Michelle dives into the topic of over-compliance in the realm of diversity, equity, and inclusion (DEI), particularly in the wake of recent executive orders and evolving legal guidance in the United States. She explains that despite the prevailing confusion and caution caused by recent governmental actions, DEI initiatives remain essentially legal, with only a few specific practices (like quotas or exclusive programs) now restricted. The conversation examines how some organizations, particularly those heavily reliant on federal funding, have adopted an overly cautious and risk-averse approach—potentially sacrificing progress and undermining their talent, financial stability, and reputation.

The episode also highlights the importance of balancing legal risks with the equally significant risks of diminished employee engagement, financial loss, and reputational damage. Drawing on recent research and real-world examples, the speakers stress the continued expectation from employees, consumers, and stakeholders that organizations remain committed to DEI.

To learn more, you can find Michelle at www.Equity-At-Work.com

Key Topics Discussed:

• The risks and impact of over-compliance with DEI legal requirements
• Recent executive orders and what remains legal in DEI initiatives
• The small set of now-restricted practices (e.g., quotas, exclusive programs)
• The motivations and pressures driving organizations to become overly cautious
• Balancing legal risk with employee, financial, and reputational risks
• Recent research on CEO, employee, and consumer expectations for DEI
• Real-world case study: Target’s backlash after pulling back on DEI
• The importance of inclusive, intentional decision-making by leadership
• The critical role of open communication when making or shifting DEI strategies

Michelle I'm Michelle Bogan, Founder and CEO of Equity at 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.

In this episode, I want to spend some time talking about the risk of over compliance. Now that may sound like a funny thing to be talking about related to dei, especially with in the US all the executive orders that came out in January and some of the continued publications of different civil rights fraud initiatives and other actions coming through the Department of Justice related to di. The intent of that, of all of those orders and the continued publications that come out, just reinforcing some of the elements of that, was really to create a combination of some fear, some confusion, a little bit of chaos related to what exactly is legal now related to DEI in the US and what it comes down to really is there are just a very small handful of things that are now not legal. DEI in total is still absolutely legal in the US the elements that have been defined as not legal under the Trump administration are just a handful of things which most people in this day and age weren't really doing anyway. When I talk things like setting quotas, absolutely, you can set goals, you should have ambitions, you should have goals that you're going after. It's different than sending a quota where you're saying we want one or two of this and this, a couple other spaces around, you know, programs specifically to attract or to promote or develop a particular group of employees that is now illegal. However, those programs can stay in place as long as they're opened up to a much wider audience. Similarly, ergs are absolutely legal as long as they are open to allies and others who are interested.

However, it's hard to pull that out of a lot of the language in those executive orders and in some of the continued publications coming out of the administration. So what's happened is many companies have swung really far into legal compliance and kind of over compliance, just playing it incredibly safe. I don't blame anyone for doing that. If you are recipient of federal funds or any kind of grants money or anything else where you're really dependent on government contracts or any of that for, you know, significant portion of your revenue, or if you're a nonprofit who's very dependent on that to stay afloat, or academic organization in a similar situation, Absolutely. You have to be incredibly careful from a legal standpoint. However, what we've seen is that a lot of people have gone so far that they've forgotten about the trade offs that can come with sort of being hyper vigilant on the legal front. So really you've got to step back and think about, you know, what are the different tensions at play here and how do we think through finding the right balance of the legal risk and against things like employee risk, financial risk, and social or reputational risk. There was a recent study that came out from the Meltzer center for Diversity, Inclusion and Belonging at NYU School of Law and Catalyst, both great organizations that do a lot of great research and education related to DEI and deib.

And they found some really positive information in terms of CEOs wanting to continue to be very committed to this work, that employees still consider it table stakes, that consumers are very much still looking to some of their key brands to set a standard in this space. And so that really touches on, you know, the financial, the talent and the reputational risk that you really have to balance against the legal component. So when I talk about striking that balance, what you really are trying to do is say, okay, yes, let's assess what our legal risk is. If you're a large company, you probably have a general counsel who can help you do that. You can also use employment attorneys to help you do that kind of assessment. They can even provide certifications that you are not violating any of the executive orders. If you've got analytics you're running or other things that you're now feeling kind of nervous about, you, you can run that through an employment attorney so that that information becomes privileged, which means, you know, it'll be kept very confidential. You may need to tighten up some of your processes and policies and procedures, but all of that falls within the legal realm.

So your general counsel or outside counsel should be helping to help you kind of, you know, figure out where to how to strike the right balance in that space. It's important that to remember, well, yes, you may decide we want to be really risk averse right now, that's fine. But the trade off of that may be that you lose some of your employees or you have a hard time recruiting new employees, especially if you have a lot of Gen Z ers in your organization or you bring in a lot of Gen Zers as your entry level employees through recruiting that generation in particular, as well as Millennials and others. But in particular, Gen Zers feel like this should be. It should be highly evident that There's DI work happening in the organization that it's a priority. So you've got to think through, okay, what's the potential impact? Could we lose people, could we lose people now? Can we lose people over time? Do we set ourselves at risk compared to a competitor who is staying on course with their DI work? Are we going to lose some good people based on that? So thinking about the talent component, obviously engagement, inclusion, belonging, equity, all of those are really important elements to focus on as really on a day to day basis to drive your business and to keep employees, you know, feeling like they've got a great place to come work, that they're excited about, that they, that they identify with, they feel like they can be themselves at and, and that's, that does drive a lot of retention and loyalty over the years. So you've really got to think through that. On the financial side, if you pull way back from di, you're walking away from the business case.

So you've got to be really careful there as well. And we've seen proven time and time again a focus on DI really does drive, you know, top line revenue in terms of innovation, identifying new white spaces to go into doing a better job of tapping into different consumer and customer needs. You know, there's just, there's so much that comes from that. You're breaking up the group. Think of your organization by bringing in a diversity and making sure that everyone is treated equitable and everybody has opportunity. So walking away from that could really have a significant impact on your business. There's also a huge bottom line component to this in terms of reduction in turnover, extending tenure, extending retention, having better engagement. All of those things help to reduce costs.

So you've really got to balance both of those when you're thinking about pulling back from dei. And some of those things may not feel so medium term. And obviously if you're balancing those against getting federal funding, you may say like, I've got to take that hit because we need those federal dollars to stay afloat, to keep the doors open and so forth. And that's completely fine. You know, all of these things have to be decided for your specific organization. But what I want to remind you is, you know, you are making trade offs as you go through these different decisions. So you just want to go into that with eyes wide open. The other component of this, and this ties very much to the financial and talent is kind of the social reputational piece of it.

And you know, we've seen some businesses really get slammed by pulling back from dei Target, of course, is the most visible example, is a really prominent consumer brand. They pretty visibly backed off DEI very early this year and there was an immediate backlash that has been sustained over almost seven months now, probably will continue to go even longer. They've lost foot traffic month over month and there will become a point where that's almost impossible to regain within a calendar year. So obviously that has a huge financial impact, a talent impact for all the employees in the stores that are dealing with that issue, as well as the employees at the corporate offices if they disagree with that. But reputationally, it will take a lot for Target to come back from that, as well as any others that have pulled back and disappointed their consumers in doing so. You know, if you're a brand, whether you're B2B or B2C, that's known for a lot of integrity around this space or for being very employee centric or, you know, focused on innovation and making sure all kinds of voices are heard as a way of driving innovation. All of those things are, you know, kind of correlated directly with DEI. Consumers are very savvy at this point.

B2B customers are very savvy. They're looking for, you know, evidence of those things. So you've really got to find a way to balance those components. A couple ways to do that is, you know, within your C suite, make sure that the general counsel has a voice as well as, you know, your cfo, your chief people officer or chief HR office, your coo, obviously the CEO, that everyone together is making these decisions, that you're balancing it as a total team so that you're well aware of the trade offs and the risks and that from a communication standpoint you can get ahead of that. Some other companies are setting up kind of governance committees around this, so maybe there's a pre step before it goes to the C suite or the leadership team where you've got a subcommittee of experts in each of those spaces that are kind of assessing risk and running different scenarios and making recommendations up to the C suite and then setting up ongoing so that you may hit a point where you decide, okay, we had to do that for some period of time and now it's time to switch gears and come back to a more balanced space or to lean in more heavily on employee or, you know, one of the other elements. For all of this work, as with all DI work, communication is really, really important to bring into this. These discussions and the rollout of those decisions. The organization needs to be brought along.

They need to understand the purpose, they need to understand the rationale, they need a lot of clarity so that they don't feel like, you know, these things are happening in a black box and that they're, they have no, you know, understanding or just can't see where, you know, where the path forward is. If you can explain, you know, the rationale, I think you have a better chance of having people who may not agree with it still stay on board because they will feel like they have insight into the, the reasoning behind it and they can make their own decision about, you know, does that make sense to me or not? And particular, if you decide to change tax at some point, it will be really important to have a communication campaign around, around that as well. It doesn't need to go into deep detail, but it does need to acknowledge that you are making a shift and the reason for doing so. So again, you know, just before jumping, you know, we all sort of were tempted to have a knee jerk reaction when a lot of the orders came out and go to a place of safety, whatever that was for each of us, and just make sure you're being, you know, really intentional about going through these decisions and doing the right wing of the different risk factors and the trade offs we're making and the upside as well to the decisions you're making. And if you're ever uncertain about, are you using the right rationale, are you thinking about all the components? Certainly we're here to help and we've got a lot of great referrals we can provide for employment, attorneys and other resources that can give you guidance on a legal front as well. So I hope this helps, gives you a little bit of clarity in, in terms of the different elements to balance as you try to navig these challenging times in the U.S. related to the executive orders. 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 to podcasts and don't forget to leave us a review. If you ever have questions, please visit our website or send us an email.

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