Diversity Critics Hit a Bullseye with Target

Hello and welcome back to Communication Breakdown, a new podcast from the Observatory on Corporate Reputation. Thanks for joining us. I'm Steve Dowling in Silicon Valley. And I'm Craig Carroll in New York City. Each week, Steve and I take a look at strategies companies are using to shape headlines and sometimes save their skins. To post-game show for PR Pros this week, diversity critics hit a bull's eye with Target.

The Minneapolis-based retailer becoming the latest company to reverse course on its commitments, just one day after its big box rival Costco saw shareholders vote overwhelmingly to support diversity programs, although that story may not be over. Target's chief community impact and equity officer explained the move in a memo to employees. She cited many years of data, insights, listening and learning, as well as, "the importance of staying in step with the evolving external landscape."

The company posted a notice to its website around midday, Friday, and the story appeared almost simultaneously on CNBC.com, quoting the memo. Then, as we've come to expect, anti-wook provocateur Robbie Starbuck took a victory lap. (Robbie Starbuck): "Target was put on notice at the end of November that we were coming for them when we were able to flip the woke policies at Target.

Knowing that a story was coming, Target executives wisely got together and figured out how to get rid of some of these woke policies. Target forwarded me this email that outlines why they're making these changes, by the way, and it says it's with the goal of driving growth. That's a good news for today. This was supposed to come from us first. It did get leaked, but you know what good news is good news?" Yeah, we'll talk about that leak in a moment.

Target has nearly 2,000 stores nationwide, a smaller footprint than Walmart or McDonald's, which have each ended diversity programs in recent weeks under pressure from the right. But Target may hold special cultural significance. As a long-time corporate supporter of diversity, especially in the wake of George Floyd's murder, which happened just a few miles from Target's worldwide headquarters.

Steve, we've been tracking the way companies are positioning these rollbacks since the trend started last summer. Are they getting any better at it? I think the short answer is yes, marginally anyway, but their explanations are still kind of vague and hand-wavy.

I think the difference is unlike the earlier reversals by John Deere (and) Harley Davidson, ever since Walmart's announcement, which was right before Thanksgiving, these bigger companies have been trying a little harder to get out ahead of the story and provide some kind of context or rationale. Mark Zuckerberg of Meta said, "Feels like we're in a new era." Target says they're staying in step with the evolving external landscape.

And setting Meta aside, I think most of the companies are trying to signal that they're still going to have the same results like a diverse workforce, a diverse supplier base,

a welcoming environment for customers. They're just going to go about it a little less programmatically, if that makes sense. And certainly, they're going to go do it without letters "DEI" in front of it. So I'll just kind of break it down using the CPR Triangle: Claims, Perceptions, Reality. Claims- what Target is saying. They're saying that they're evolving their approach to reflect data insights and evolving external landscape. In other words, this isn't a retreat, it's an adjustment.

Perceptions- meaning how it's being interpreted. Conservatives see this as a victory over woke policies, progressives see it as Target abandoning its values. And employees are likely confused. Do these values still stand or not? And then Reality- what Target actually does. Programs may not actually be going away. I think the issues that they're just repositioning them under a different name.

Target's trying to protect itself from being put in a category that could exclude itself from key policy conversations. I think the question we should be asking is Target rolling back to the DEI? I think the question we should be asking is what's the real outcome they're aiming for? And I think to your point about reality, I think that's what people are really waiting to see what emerges, what transpires, because the companies are saying they're still committed to a diverse workplace.

However, at the same time, they're saying they're going to make some changes. They're ending programs whether they were scheduled to or not. In Target's case, I think most things they said were going to end. They were already scheduled to end. But I think one of the things that is creating this concern, certainly from my point of view, is we keep hearing companies cite data and learnings in their explanations, but in a lot of cases they're not sharing that data or articulating the learnings.

And then to explain it, what I think is widely understood, these are unpopular policy changes, but to explain it, they point to this what we've called the 'vibe shift'. Target says they're staying in step with the evolving external landscape. And it kind of scrambles your brain when you read it, if you parse some of these statements, so you start to understand what's going on.

The "evolving external landscape" seems to be the pressure target and certainly many other companies are feeling from the right. Yeah. See, this is what I wonder, right? I mean, if Target had the right data to back up their DEI programs, would we even be having this conversation? Because to me, companies that successfully defend DEI, don't just say it's important, they prove it with numbers.

They can point to hard data on retention, consumer loyalty, even risk mitigation, and say, this isn't just the social good, it's a business imperative. For me, that's one of the things that stood out with Costco's response, but when we don't have that data or he don't use it, you're left making decisions based on sentiment, not strategy, and that's where you lose control of the narrative.

Because right now, I think part of the issue is that Target's in this awkward position where they're not really changing much operationally. They're just changing the language, and that puts them in a little bit of a dangerous spot. So the question is, is this adaptation or is this appeasement ?

Because if the core programs are there- supplier diversity, hiring initiatives, ERGs- if they're still in place, the critics who pushed back for the rollback might not stop there, and at the same time, they risk alienating employees and customers who supported these initiatives. They could end up frustrating both sides, all while hoping the rebrand is enough to make the problem go away.

To your point about appeasement versus adaptation, I think there is an element of appeasement here, and we should talk about that in a moment. But over a longer period of time, you've been seeing this process of adaptation. Target, I think it was a year or more ago, changed the name of their diversity program, their DEI program, to "Belonging at the Bullseye." Other companies have made similar moves.

So we've been watching them adapt, but it's really important to point out here, I think customer opinions have not changed, and diversity remains important both to businesses and to the public, and popular, or at least acceptable, among a majority of customers. It's just that when you talk about diversity in a certain way, like directly about diversity, that's not acceptable to a relatively narrow audience.

Despite that, there's a vibe shift that we've been talking about since the election, there's no evidence that anything has changed in public opinions. I'll give you an example. Early in January, before the inauguration, Axios and the Harris Poll found 61% of workers said diversity is good for companies. 75% agreed more needs to be done to make sure everyone has a shot at advancement. Here's Ray Day of Stagwell Global, the company that runs that Harris Poll.

(Ray Day): "With all the backlash on DEI, you would have thought you would have seen more negativity, but in fact, it's very consistent that we've been seeing for years. The acronym is a problem just like all acronyms. Americans are either confused by or they dislike DEI, ESG, IVF, but when you go underneath the covers, Americans still value diversity to ensure everyone is advancing. So, perhaps we have a communications problem with DEI, but the value of diversity in business is alive and well."

And YouGov, I know this is statistically a different kind of poll, Craig, you're the PhD, not me, but YouGov found that 48% of the Americans they surveyed this month held favorable opinions about DEI versus 29% who find it unfavorable. That's a +19 favorable rating for diversity in the workplace.

Yeah. For both of these polls, what stands out is that they're both reporting numbers that are tipping in favor of diversity that seem even at odds when you think about the split of the country right now in terms of red states and blue states, right? This certainly makes it more difficult for Target being one of America's favorite

companies, right? I mean, they have always represented America, right? So they're not just a retailer, they're America's brand. They sit at the heart of American life. It's in every community. It caters in every demographic. They built their identity on being a place where everyone from suburban moms to city dwellers from those that are budget conscious to brand enthusiasts, they can find what they need.

And I think that's what makes this moment so complex is that in a divided country, brand like Target doesn't have the luxury of picking aside. Unlike niche brands that can lean in more fully into like a specific audience, Target's got to navigate the landscape pretty carefully where one move could alienate half the country. But in this case, going back to the data that you're reporting on, that data is tips and favor of diversity.

Yeah, and you want some evidence of that, Target's website, if you go to Target.com today, you'll see features for Black History Month and Lunar New Year. They have online shops dedicated to each. And so to those audiences who are just going to Target to shop, at least online and who aren't tuning into the news about DEI, there's no apparent change. But for those who are tracking this issue, I think the immediate reaction was, I would say, pretty strongly negative.

And that was influenced a lot by the reaction of the LGBT community in the Twin Cities, where Target was born and where the company is still based. Target was a long time sponsor of the Twin Cities pride parade. And I don't think there was any indication that they were not going to continue in that role. But when the organizers of the parade heard that that diversity announcement from Target, the parade essentially kicked them out. They said, we don't want your money. We don't want your float.

Bullseye be gone. And that's a $50,000 sponsorship. So the pride parade then turns around to its donors to make up the money, and they end up raising over $70,000 in 24 hours. And separately, I did hear voices on MSNBC in the wake of that Target announcement saying, maybe boycott Target or shop at Costco instead. And by the way, we need to get back to Costco before this episode is over. But we also read that some black influencers and suppliers are actually calling for a different strategy.

This is according to Reuters. They say these influencers are urging their followers not to boycott over the policy change. They're saying a better approach would be for customers to flex their economic muscle and make it clear that it'd be a bad decision, a bad business decision for Target to drop products by Black owned companies. But by the way, we haven't seen any indication that Target was planning to do. And there's the interesting divide.

Some activists are calling for a boycott and others are saying no.

Let's use our economic power to ensure Black owned businesses don't have a place at Target. And that's a crucial distinction because the second approach recognizes that Target isn't necessarily undoing diversity efforts. But if they were to start dropping Black owned brands, that would be a meaningful shift in reality. And so we're seeing a moment where different communities are trying to figure out how to respond when a brand changes its posture, but not necessarily its actions.

You know, do you punish them for the signal they're sending or do you make sure that they stay accountable where it really matters on the shelves and the supplier relationships and then hiring decisions? I think that's the real question moving forward. It's probably very hard to organize and impact, and economically impactful boycott on this issue, maybe on any issue.

I just don't know that that many people are paying that much attention to it or going to change their shopping, their spending behavior as a result.

But I think this one is a situation where the calls for a boycott or an organized effort, a seemingly organized effort to pull together a boycott, just that effort could be as impactful as an actual boycott itself because as we've seen when the companies are making these announcements - Target made its announcement on a Friday afternoon, Walmart made its announcement like the day before Thanksgiving or Tuesday before Thanksgiving - they're not looking for these stories to have long legs.

They're looking for them to go away. And calls for a boycott or a viewer to see, "Mounting calls for a boycott, " choose your headline in that direction. It could bring the story back to the front page, and that's the situation these companies do not want to be in. I think it's really instructive on that point if we look at what has happened in the wake of Costco's shareholder meeting. Just to bring you back up to speed, Costco was under pressure, but they did not go quietly.

The shareholder proposal to roll back Costco's diversity programs went down to a resounding defeat. Yeah. So what happened after that? Their CEO gets a letter from Republican Attorney's General from 19 states saying their policies are illegal. And perhaps just as important, they say they're out of step with Trump's executive order, which encourages the private sector to end DEI programs. So Target doesn't want that kind of heat. And you know what else Target doesn't want?

And nobody in American business wants is tariffs. Walmart and Target, they're two of the biggest importers in the United States. Last year, he was during the port strike. We read they were the two biggest importers. And look who's right behind them, probably in the top five is Lowe's, which also rolled back diversity commitments last year.

These are companies who you'd like to think an American president would listen to before pulling the trigger on 10, 25, 60, 100 percent, whatever, the latest number is being bandied

about on tariffs. But if the White House thinks they're too woke, maybe they lose their seat at the table. So I think if you zoom out, you see some companies who are at real financial risk if Trump's economic tariff threats become reality. And it may be that they're looking at the equation and saying, if we give on diversity, maybe we stay off the White House naughty list.

Yeah. I got to say this is something for communicators that were not as as a collective, not all that equipped to handle very well. This is why for me, I think this area of corporate affairs really adds something here to communications. Because up to this point, we've been talking about their stakeholders, their customer base or employee base. But now we're talking about, you know, with tariffs that there's another group here at play.

What I want to hit on here is that one of the problems I think is how we think about the groups that we're interacting with. We're going back to this idea that we have a tendency to treat everybody as a stakeholder, not everybody is a stakeholder. The general public is not a stakeholder. They're just an audience. So often when we're talking about stakeholders, it's almost like they're this all encompassing single entity, but not all external voices actually have a stake in target operations.

So right now, targets responding to two key groups, those who have a stake in what target is doing, customer, employees and investors, and also those who target has a stake in, which is regulators, government entities and policy makers. The real challenges, aligning these two groups because they often have conflicting interests. Well, this brings me back to what you mentioned earlier, which is appeasement. And as a strategy, appeasement does not have a great track record.

But if we look at how we got here, and we've learned over the past few weeks that access to Trump carries a price tag. That's apparently the new cost of doing business or one of them. And these companies may be looking at that equation as I said, going, well, with this approach, hopefully we don't change much in terms of our outcomes regarding diversity, but we nod to Trump with the optics on diversity. It's a really unfortunate cost-benefit analysis.

And some companies seem to be betting that they can eventually repair their relationships with customers, employees, and their advocates down the line if that's the cost of staying on Trump's good side for now. It feels to me like a Hobson's choice that taking a reputational hit now, hopefully recover from it later. I think the big question, Mark, in following a strategy like that is, what you're doing is you're betting that if you give on something, on one thing, you won't have to give up on

more. But you're also showing that you're willing to make concessions. So what will you be asked to give up next? And DEI is the MAGA bludgeon of choice right now. It's apparently, according to some, including in the White House, it's White California Burns, that's why the Fed hasn't lowered interest rates, blaming it all on diversity, and absurd as it sounds that is a lot of pressure for companies.

Who to your point have a stake, and not insignificant stake in what's coming down the pike from Washington? This idea of tariffs is not something most communicators are equipped to talk about, right? We're used to talking about relationships and reputation, right? And for me, this is a very clear difference, and why they're both important, but sometimes it's not about reputation itself anyway, but what category you get placed in that determines the outcomes.

Companies can get included or excluded from opportunities based on how they're categorized. I think Target saw the risk of being placed in the progress of only box, potentially excluding themselves from influential policy conversations. So being in the wrong category can close doors regardless of your actual reputation. I think the issue there is what category do your customers put you in, and how strongly are they going to react?

We saw what happened with the pride parade in the Twin Cities immediately after Target made this announcement. I think they got put in the not-so-diversity-friendly category by their critics at least, and there is certainly some nuance in all of this as companies have been readjusting to your earlier point as they adapt.

I think things are so fraught right now that these announcements as they're coming out and now activists and other people paying attention have seen a string of them over the last several weeks and months. Trump delivering on these are things he promised to do, but the executive orders still were shocking if not surprising once he took power. Although we haven't seen action on tariffs as we pointed out, I think it's heightening people's anxiety about all of this.

As we mentioned earlier, people don't really know where it's going to stop. Some people that may seem hyperbolic, they said they were going to do this, so are we surprised? But tensions are high right now, and people are worried about this and many other issues.

Steve, this is where we have to talk about the massive growth between reputational shifts and real-world business consequences like tariffs, tax incentives, and regulatory oversight, because it's one thing for Target to take a reputational hit over DEI. It's an entirely different thing if that reputational shift translates into economic penalties that impact their ability to compete.

If you look at what happened with Walmart and Amazon, these companies secure billions in government incentives and subsidies and tariff advantages, not because of the reputation for the public, but because of their positioning with policy makers. Reputation with the media or your local customer base is one thing, but being on the right

side of economic decision making is another. I think that's the challenge for Target because if they don't make these DEI adjustments, do the risk falling out of favor with the political landscape that now controls access to key business advantages? Well, if they do make them, do they alienate employees, customers and local partners of Philoband?

I know that's not an easy equation, but what's clear is that corporate influence that he isn't just about branding, it's about maintaining leverage and policy trade and regulatory circles. Yeah, I mean, having a great reputation as a business doesn't help much if you don't have a business any longer.

I think that's the calculation, maybe to an extreme, that some companies are making because they see, I don't know, that it's an existential threat, but they can clearly see a significant threat to their businesses from tariffs and other economic policies that may be being considered. They're looking to make sure that they still have a seat at the table when it comes to decision time. Yeah, I think the question is, what's the bigger business player?

They're making a short-term, reputational concession to protect long-term economic positioning, because if they don't, then they lose access to all those advantages. It's not just about reputations, whether they can remain competitive against companies who are playing the game a little bit more strategically. Target's move right now isn't just about protecting itself, but actually about protecting the very communities and stakeholders that they'll excluded.

What if this wasn't a retreat, but a strategic repositioning that allows them to continue supporting DEI in ways that we can immediately see? Because here's the reality. If target becomes too politically vulnerable, they can lose the ability to do anything for these communities.

If staying in the progressive only category meant that they risk losing access to the decision-makers who control tax incentives or procurement policies or economic partnerships, then staying rigid on DEI messaging can actually make them less effective at advancing these goals. Maybe this move is about keeping the wrong-term influence intact.

Maybe it's about ensuring that their supplier diversity programs, community investments, or inclusive hiring practices stay alive, even if they have to evolve the way that they talk about them. The way to win the bigger fight is not to charge straight at it, but to make sure that you're still in the room where the real power is being negotiated.

That may be, but I think it's one of those situations where you're making this gesture that says you're still important to us and your audience reacts by saying that you've got a funny way of showing it. I think in that situation it will come down to communications. The calculation is, will this undermine our efforts with the people we're trying to appease or impress or otherwise stay on the good side of right now?

Then, if that is the case, it wouldn't surprise me if this is the calculation at some level, you're making this calculation that we can come back to these folks and they will receive us with a warm embrace. That may be true, but certainly the initial reactions like we saw at the Pride Parade in Minneapolis and some other corners, we're going to have to see how that reaction evolves.

You would give me pause on making that kind of calculation because you have to wonder about your long-term relationships and think about all the effort that you put in over many years to develop those and how quickly you have decided to sort of roll the dice and getting them back at some point in the future. It's going to be very interesting to see how this plays out, especially over the next several weeks.

I don't know which companies might be left on Robbie Starbucks, pardon the pun, target list. It will be interesting to see how Costco's situation plays out with these attorneys general who are, I think, a fair reading of that would be that letter would be that these attorneys general are making threats. We're going to have to stay tuned on it. Of course, we will. That's our show for this week. We want to thank Shawn P. Neal and the PeopleForward Network for making our podcast possible.

If you'd like to tell us what you think or if you have a topic you'd like to suggest for our show, we would love to hear from you. Our email address is podcast@ocrnetwork.com. Communication breakdown is a production of the Observatory on Corporate Reputation. I'm Steve Dowling. And I'm Craig Carroll. Thanks for listening. We'll be back next week. [MUSIC] [BLANK_AUDIO]