependent on your goals, as outlined above. Distribution of the budget can be targeted to areas within workplace functions (such as by department, employee age, etc.) or by business activity (such as training, marketing, recruitment, philanthropy, etc.).
Research shows that out of 1000 companies, funds for outreach and recruiting (45% of companies) was also a large portion of the budget. 39% of companies reported that more than 25% of their diversity budget went towards general administrative costs (such as staffing and payroll for D&I related staff), and 25% of companies reported that diversity marketing accounts for more than 25% of their budget.
Related: Diversity and Inclusion Initiatives When DEI Budgets Are Tight
Provide Training Programs
Effective D&I training programs are essential for fostering an inclusive workplace. These programs should go beyond traditional training methods and include action-oriented sessions that provide employees with practical strategies to mitigate biases and improve evaluation processes. Investing in high-quality training can lead to significant improvements in employee engagement and retention.
Recruitment, staffing, and hiring
As mentioned prior, the D&I scope and department responsibility look different for every company. Large companies may choose to hire a Chief Diversity Officer who reports directly to the CEO and oversees all D&I related activities. Smaller companies tend to depend on the human resources department to the forefront of all D&I initiatives.
Generally, the salaries and recruitment budget for DEI purposes is dependent on the budget. The larger the budget equates to the more attributable for hiring in-house employees to promote D&I related activities. There are options for smaller DEI budgets too.
Use technology platforms designed for DEI management and analysis
Leader are aware of the need for a systematic approach to DEI, but might find their initiatives hindered by existing tools that aren’t designed for the nuanced demands of DEI management. These platforms often fall short in delivering deep, actionable insights. Invest in advanced DEI management platforms that provide comprehensive analytics, real-time data, and interactive features. Organizations the want to spend D&I budget effectively, should look for tools that offer seamless integration with your existing HR systems to ensure a unified approach to DEI.
DEI practitioners and HR departments can also find themselves caught in a catch-22 with their existing engagement and DEI survey tools, which are often too rigid to accommodate the unique culture and needs of the organization. Companies should opt for survey tools that offer high customization and flexibility, allowing you to tailor questions to your organization’s specific context and conduct surveys as frequently as needed.
Non-financial expenditure is the first step
Often, the best way to spend on D&I is without even opening your wallet. Aubrey Blanche, the Global Head of Diversity and Belonging at Atlassian, reinforces the idea of raising standards, stating that “a lack of diversity is the first indication that a company isn’t a meritocracy”. Under her leadership, Atlassian boosted its female technical hires by 80%, with 13.1% of all technical employees identifying as members of underrepresented groups.
Blanche believes that before you even spend enormous sums of money into workshops and training, you must understand why you are doing what you are doing. You have only completed the first step once you are able to look inwards, recognize the problems, create goals, and infuse them into your company’s flesh. Only then are you able to generate the right path for your company to follow.
That path will definitely include training, but not the kind that many companies have wasted resources on. Atlassian has implemented and encouraged action-oriented training. Instead of simply informing recruiters and managers on biases that they may encounter, action-oriented training provides them with specific unconscious bias sessions that are designed to give behavioural strategies that they could use to become more objective evaluators. While many evaluation processes, if not all, are subjective, this training enables evaluators to be more conscious of that and actively look to mitigate their biases.
One Diversio recommendation to consider
Similar to the discussion above regarding training for evaluators, consider implementing a policy for unbiased feedback training. This recommendation will teach evaluators specific measures as to how to mitigate their personal, unconscious biases. Overall, it will create a more fair and objective evaluation process.
Beyond generic initiatives: Spend your DEI budget effectively with Diversio’s help
Our diversity management platform and expert advisors help organizations addressing the critical challenges faced in DEI management with advanced, data-driven solutions. Through the unique combination of AI technology and human expertise, Diversio is able to accurately diagnose your pain points, benchmark you against peers, and create a robust action plan that will meet your DEI goals.
The AI-powered Recommendation Engine™ provides tailored, actionable insights based on comprehensive DEI analytics, enabling organizations to move beyond generic initiatives.
Our platform integrates seamlessly with existing HR systems, offering real-time engagement data and customizable surveys to capture the unique needs of an organization. By quantifying DEI efforts through clear benchmarks and providing robust analytics, Diversio assists in demonstrating both financial and social ROI, thereby justifying continued or increased investment.
Our expert-led training and consulting services support organizations in implementing and evolving their DEI strategies.
We help companies ensuring their DEI initiatives are strategic, measurable, and impactful, addressing both the practical and cultural aspects of diversity and inclusion.
