Walmart's U-turn on DEI

Hello and welcome back to Communication Breakdown, a new podcast from the Observatory on Corporate Reputation. Thank you 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 say their skins. It's a post game show for PR Pros. And this week Walmart, America's largest private employer becomes the latest company to dial back its commitments on DEI.

As stop us if you've heard this one before, conservative activist Robbie Starbucks had a call with Walmart PR in mid-November to dig into what he calls "wokeness" at the company. Apparently he threatened a customer boycott that would be timed for Black Friday. And what do you know? A week later, instead of a boycott, Starbucks had big changes to announce on behalf of Walmart.

So Walmart will stop using the term DEI and they will end their participation in the annual Corporate Equality Index by the Human Rights Campaign, the leading benchmark for scoring how companies support their LGBTQ employees. But many of the other companies who have been pressured to walk away from that index, Walmart had consistently scored a perfect 100 and they've promoted that score to shareholders and to the public.

And also among the changes, Walmart will review its funding at Pride events, reevaluate supplier diversity programs, discontinue racial equity programs, and sunset of five year $100 million initiative called the Racial Equity Center. Walmart confirmed the news to reporters but said it had already been revaluating some of its DEI programs before Starbucks came knocking on their door.

So Walmart joins Ford Boeing, John Deere, Lowes Home Improvement, and a handful of other companies as big game trophies for Robbie Starbucks. Craig, this was the topic of our very first podcast back in September and the names keep getting bigger. Walmart has 2.1 million employees. That's more than double the combined employee base of all the other companies who have given into this pressure campaign so far. I've got to believe it hurts them with retention and recruiting at a minimum.

What's behind this apparently accelerating abandonment of diversity pledges by corporate America? Yeah, well, you know, there's no single answer. I'd say several factors are driving the trend. The political climate has shifted. DEI once started out as a standard for corporate responsibility, but now, you know, the past couple years it's become a lightning rod in cultural debates. There's like, "Woken is now being weaponized against these programs."

And then you have activists, campaigns like those by Robbie Starbucks, capitalizing on this polarization, pressure companies to skill back some of their initiatives.

I'd say second economic pressures of inflation and the uncertain markets right now have led many organizations to evaluate their spending. I think some of the issues that programs can be perceived a little symbolic or difficult to directly tie it to the bottom line, and that's a factor. DEI initiatives, especially those that are framed as broad societal commitments rather than practical business tools, are certainly environment right now during this.

And then finally, I think there's just a disconnect right now between how DEI is being presented and how it's being perceived. Many stakeholders, employees, customers, investors, value fairness and inclusity, but are starting to react negatively to terms of programs that feel like they're politicized. So I think companies just struggling to bridge that gap right now. And as a result, we're seeing DEI roll back to being the path of least resistance.

The results is I think a short-term win in avoiding controversy, but potentially long-term risk to accompany culture, reputation, and innovation. It's certainly a trend that's reflected more about the pressures of the moment than any true shift in what stakeholders value. Yeah, it's that disconnect you mentioned that resonates with me how DEI or diversity is presented and how it's perceived.

And yeah, I agree that companies are maybe reluctant to be more forthright about that value when they feel it's being politicized. The thing is that the people who are politicizing it are the ones who are forcing the companies to make this change. And so therefore, they're sort of creating this environment in which the companies don't like to operate it. I think it's worth more discussion. But I wanted to talk first about some of the tactical considerations here in this announcement.

It's a real head scratcher for me if some of the inconsistencies in this. Timing is always a factor. And it seems that the holiday shopping season was Robbie Starbucks target here, supposedly threatening this boy caught around Black Friday, who knows what would have materialized. But the holiday week might have also been part of Walmart strategy in the announcement, not to maximize, but to minimize impact. This came out news came out on November 26th. That was the Tuesday before Thanksgiving.

You can think of it as like the last full news cycle before a long holiday weekend. And when you make an announcement in that window, you know you're burying it. But zooming out, you know, you made the point that companies have been saying that they've planned to make some of these changes even before Starbucks approached them.

But I think if you look back, I mean, as recently as July, when this whole Starbucks campaign was getting started against the corporate equality index, Walmart actually back then said they had no plans to change their DEI initiatives. And they're, they're statement we should include because it was similar to what they said in this latest change. They say, there's a quote, we want everyone to feel they belong whether shopping or working

in our stores, clubs and offices. So once again, as we talked about back in September, I think they're saying one of two things. They're either saying we were making a U turn on our values. We used to value equality now. We don't. Or they're saying we respect our employees, but not enough to say so. And that it's in itself is a statement of values. I go back to one of the things I just, I can't get past is how Walmart and these other companies have let these announcements roll out.

And there's no official announcement from the company and you can understand why, right? It's a, it's a U turn. It in Walmart's case, it's a hundred million dollar U turn. That's the big financial commitment that you mentioned that they made in 2020. But more broadly, it comes across as a U turn on values and Robbie Starbucks gets to take a victory lap. That, that is a gift for Robbie Starbucks, a big wet kiss from the PR department.

Not only does he get to take credit, he gets to deliver the news and put whatever framing on it that he wants. So it's a complete capitulation on the messaging. He shares the news on Twitter. Reporters call the company, which confirms and sometimes as in Walmart situation, they say two things. They say first, some of this stuff was already in the works. And second, there's inevitably some line about how things aren't really changing. Yeah. So look, there's some that's there.

I mean, I'm just going to start with the first one about the U term. But for me, thinking about the U term, it's all a matter of scope and how much you're zeroing in or if you're able to zoom back out. And I think when you look at it from a zooming out perspective, there's a lot more going on here. I certainly think the micro level looks like a U turn. The lost opportunity here is to talk about that at the expansive work here, right?

So yes, they are shutting down a center where they had a five year pledge. Now at the end of five years and sure they could have renewed it. Yeah. I mean, you could actually say they're not shutting it down. They're just not going to continue with it or they're letting it run its course. Right. Yeah. And that's what's happening there, right?

So part of it is not controlling the narrative or putting their own story out there and not participating or when they are participating, it's purely from the lens of what Robbie Starbuck has said and then they have the response rather than controlling proactively what their story is, what their goal is, what it is that they're trying to accomplish here.

And I think part of the issue here is that DEI as a concept has suffered after getting pummeled for the past year plus part of it, I think is that it was an election year, but there's definitely been a backlash that we've seen that we've discussed that there was a Pew Research poll just a few weeks ago that showed over the course of about 18 months February, 23 through October, 2024. Workers who said that DEI is a bad thing went from 16% to 21%. So now about one in five think that DEI is bad.

But at the same time, half the workers surveyed 52% say more DEI is a good thing. That's ticked down from 56% in 2023. So I think the theme that we've seen in polling over the past year is that employees are

seeing DEI in a slightly more negative light. I don't know that you can still call diversity initiatives broadly popular, but they're not overwhelmingly seen as bad. And actually when people hear about specifically defined diversity goals, they tend to support them like 60%. We saw that in a Washington Post poll this summer, but DEI has become a buzzword. It's been a buzzword for quite a while.

And so this is as much about how companies talk about diversity and maybe more importantly, how they're allowing critics like Robbie Starbucks to redefine those initiatives. Yeah, I'm going to push even further to say, you know, it's not only the way companies talk about it or Starbucks talks about it. It's also the way the survey respondents are thinking about it, right?

Because when you're looking at somebody else's survey data like this, there's going to be times where the, you know, the respondents are responding to the label and other times where they were responding to responding to the heart of the problem. Like what is it they're trying to address? And that's something that no matter what direction we take, we got to recognize labels are important. We got to have shared labels.

We got to understand what everyone's talking about here, but it's, but there's an actual substance behind this behind this initiative here. And that at the end of the day is, is the issue. And if all we're focused on is, oh, are we using the right word or this term is falling out of favor and now we need to call it something else? Well, you're just going to keep changing it over and over and over again if you haven't really addressed the heart of the issue.

And what I see here, at least in Walmart's response here is that they are attempting a slight reframe, right? By focusing on inclusion and belonging as a larger concept rather than DEIs and construct. I mean, they're both about inclusion.

And here is an opportunity that they see to some might look at it as a U term, but if we zone out, we can see, you know, if there's a whole lot of other initiatives that have been neglected because they focus so much on this that they are ignoring stakeholders right there and their own backyard. One other thing I'd say, part of this is that we're not clear in the difference between the, what the, the public thinks and what your stakeholders think.

I think that's, I'll just add that into the mix too for something for us to think about here. I think you are right. We may be seeing the beginnings of a reframing and using language like belonging, although I don't know that that is necessarily as specific as concrete a concept or as measurable perhaps, but it'll be interesting to see if when we get to the, you know, annual meeting time proxy ESG page, annual reports that Walmart and many other companies do on what would

previously called, you know, DEI diversity. It'll be interesting to see how the language starts to change. I believe that by all indications, companies want to keep diversifying their workforce even as they're giving into some of this pressure and handing the microphone to Robbie Starbuck.

But they're going to have to do a better job talking about this value, whether wherever it is on the priority list because this anti-woke movement really seems to have the upper hand and they, they presented as a zero sum game, which I don't think it has to be shareholders, talk about stakeholders, shareholders want companies to be more profitable, customers want companies to play a positive role in society.

We have seen that in the data, but customers are also recognizing in almost equal numbers according to some polls over the summer that companies are struggling with how to engage on social issues. And one of the things that comes to mind for me is outcomes and results. We don't see a lot of talk about outcomes and results from these initiatives.

And our company is going to start making statements about performance being better, company-wide, employees being happier, or at a minimum, making the point that no one is disadvantaged by this to counter this idea that it's a zero sum game. Yeah, I think the issue here is they're not going to be able to do it even if they wanted to now.

When this all started five years ago, the issue is responding to the moment and being on the right side of history, being in calibration with the expectations of society and not being in a different category from companies that were taking action and were trying to be a part of the solution rather than being part of the problem.

And in that, we could call it a knee-jerk response, but whatever it needed to be responsive at the moment, it needed to be done and getting a statement out there and getting alignment and support in that direction is going to be the first step. So taking it, making the claim, this is what we're going to do, and then following in line to line up around that directive and making it so can then be done.

And the issue was they've never revisited that to look at what does it mean from a sustainability perspective. And I don't mean like in an environmental sense, but truly in the enduring sense of, okay, if we're really committed to this and this is going to be a permanent part, they've got to have the business case for doing it. If you haven't made that business case so for yourself, then you're not going to have the metrics.

You're not going to be able to fall through at the moments because the reality is if they had the data, the data to say, you know what? Guess what?

It's working for us. Robbie Starbuck, you're wrong. They would have done that, but the reality is they didn't have the data. So it's not just simply a matter of cow-towing to Robbie Starbuck. It's just they didn't have the data in hand to say you're wrong. I don't think that they are completely without data or evidence that diversity as a concept is necessarily bad. And I think the company need to do a better job showing that, demonstrating. But I think you're right, though.

I don't think they had that data that was bad. I think it's also that they didn't have data that it was good. They didn't have any data to refute them. I think you're right in that. I think when you talk about the moment in 2020 when many of these initiatives were kicked off, let's look at Wal-Mart as an example, they created a five-year program. Why five years? Was that that seems like a pretty arbitrary? But you know, at the time, probably a good sounding or good seemingly good period of time.

But I think to your earlier point, it may not have been based on data or certainly on experience. And I think that the flip side of that, though, is that it strikes me as an effort that can't really be quickly implemented, because the companies that have struggled with implementing some of these programs, maybe they moved too quickly, but it also can't be quickly measured.

And so just as, you know, we say 2020, who's to say that five years was, you know, the right period to launch an initiative for who's to say that after five years, this is the time to say, okay, well, it was a complete failure, because I don't think that the answer is either extreme there. Well, look, five years is a long period of time. Well, depending on what you're trying to change. Well, so for one thing, a three year is just going to be too short.

It's something it's better than nothing, but a five year plan is more than three years, and you've got a budget. You're making a promise to make those allocations. And the thing is, five years is enough time to get your bearing straight and to put a plan in motion that you can then measure and evaluate for its success or not. And I think largely what it came down to is the back end was never delivered upon.

They never took the time to measure along the way to get there because if they had, and if they'd seen evidence, they probably would have stuck it out. But on the other hand, if they had evidence to say, you know what, out, does this either backfired or didn't do what we thought, and we put our best into it. And now we have evidence to say it just didn't work out, but they don't have the data either way.

And I think on an issue that is really a societal issue, and that is the interest in which I think many companies got into this, whether it was their own idea or they felt like they needed to play catch up, whatever. This is a societal issue, and I think it is fair for a societal issue to say that the time horizon might be longer than your traditional business cycle, especially when you're talking about people's careers and the entire trajectory of the workforce.

In any case, I think this goes to our earlier point that companies need to figure out how to do a better job of talking about why they have these programs, what the long term outcomes

could and should be, and also along the way the benefits that they're seeing because they have to be there. Like Bloomberg's Beth Kowitt pointed this out last week, shortly after the announcement about Walmart. And her point of view was that this was too easy for Robby Starbuck. He didn't have to actually mount a campaign. Walmart rolled pretty quickly.

Usually what Robby Starbuck will do is he will announce to his followers that he's investigating a certain company, and that I think has the effect of getting that company sort of nervous and then he makes some kind of approach. We're not sure exactly what it is, but there is either an explicit or implicit threat of boycott for lack of a better framing. And he's trying to impress upon these companies that he has some army that is ready to unleash economic fury on a company if they're too woke.

But Kowitt's assessment is that this time it wasn't really about Robby Starbuck. It's about Donald Trump. That the government is about to be filled with culture warriors and companies are worried about what that means for them in a regulatory sense. Are they going to get called out just named and shamed? You Craig, you've got your finger on the pulse of corporate communications. You're talking with CCOs all the time. Does that fit with what you're hearing these days?

Well, I think what does fit here is that not all companies are unhappy about the about making changes. But to me, that's not the same thing is saying that they're worried about what's going to happen with the upcoming election or they're worried about Robby Starbuck. I think the reality is is that because companies don't have the data to support it one way or another, they made five year promises, five year claims. They have no evidence one way or the other that it's working out for them.

It is getting hard. It is some are considering it distracting and it's an opportunity for them to get back and do with their businesses about. Having said that, that sounds like they're wanting to abandon it all together and that's not really what's going on. I think the issue here is taking control of the narrative and doing it their own way. The trouble is they're not communicating that very well.

They might be doing it internally and saying, okay, this is what we're going to do, but it still feels reactionary, whether you're dealing with the Trump administration and the perceptions of how we think things are going to be different here in 2025 or the perception that they're cowtowing to Robby Starbuck because there's so much silence about which

group that they're responding to. Nobody's believing that they are truly doing it on their own. I think it's because they don't come out and say, we're not doing this because Starbuck is saying this. We're not doing this because this is what we expect is going to happen with the upcoming administration. They're leaving both attributions largely unsaid and it creates this huge void that other people are filling in the association for them.

If the boycott threat had any validity to it and I don't know that we have talked a lot about data and evidence here. I don't know that we have other than Bud Light, which I think was a somewhat different situation. Yeah, completely different example. Right. Because what we don't know but we could easily surmise is that there could be a strong degree of overlap between Robby Starbuck's army and the customer base for Walmart. Walmart has a pretty big footprint.

If you look at the companies where Robby Starbuck started, tractor supply, John Deere, brown foreman, Harley Davidson, I think you could make the argument. First of those relatively small employee bases and tiny in comparison to Walmart. But these, I think, are companies that are perceived as middle America companies and rightly or wrongly, the assumption is that their customer base is more conservative.

I don't think you can say the same about Walmart, which is the largest retailer in the country. What I see is going on here in terms of the overlap, part of it is from a languaging perspective. DEI has become associated with being divisive and becoming political and it's more about playing favorites rather than being fair. And that's sort of the perspective of people on the ground floor from Walmart's employee base or from their customer base here.

But that I think is on to a certain extent that is on the communications departments at these companies because they are allowing someone outside to reframe the issue to describe the impact, to characterize the things that they are doing. And in these specific cases, they are literally letting the critics make the announcement.

And I agree with you that the broader effort here on the part of the critics is to turn DEI into this convenient bogeyman label that they can slap on anything they want knowing that culture war, assuming that the culture warriors are empowered and they are going to be able to push companies around. But I tend to think that companies have a lot more leeway and power in the messaging here than they are exercising with these announcements.

So do you think they should have engaged him directly? I mean, speak about him publicly. Name him through their media, through their messaging and through their communication channels. They've already effectively embraced him. They've already endorsed him by allowing these announcements to be made as some sort of technicality, I guess, that they didn't say. And now here's Robbie with our news.

I just have a hard time imagining that happening with any other shareholder proposal or any other critic who comes at you and makes you move with it. And any other topic I've got to believe that they would have put their own words to it. They would have tried to frame it in a way that at least they were in control.

But instead you have him going out and making the announcement in his own terms and then the company just sort of, I think, probably in an attempt to not draw more attention to it, they really just sort of do a tacit confirmation. For me, it's like the best way to deal campaigns like Starbuck's campaign isn't to ignore it, but to find a way to respond in a way that reclaims the narrative. You've got to find a way to engage strategically, transparently.

They've got a, companies have got to demonstrate leadership and trust. And they've got to reinforce their values. But at the same time, they've got to find a way to disarm their critics. I mean, for me, for me, all the points that you're making are true, but they're doing none of those. That's right. Exactly right. Okay. So for me, that is what is missing here. And for me, that is the question as to why they are not doing any of these things here.

I think this is a dynamic that you occasionally see, which is that sometimes when you have bad news, the instinct is to sort of stand perfectly still and hope nobody notices. But when you have 2.1 million employees, that's easier said than done. Yeah. I think there's a couple of things here. I know it's time to wrap up here. I think one question still in the table is, what are companies going to be doing in the future as we have more Robby Starbuck-like characters that emerge?

Because as I see it, looking at the field, what's going on by not acknowledging him publicly and making any attempt to disarm him, as I think it's a fear of the unknown, like what type of Pandora's Boxer we opening up if we do engage him? Could we get more damage done? Ultimately, you're going to have to have data on this, right? You're going to have to find out. This is, you know, some might feel like this is too large to test what happens if we engage directly.

But I think here it's going to increase more frequently because they have not chosen. They're only going to give him more ammunition to keep doing what he's doing. And it's going to open up more opportunities for other people, not necessarily French groups. But any influencers are going anyway across the board as a stakeholder group.

And I think the second is, you don't want to have a knee-truck response, but you've got to be very clear about what you're doing, why you're doing it, and have the evidence to back it up and make the case for that. Right now, they're always going to be playing the games of optics. They're going to be performative because that's all they have.

If they don't have data to support why they're doing what they're doing, the only data that they're going to do, go with this public opinion polls or criticism from very steak or vibes. It arrives. I agree with everything you've said. The Robby Starbuck is feeling it, by the way. He's already said that Target and Amazon are on his list. He hasn't made threats specifically, but he's already called them out for doing the sorts of things that he's been able to dissuade Walmart from doing.

I think the first quarter of 25 is going to be a really interesting time to see because that's when you're gearing up for a shareholder meeting. That's when the shareholders proposals start rolling in and you're also companies who are preparing their annual reports, whether it's ESG or diversity or the other reports that they've committed to. To your earlier point, it'll be interesting to see how if and how language changes or how forthright companies are about that.

I think my main takeaway from these episodes is these companies have to put an ore in the water because right now they're not doing that. They're allowing the activists to control their destiny or at least control their messaging. I like that metaphor of the ore and the water here. I think the ore in the water and steering their own way has a really powerful idea for like how to move forward because right now the larger public perception is that the pendulum is swinging the other way.

We've gone from one response of as a society or corporate America dealing with racial equity and singing with one voice five years ago to now the pendulum swinging the other way of cowtowing to an activist where they are it appears to be taking our backtracking on all of the previous commitments and the idea of rowing their own way taking the or their or some moving forward right is an opportunity to say here's the direction we're going right. This is what we're trying to accomplish.

We are focused on belonging and inclusion. We're going to do it our way.

We're going to do it with the meets that meets the needs of our stakeholders and we've got feedback data evidence that supports our business goals but because they aren't collecting that or organizing in a way that is consistent with their values and there's this is you know it's hard even say the degree of lack of alignment between what they say and what they're doing if they've not invested the time to to test it out and to get the feedback and

then to speak out and say here's what our data says here's what our feedback says here's what our stakeholders are telling us. Couldn't agree more great closing thought and we will be watching as this plays out because there is surely more to come that is 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. In 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. (upbeat music)