DEI is dead; long live DEI (but you don’t have to love it)

From the March-April 2025 edition of Supply Chain Management Review.

March-April 2025

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As we head into 2025, certain omens are pointing to an important future state—DEI (Diversity, Equity, and Inclusion) seems to be on its last legs. To understand the nature of these omens, consider the following developments:

• In January , Donald J. Trump was sworn in as the 47th president of the United States. One of his major campaigning planks—the removal of DEI initiatives (especially within the federal government and educational institutions supported by public funding).
• On June 29, 2023, in an historic decision and by a vote of 6-3, the Supreme Court severely limited the use of affirmative action in college admissions.
• According to recent reports, companies such as Walmart, Ford, Harley-Davidson, Google, Meta, John Deere, Lowe’s, Tractor Supply, Boeing, Molson Coors, Brown-Forman (the maker of Jack Daniel’s whiskey), Toyota Motor Corporation, and McDonald’s have been scaling back or dropping their DEI programs.
• A recent report from HR consulting firm Revelio Labs found that DEI executives were terminated at a much higher rate than all other executives in 2022.
• More than a dozen conservative attorneys general have issued letters threatening legal action for corporations’ diversity initiatives.
• The apparent success of conservative political commentators and activists such as Robby Starbuck in combatting “woke” practices such as DEI in corporate America.
• The emergence of conservative consumers who are using their buying power to “punish” companies that push “woke” practices.

Yet, this apparent rejection of DEI is not universal. Some companies, such as Costco, regard DEI as a strategic imperative and critical to its long-term survival and development.

When reading this, we should recall the words of Mark Twain, who, when some newspapers had reported his death, said “the reports of my death are greatly exaggerated.” To be clear, DEI, as a term, is effectively dead—there is too much negative baggage associated with it. However, as this paper will show, the goals and the need for initiatives that recognize demographic changes and enhance the ability of the firm to attract, evaluate, develop, promote and retain customers, employees and suppliers from a broader base are still very much there. Such inclusivity initiatives represent important changes. When it comes to change, we agree with the view of David Mixner, American activist and author: “Change comes with both fear and some pain. Those two ingredients create mistrust, misunderstanding, and misinformation.”

Specifically, this paper looks at the various myths and misconceptions that appear to accompany the concept of DEI; for each myth, we identify the possible source of the myths, and then we will show why it is a myth. Ultimately, we try to show that, once properly understood, inclusivity initiatives can generate numerous benefits not only to the targeted minority groups but also to others both in the firm and in the supply. Finally, we will note that an acceptable goal, poorly implemented, harms the attainment of the goal.

DEI is a fad

According to this view, the push for DEI can be traced to the death of George Floyd (May 25, 2020). His death led to widespread protests and a demand for corporate responses to address the underlying racial injustices. The resulting diversity initiatives are best described as public relationship (PR) responses. However, over time, firms have backed off from these initiatives.  Why? Because they are now faced by several new demands (e.g., the need to improve profits and reduce costs, the difficulty of quantitatively justifying investments in DEI initiatives, the emergence of a more active conservative customer segment). Consequently, firms have been forced to scale back their DEI efforts.

There are three problems with this view: (1) it overlooks certain critical demographic developments affecting every phase of supply chain management; (2) efforts at improving inclusivity are not new; and (3) DEI is a strategic issue.

Demographics argue against the DEI as a fad view. The United States market is diversifying. According to the U.S. Census, from 1776 to 1950, Caucasians (white) were the largest population segment, accounting for 90% of the Census count. Yet, from 1950 to 2020, Caucasians fell to 60.1%. Furthermore, it is projected that white Americans will comprise only 44.9% of the total population by 2060. Consequently, it makes sense for firms to rethink what and how they sell and service this increasingly diverse market. What sells to one group may not necessarily sell to another. This factor was explicitly recognized by Costco, which noted that diversity is a critical business imperative, not a PR stunt.

Furthermore, new business startup growth reflects this increasing diversity of the population.  Recent data has pointed out that Hispanic-led firms have grown by 46%, Black-led firms have grown 34%, and Asian-led firms have grown 22%. In contrast, white-led firms have experienced a 4.7% reduction in growth rates over this same time. These new startups impact the supply chain through both the demand side and on the supplier side (i.e., through the emergence of new suppliers).

Finally, there is a shortage of skilled workers in many industries in the United States. For example, the Manufacturing Institute projects that the industry will have 2.1 million unfilled jobs by 2030. In 2024, the construction industry needed to bring in 342,000 new workers. To address this shortage, firms must expand their efforts to recruit and train workers from a more diverse base.

Consequently, firms cannot afford to ignore the economic impacts, and the profit opportunities, associated with an increasingly diverse population.

DEI-like initiatives are not new. In contrast to popular opinion, DEI-like initiatives are not new.  One of the first time that we saw an explicit attempt to diversify the workforce occurred during World War II. With many white male workers enlisting in the American armed forces, firms needed workers. They turned to women and to various minority groups. Rosie the Riveter reflected this new type of worker. Women workers formed a major part of the American workforce during this period.  They not only built Liberty ships and B-24 bombers; they also built Gibson guitars. The Banner acoustic guitar, considered by many musicians to be one of the finest guitars ever built, was manufactured by Gibson’s Kalamazoo Gals (located in Kalamazoo, Michigan). In New Orleans, Andrew Higgins was building the war’s finest landing crafts and PT attack boats using a highly integrated workforce of men, women, Blacks, whites, and Hispanics. These initiatives worked because they addressed a real need.

DEI is a strategic issue. Ultimately, DEI is something that must be led by the firm’s board of directors and by top management. It is a strategic issue because it affects how the firm competes in the market; it deals with identifying new markets and new sales opportunities. It also deals with the type of capabilities offered by the supplier base (through the emergence and integration of non-traditional suppliers). DEI, if successfully implemented, affects the firm’s entire ecosystem—internally, upstream, and downstream.

DEI is a zero-sum game

This myth argues that DEI is essentially a poker game—a situation in which what one group gains in terms of job and economic opportunities at the expense of other groups.  Therefore, DEI creates artificial winners and losers; it does not increase the size of the pot. It is a game where the stakes are stacked up against Caucasians.

Debunking this myth can be done in several ways. However, we must first note that to debunk this myth, we must assume that the organization is deploying DEI correctly. By correctly, we mean the following:

Successful DEI is a long-term process. It is based on elements: relationships (developing ties between the organization and the minority groups), communications (frequency and content of information flows) and commitment (developing a duty to these targeted groups that you are in it for the long haul). It is also based on the assumption that the groups (be they suppliers or employees) are similarly committed to the organization and to improving their performance. From this stance, these practices are readily transferrable to other groups both within the firm and within the supply chain, with the result that everyone benefits. In many cases, we have seen “DEI as PR” be confused with “DEI as strategy.” With DEI as PR, the organization seeks to portray itself as champions of diversity by relying on a series of uncoordinated actions that give the appearance of being committed to DEI without the substance or systems needed to ensure that diversity is successfully embraced as being important, necessary, and beneficial. A DEI office is established with its own head of DEI initiatives; training programs are rolled out (often requiring mandatory participation); investments in DEI-related organization are promised and made; if someone who is a minority is promoted (for whatever reasons), that promotion is publicly portrayed as being of the firm’s DEI system. At first glance, these actions seem to be “right.” Yet, ultimately, such systems are doomed to fail because they are not sustainable. They focus on outcomes (e.g., look how many minorities we now have in management) rather than on processes and systems. As will be shown later in this paper, they fail because they do not recognize that, to succeed, they must effectively change organizational cultures and the ecosystems in which employees and suppliers feel safe, comfortable, and appreciated.

To debunk this myth, we must recognize that DEI creates two forms of benefits: (1) economic; and (2) organizational.

Economically, there are real dollar benefits to diversity. For example, it has been estimated that the growth of minority-owned businesses will add between $6 to $8 trillion of additional GDP to the U.S. economy. Considered by itself, this contribution alone would be the third-largest economy in the world. Furthermore, adding this amount to the current U.S. GDP would contribute an additional 24% to 32% to our economy. Next, there is the changing nature of the market that we are servicing—it is becoming more varied, more diverse. How and what we sell must change to fit these changing requirements. In short, the economics of diversity are too strong to ignore.

Organizationally, as previously noted, DEI is built on three foundational elements: relationships, communication, and commitment. These elements are not simply appropriate for working with minorities (racial and gender); they also work for all other forms of diversity, including special needs, age, socioeconomic, and educational (college, trade school). More importantly, they can be applied to the entire organization and its supply chain, thus benefiting majority and minority groups. If you add in transaction management, you get the foundations of a firm becoming a “good” customer and receiving “earned preferential treatment” from its suppliers (as noted by Melnyk et al., in the March/April 2021 issue of Supply Chain Management Review, pages 40-47). In other words, DEI, if done correctly, emphasizes the same business practices that you find in “good” supply chain management.

DEI initiatives do not work

This myth argues that these initiatives are doomed to failure because they do not demonstrate economic benefits and they are distracting to firms, forcing them to divert attention from those activities that add value and improve profit to other non-value-adding activities.

While many firms are having difficulty in demonstrating the value of DEI-type initiatives, there is other evidence that says otherwise—one coming from McKinsey and one coming from history.  A recent McKinsey study (Dixon-Fyle et al., “Diversity Wins: How inclusion matters,” McKinsey & Company, May 2020) found that diverse companies outperform non-diverse companies by as much as 39%. This finding should be treated as being tentative because of concerns with the methodologies used.

Second, history provides us with numerous examples of American society successfully expanding and changing its view of what is acceptable. To illustrate this point, consider the following examples:

• The arrival of Irish immigrants in 1845.
• Italians arriving in the United States beginning in 1820s.
• The women’s suffrage movement in 1920 that resulted in women getting the right to vote.

In every case, a group entered demanding access to opportunities; there was initially a negative reaction to these groups and their demands. However, over time, American society came to accept these changes, and, in every case, we found that these changes introduced new strengths and benefits.

One of the most compelling arguments supporting diversity is found in the experiences of the United States military—one recognized as being the gold standard for global military effectiveness. A critical contributing factor to this state can be traced to the decision to integrate the military.

The United States military was desegregated by Executive Order 9981 on July 26, 1948. Since then, that order:

• Created opportunities for future generations of Americans.
• Helped eliminate barriers that had previously prevented non-whites from serving in the military; and
• Helped create a more skilled and effective fighting force.

On the last point, Max Boot, writing in the book War Made New: Technology, warfare and the course  of history, 1500 to today, attributed much of the current success of the armed forces to the presence of the volunteer-based force that was integrated by both race and gender. A symbol of the success of these efforts can be found in the decision to appoint General Colin Powell to be the first black chairman of the Joint Chiefs of Staff in 1989. Powell noted the importance of the desegregation of the military in his autobiography when he wrote: “The military had given African Americans more equal opportunity than any other institution in American Society.”

Middle management should be primarily responsible for DEI

This myth argues that DEI should be run by middle management. This management level has the most familiarity with the issues and problems associated with DEI initiatives; they understand and often know the personnel and suppliers affected, either directly or indirectly.  Being closest to the problem, they are in the best position to make intelligent and realistic decisions and to take the appropriate actions. While this logic is difficult to argue against, it ignores several factors that ultimately make it a myth.

First, to be successful, DEI needs visible, consistent top management support. If top management is either indifferent to DEI or has yet to make any statements of support in favor of DEI, then the initiative is doomed. Second, because DEI is a strategic decision , it is therefore a top management issue, not an issue for middle management. Third, because DEI can ultimately impact the organizational culture, this decision must again default to top management. Fourth, DEI, as an initiative, requires significant investments in terms of time and money. Such decisions are most often made at the top management levels. Finally, if you assign the responsibility for DEI to middle management, be prepared for it to fail. This management level often does not have the time, resources and/or authority to properly support DEI. What you can expect to get is lip service and DEI as PR.

DEI is about quotas and reverse discrimination

At the heart of this myth is the tendency of many companies pursuing DEI to post the results of their efforts and to show how the demographics of the organization now more closely align with overall racial, gender and other similar measures of social composition. Initially, these numbers were intended to keep companies accountable. However, over time, they became misconstrued. As noted by Bo Young Lee, who was Uber’s diversity chair from 2018 to 2023, in a Dec. 22, 2024, Wall Street Journal article (“They helped create DEI—and even they say it needs a makeover”):“By the time the message trickles down, it’s heard as ‘they won’t hire a white guy.’”

Considering a recent federal appeals court ruling stating that Nasdaq’s racial and gender targets for listed companies amount to unlawful quotas, there is legitimate concern about the future validity and viability of such actions. Furthermore, this focus on quotas is often associated with companies pursuing DEI as PR; it is not often observed in organizations pursuing DEI as strategy (e.g., companies such as Costco). To understand this mentality, consider what Young Lee did when she first took over her position at Uber.

One of the first questions she asked her staff was: “What’s your job?” The answers she most often heard was that DEI was about empowering women and minorities. She rejected this answer. The purpose of DEI is to help the company make more money by ensuring discrimination does not cost the company talent, customers or a good reputation. To this view, we offer two important additions. First, DEI must also consider explicitly the issue of retention—keeping qualified talent within the firm. Second, it must extend to include suppliers and the supply chain.

That is the real bottom line of DEI. It is to increase profit; it is to enhance shareholder value. Quotas and reverse discrimination are inconsistent with these objectives.

Rethinking DEI

Having identified and debunked the various myths associated with DEI (the preceding discussion is not exhaustive), we must next lay out the steps necessary to successfully implement DEI.

Ditch the DEI name

This is a simple one to understand. The term, DEI, is now cloaked with strong negative connotations. Many companies have chosen to distance themselves from the term DEI while still pursuing the goals and objectives of DEI. A good starting point is to use a different title. Make it simple and self-explanatory. Ensure that it makes sense to the company or the supplier base.

Understand that we are essentially dealing with change management

DEI is about improving the competitiveness of the firm and its supply chain; it is also about changing organizational culture. These last three words are critical to a successful program.  Consequentially, it makes sense to remember the major guidelines for successful management:

• Identify the need for change. This is a two-part challenge. The first part is to determine why change is needed. This is where we need to develop and present a compelling, data-driven business case. The second part is more difficult (and essential when dealing with culture)—discrediting the current approaches. Unless you can show the people involved how and why the current approaches are not working, then you will not succeed. As soon as any training program is complete, people will return to what they previously had done. This makes sense because they know the current system and, in general, they are comfortable with it.
• Create a change management plan. This plan should include objectives, stakeholders, communication strategies, and a timeline. This plan should also convey urgency—the need for action now.
• Assess the impact of the change. Determine how the changes will affect people, markets, processes, and systems.
• Communicate clearly and frequently. Keep everyone informed about the change on a regular basis.
• Involve stakeholders.
• Plan for implementation.
• Monitor progress.

Achieving DEI should be treated as a business process and a business decision—it must make sense for everyone involved. It must identify a clear future state and a path from the current state to the future state.

Ensure rock-solid top management support

Because DEI is a strategic decision, it should be made at the top management and board of directors level. Consider how Costco responded to a recent proposal presented by a conservative think tank, the National Center for Public Policy Research, as noted in a CNN Business article on Dec. 27, 2024, (“Costco is pushing back—hard—against the anti-DEI movement.”) This proposal would require that Costco evaluate and issue a report on the financial risks of maintaining its diversity and inclusion goals. The group criticized Costco for possible “illegal discrimination” against personnel not “white, Asian, male or straight.” The board of directors unanimously recommended to shareholders they vote against this proposal. The rationale—Costco has stated that its DEI efforts have helped Costco attract and retain a wide range of employees and improved the mix of merchandise and services offered in the stores. In other words, voting against DEI adversely affects the ability of Costco to compete.

We also need this top management support to be highly visible (think back to the Costco example). Ultimately, we need to convince top management to be committed to DEI by showing how it positively affects profit, reputation, and market share. It is not enough to argue that DEI is the “right” thing to do; it should be argued that it is good for business and essential or survival.  

Remember: This is a long-term undertaking

Because DEI involves organizational culture, it is not an undertaking to be embraced lightly. Changing culture takes time and persistence; it involves identifying sources of resistance (especially from laggards—we will talk about this category later) and formulating and deploying strategies for overcoming these sources. It means demonstrating that DEI is working. In short, it takes time—accept that as a reality.

Be transparent

This recommendation is somewhat self-evident. It involves the following:

• Openly communicating the reasons for the changes proposed.
• Honesty about the potential challenges.
• Sharing decision-making processes with  key stakeholders.
• Actively soliciting feedback from employees (current and those who have left) and suppliers (current, those who have left and those who are considering you as a customer).
• Clearly explaining benefits.
• Identifying next steps and timelines involved.

Being transparent is critical to building trust—both internally and externally. Trust is important because it creates goodwill and willingness to tolerate failure. With trust, people are willing to wait to see what happens rather than offering immediate condemnation.

Identify and defuse institutional barriers and biases

One nice aspect of change management is that it gives everyone an opportunity to identify practices and approaches present in the organizations that have (often) unintentionally cost the company good talent, customers, good suppliers, or harmed its reputation. This must be done at the outset.

These practices may have made sense in the past or they may have been introduced to deal with a short-term problem. However, when examined critically, they are often found to not make sense. To understand this position, consider the experiences of one of the authors.

When he approached the university with a request to become a supplier, he was told that his company wasn’t qualified to be a supplier to the university. The reasons the company wasn’t qualified included 1) they needed to have three other universities of their size as current clients, 2) they had to have at least $3B in assets under management, and 3) had to have been in business for at least 30 years. These were unreasonable requirements—especially for a new supplier and the only certified minority-owned firm in the state within that business segment. Several months later, since this author had been recognized as being a successful graduate by the university, he was approached by the university with a request for a donation. His response: “Why am I good enough to give you money, but not good enough to be a supplier?” This policy regarding new suppliers was probably introduced in the past to deal with a problem involving a new supplier. This same policy also effectively excluded new suppliers from competing for university business. Many of these new suppliers will most likely be minority/women-owned or led.

As a final point on this issue, identifying such practices and policies is often best done by bringing in an outsider. Such outsiders bring with them an important asset—a fresh pair of eyes.

Remember the three foundations: Relationships, communication, commitment

As previously mentioned, DEI programs are built on three foundational elements.  The first, relationship management, deals with how the firm and its management deal with employees and suppliers and the overall quality of the relationship. Included in relationship management are elements such as the following.

• How the firm deals with problem-solving.
• Conflict resolution mechanism.
• Clarity of objectives and goals.
• Mutual trust and respect.
• Clearing of the mission.
• Openness to new ideas or suggestions.
• Risk sharing.

Communication flows have been previously discussed. However, it is important that this element includes the following elements.

• Performance measurement system.
• Consistency of messages and signals from the firm to others.
• Transparency.
• Frequency of communication.
• Early warning.

Commitment includes the following elements such as development programs for suppliers and employees and demonstration of commitment by the firm to the supplier and employee. It is here that we would include mentoring programs, where management from the firm mentors either employees or suppliers.

When you look at these actions and you compare them to what a firm must do to be viewed as a good customer, you find that many of the things that you do to help DEI succeed are the same things you do to develop and maintain good buyer/supplier relationships. It is our view that effective DEI draws on many of the same practices that you use to become a more effective supply chain manager.

Emphasize equality of preparation/opportunities, not equality of outcomes

This guideline is simple to understand—everyone (employee or supplier) should be given equal opportunity to participate after having been adequately prepared (as discussed in the preceding point) so that they can successfully compete against others. It is now up to the employee and supplier to prove that they are up to the challenge. Minority employees and suppliers can fail just like anyone else. More importantly, qualified employees and suppliers succeed because they compete on a common field and meet and/or surpass the requirements for success. These groups succeeded not because they were drawn from minorities; they succeeded because they were good, and the company gave them the opportunity to succeed.

Equality of preparation/opportunities requires work; it requires investments of time and resources. Some firms, however, may simply reduce the need for work and investments by trying to seek equality of outcomes. If 19.1% of the United States population (using 2022 Census data) are Hispanics, then we make sure that 19.1% of our supply chain is Hispanic-owned or led. The problem with this approach is that the issue of whether these suppliers are qualified is not addressed. There is always the question of whether they got their positions because they were Hispanic rather than qualified.

Don’t focus only on recruiting; recognize the importance of retention

It is not enough to attract qualified minority employees and suppliers, you must also ensure that you have created an environment that is safe and welcoming to the employees and suppliers. This means assessing the corporate environment and also the communities in which the employees live. As one author experienced in a conversation several years ago, a corporation had recruited a very qualified African American woman to become the CEO of their company. The compensation package was very competitive and the opportunity with the company was attractive.

However, the candidate started asking questions about the community in which the company had its headquarters. She found the community didn’t have the infrastructure and services geared toward people of color. As an example, she would have to drive an hour just to find a hair stylist who was experienced with African American hair.

Recognize that not everyone or every firm is an early adopter or early majority

This recommendation is based on the framework presented by Geoffrey Moore in his book, Crossing the Chasm (Crossing the chasm: Marketing and selling technology products to mainstream customers) he noted that, when dealing with change, people and companies fell into one of five categories.

• Innovators. Willing to embrace the change because it was new and different.
• Early adopters. Willing to embrace the change based on the promises offered by the change.
• Early majority. Along with late majority, formed the largest group of companies and users. Very risk-adverse; driven by actual results (i.e., show me the money), wanted to see the change in action. Often cost-focused.
• Late majority. Like early majority but more risk-adverse.
• Laggards. Very resistant to change, likely to sabotage efforts to introduce the change.

Only 15% tend to be either innovators or early adopters, the bulk of responses fall into early majority/late majority categories.

Using this approach, we expect different responses to DEI. However, it is up to the supporters of DEI to focus on demonstrating to the majority (the early and late majority) the viability, feasibility, and positive impact of DEI. Remember, when it comes to changes, this group is driven by a simple mantra: “Show me!” Another implication of this approach is that we should identify and explicitly address in advance laggards and the challenge that they pose. Members of this group will resist any change to the status quo.

Monitor effectiveness continuously: Measure, fail fast, learn, and repeat

Changing an organization’s culture is a long-term undertaking. Expect errors to take place. Make sure that you are continuously measuring (this is not the same thing as setting quotas) performance and the extent to which goals are being met. When performance shortfalls occur, remember that measures are symptoms—they tell you that something has gone wrong; they do not tell why things went wrong. We need to quickly identify possible root causes and address them. People and organizations will tolerate failure as long as they know that the causes of the failure are being continuously identified and quickly eliminated.

In supply chain management, there is a mantra of “fail fast, learn, and repeat.” That approach is equally appropriate to DEI.

Concluding comments

We began this article by noting that for many, DEI seems to be triggered by current events. What we have tried to show in this article is that DEI is not a response to a death that took place in Minneapolis in 2020 but rather a response to fundamental changes now taking place in the American market, in the American workforce, and in the American supplier base. We have also tried to show that DEI is strategically driven and that there are real benefits to be captured by pursuing DEI. We have also tried to debunk many of the myths and misconceptions surrounding DEI.

However, when everything is said and done, we have a simple message to share with the reader.

Faced by a drastically changing marketplace, faced by a labor shortage, and faced by the need to develop and maintain a vibrant, qualified scalable supply chain, we need some form of a DEI initiative. The good news is that we already have access to most of the tools needed to do so. The only thing missing is the will and determination to commit.

About the authors:

Steven A. Melnyk, Ph.D., Western (1981) is a professor of Supply Chain Management (retired/Emeritus) at Michigan State University. He has co-authored 25 books, more than 100 refereed journal articles, and more than 300 practitioner articles. His research focus includes buyer-supplier relationships, supply chain risk and resilience, strategic supply chain management, supply chain cybersecurity, and certified management standards. He is a past member of the APICS Board of Directors. He is currently part of the DBX initiative (DoD sponsored), which is part of the CHIPS Act. Since retiring, Dr. Melnyk has now part of the Executive Development Program at Michigan State University.

Jim Roberts is President and CEO of Jim Roberts Enterprises. Roberts graduated from the University of Michigan with a Bachelor’s degree in engineering and holds an MBA from Michigan State University. His career has included executive-level positions with CB Richard Ellis and Earth Tech, a Tyco International consulting subsidiary. He currently serves on the Board of Directors for the Michigan Minority  Business Development Council, West Michigan Sustainable Business Forum, Citizen Advisor for the Berrien County Pension and Trust Investment Advisory Committee, and Audit Committee for the Child and Family Services of Southwest Michigan.

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