With the changes in DEI last year, Michelle discusses what the landscape of DEI looksl ike in 2026, and how the widespread confusion and fear surrounding legal changes has impacted business decisions. She talks about how most DEI initiatives remain lawful despite the uncertainty. Leaders are urged not to adopt a wait and see approach or pull back too aggressively, as such tactics risk alienating employees and shareholders, damaging organizational reputation, and forfeiting opportunities for growth and innovation.

She also outlines a six-dimensional framework for balancing risk and reward in DEI strategy, touching on financial, legal, regulatory, employee, social, and shareholder perspectives. She highlights the rising employee demand for inclusion and belonging, the costs of retention and disengagement, and the risks posed by reputational setbacks. She closes with actionable advice: recalibrate your strategy by focusing on engagement and inclusion, even if you change the terminology, and leverage available resources to navigate the current climate without abandoning the foundational principles of DEI.

I'm Michelle Pfefferman, founder and CEO of Equity@Work, and this is your DEI Minute, your go-to podcast for leaders looking to navigate the ever-evolving landscape of diversity, equity, and inclusion in the workplace. Whether you're just starting out with DEI or looking to sustain your long-term successes, each episode will provide you with actions you can take to move DEI forward at your organization, all in 15 minutes or less. Before we get started, this is Michelle Pfefferman, and I'm really excited to let you know that my new book, Do DEI Right, is now available. This is your guide to the Equity at Work maturity model, which shows leaders how to make DEI part of every day and drive great results. You can get your copy through the link in the show notes or wherever books are sold. Hi there. In this episode, I want to talk about where we are with DEI in 2026. 2025, as you all know, was a rough year for DEI with the Trump administration coming in and executive orders coming out.

It caused a lot of chaos, a lot of confusion, a lot of fear. I feel like as the year went on, people started to kind of settle into a pretty good understanding of what was now, you know, marked as potentially illegal in those executive orders versus not. And honestly, most of what people are doing in DEI, very little of that is now illegal, even though, you know, sort of formally we haven't had it wind its way through the courts completely. I think there just still was so much kind of fear and confusion that a lot of people pulled back really hard in DEI. What's coming out now, you know, as time continues to go on, and of course there are all kinds of things happening around us in the world that are sort of DEI-related, not so much in the workplace, but, you know, around all of us with ICE raids and so many other things that are racially targeted and again, sort of in the diversity adjacent area of things. I think leaders right now are really facing a really tough inflection point for this year and going forward. We have 3 more years under this same administration. They're certainly not backing off of their anti-DI focus.

However, employees have been pushing back, shareholders have pushed back. There's been a lot of revolt the anti-DEI stance coming out of the government and other activists and legal institutions that are trying to help enforce that anti-DEI stance. So I wanted to walk through a bit of a framework on how leaders need to look at this going forward. Waiting to see what happens or do nothing, kind of stick your head in the sand, is not working. Obviously, it's not a strategy. It's very much like a reactionary tactic. But these issues are really too important to employees in particular for leaders to sit back and wait until the next administration comes in before they really address them. And you can see people that either had a knee-jerk reaction, pulled back too hard, you know, if you think of Target, for example, or have just tried to do as little as possible, you know, they're really struggling with now a lot of pushback from shareholders and employees in particular.

As well as some of the organizations, you know, on the nonprofit side or academic side that have lost that support that they needed from those corporate organizations. They're really kind of getting hit all around. So having a very thoughtful strategy that takes into account all of the key stakeholders in the equation, and your business is obviously a big part of that, I think is really important going into this year. So it's a matter to me of kind of balancing risk and sort of the risk and reward, but looking at it from 6 different dimensions. So the first is financial, because without your business staying solvent, keeping the doors open, you're not helping anybody. So, you know, but how do we, you know, there are a lot of business benefits that are associated with DEI that will get left on the table if you pull back too hard or you just push it to the side for the time being. And that's both on the revenue and margin side with innovation and breaking up groupthink and having better, more robust view on risk, seeking out new white spaces, representing lots of different customer and consumer perspectives within the workplace. Like those are all really, really important for growth and from the revenue standpoint and a margin standpoint.

So pulling back too hard, you will definitely miss out on that. At the same time, there's a lot from a cost perspective in terms of retention and just making sure people are being— are super engaged and being really productive. And all of those are very, very much addressed through DEI work. So you've really got to look through, you know, on both sides, what are you putting at risk if you pull back too hard from a growth and a cost management perspective. The second, of course, is legal. This is really important. So if you are a business that is very focused on Or even if you're in academia or nonprofit, if you're really, really dependent on federal funding, this is going to be a crucial time for you. So making sure you're really, really following the executive orders to the letter is going to be important.

The most important things are making sure that you're not setting quotas for anything in your hiring or your promotion or, or even any kind of programming specific to high performers or high potential folks in your organization, making sure your ERGs, if you have those in place, are open to everybody, including allies and others who just want to participate. Those are some of the key things that you've got to have in place to make sure that, you know, that you're getting the funds that you need, that the government's not going to have you on one of their kind of, you know, go-after target lists. I would say there also, you've got to sort of partner with your legal counsel, whether that be somebody in-house or you've got somebody, you know, sort of on tap externally, and really understand what those trade-offs are legally. Because let's say you're not as dependent on federal funding or state funding, which of course is impacted by federal funding, you may be an organization that's just very prominent out in public, and so that may make you a little bit more of a target. So just looking at the appetite of the current administration towards some of the things that you're pushing for, calibrating the risk there is really important. Typically, Legal counsel wants you to be as risk-averse as possible. But again, you've got to balance that perspective with the business perspective and some of the other elements I'm going to walk you through. The next one that I would think about is regulatory risks.

So are you in the middle of, you know, big merger and acquisition activity, especially if you're a large public company? Are you in entertainment? Are you in telecom? Are you in healthcare? Are you in oil and gas? Some of these really, really big industries with really large organizations, you know, they're definitely under a microscope with this government in terms of, you know, the various government organizations are leveraging, you know, their power in approving your mergers and acquisitions and giving approval for that and, and not creating extra hurdles for you to go through by making sure you're not engaging in what they're deeming illegal DEI activities. So if that's something that's really coming soon for you or you're in the midst of, it is a good time to play it safe there, which again, I'm not saying to scrap everything, but I'm saying the things that are called out in those executive orders as being problematic, it's really important to take a close look there. Now, of course, you have to now balance this with some of your other stakeholders, which are your employees, which are vital. A lot of recent studies have shown the demand for DEI is back to the highs that it were, those numbers were, the highs that they were back in 2020. We had a little bit of a dip, not significant, but now we're back at that peak level of, you know, people feeling like they want to have a sense of belonging. They want to feel like their voice is important. They want to be able to show up at work as they are. They want to feel included.

They want to feel like there's a real focus on fairness and equitable treatment within the organization. And a lot of employees, you know, especially your Gen Zers, your Millennials, like this is table stakes for them. So, The risk right now is, you know, a lot of the job market is tight, but the minute it opens up, if you're in an organization that has been pulling back really hard on DEI, your employees are taking note. And when, you know, things start to open a bit, they are very likely to jump ship. So that will cause you a big turnover, you know, cost and issue. And that can also create a lot of morale issues. So just, you know, making sure that you've got a good pulse on what your employees are looking for there and that you're doing your best to keep those programs going for them. Is really, really important.

And I would say in that, you know, a lot of people get super focused on recruiting. That is important, but remember, you've got to start first with what you've got on the inside. So, making sure your policies are great, very equitable, same with your benefits, that you've stripped the bias out of promotions, out of, you know, staffing on projects and opportunities, that you've got, you know, equal pay for equal work, equal comp overall for equal work, you know, including benefits. All those things are still really, really important to review. Another piece is social. So reputational damage is real. And you can— again, I mentioned Target earlier, like they really, really have struggled to get their ground back after losing so many consumers because they pulled back so hard on DEI after having a brand that was so associated with inclusion and making sure everyone felt like they could shop at Target and feel welcome and that the brands that were in there really represented what they were looking for. Customers are a big part of that.

The end consumer, or if you're a client-based business, those are an important part of it, and your communities as well. If you're suddenly pulling back from, you know, organizations in your community that had a DEI focus of some sort, there's a real backlash against that now. I think people are getting really fed up with that and saying, you know, like, are you only doing this? It sort of makes it look like you've only been performative. If that was the case, then yes, pull back because you're not really invested in it anyway. But if you are invested, you need to— this is the time to really stay strong there. And the last piece I would mention is shareholders. This has been something really interesting to watch over this year, which is there's been a lot of anti-DEI proposals floated by different activist investors, different agencies that are very anti-DEI in their work, and very consistently, like 98 to 2, 99 to 1, or 100% have been voted down by your shareholders. Now, the board does not necessarily have to act completely on what the shareholders are voting for, but if you've got that strong, that clear of a message coming from them of the support, where they wanna put their support and where they don't, I think it's really critical to take that as counsel into how you're looking at your organization, how you're running it, how you're prioritizing things, and keep those DEI components in place.

You absolutely can change what you call it. If you need to take out diversity and focus on inclusion and belonging, that's fine. If you need to focus on engagement or employee and customer experience, whatever you want to call it, as long as you're still investing in that work, that is completely fine. And there are ways to keep all of this going without having you sort of be center of a target with the government. Through this time. So again, just make sure you're really kind of recalibrating your strategy here, not kicking it to the side, not kicking it, kicking the can down the road, not sticking your head in the sand. These are all really critical factors to think about related to kind of resetting your strategy this year and going forward. We would love to help you with this, so please don't hesitate to reach out.

We've got information on our website and some of our blogs. And you can also follow us on Substack now at M.E. Pfefferman, and you'll find Do DEI Write on Substack, and that'll be a great place to follow us, and we will be posting a lot about this this year. Please don't hesitate to reach out if we can help you, but definitely check out some of the resources we're providing. And that's a wrap. I'm Michelle Bogan, and that's your DEI Minute for today. Thank you so much for listening. Please be sure to follow us wherever you listen podcasts, and don't forget to leave us a review.

If you ever have questions, please visit our website or send us an email. You can also sign up for our newsletter and follow us on LinkedIn, YouTube, and Instagram. Links to everything can be found in the episode notes. This episode was produced and edited by Pod Growth with podcast art by our very own Jamie Applegate.