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Walmart's U-turn on DEI · Communication Breakdown

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Hello and welcome back to Communication Breakdown, a new podcast from the Observatory
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on Corporate Reputation.
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Thank you for joining us.
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I'm Steve Dowling in Silicon Valley.
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And I'm Craig Carroll in New York City.
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Each week Steve and I take a look at strategies companies are using to shape headlines and
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sometimes say their skins.
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It's a post game show for PR Pros.
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And this week Walmart, America's largest private employer becomes the latest company to
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dial back its commitments on DEI.
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As stop us if you've heard this one before, conservative activist Robbie Starbucks had
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a call with Walmart PR in mid-November to dig into what he calls "wokeness" at the
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company.
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Apparently he threatened a customer boycott that would be timed for Black Friday.
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And what do you know?
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A week later, instead of a boycott, Starbucks had big changes to announce on behalf of
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Walmart.
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So Walmart will stop using the term DEI and they will end their participation in the annual
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Corporate Equality Index by the Human Rights Campaign, the leading benchmark for scoring
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how companies support their LGBTQ employees.
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But many of the other companies who have been pressured to walk away from that index, Walmart
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had consistently scored a perfect 100 and they've promoted that score to shareholders and
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to the public.
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And also among the changes, Walmart will review its funding at Pride events, reevaluate
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supplier diversity programs, discontinue racial equity programs, and sunset of five year
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$100 million initiative called the Racial Equity Center.
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Walmart confirmed the news to reporters but said it had already been revaluating some of
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its DEI programs before Starbucks came knocking on their door.
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So Walmart joins Ford Boeing, John Deere, Lowes Home Improvement, and a handful of other
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companies as big game trophies for Robbie Starbucks.
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Craig, this was the topic of our very first podcast back in September and the names keep
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getting bigger.
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Walmart has 2.1 million employees.
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That's more than double the combined employee base of all the other companies who have given
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into this pressure campaign so far.
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I've got to believe it hurts them with retention and recruiting at a minimum.
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What's behind this apparently accelerating abandonment of diversity pledges by corporate
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America?
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Yeah, well, you know, there's no single answer.
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I'd say several factors are driving the trend.
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The political climate has shifted.
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DEI once started out as a standard for corporate responsibility, but now, you know, the
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past couple years it's become a lightning rod in cultural debates.
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There's like, "Woken is now being weaponized against these programs."
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And then you have activists, campaigns like those by Robbie Starbucks, capitalizing on
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this polarization, pressure companies to skill back some of their initiatives.
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I'd say second economic pressures of inflation and the uncertain markets right now have led
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many organizations to evaluate their spending.
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I think some of the issues that programs can be perceived a little symbolic or difficult
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to directly tie it to the bottom line, and that's a factor.
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DEI initiatives, especially those that are framed as broad societal commitments rather than
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practical business tools, are certainly environment right now during this.
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And then finally, I think there's just a disconnect right now between how DEI is being
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presented and how it's being perceived.
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Many stakeholders, employees, customers, investors, value fairness and inclusity, but are starting
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to react negatively to terms of programs that feel like they're politicized.
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So I think companies just struggling to bridge that gap right now.
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And as a result, we're seeing DEI roll back to being the path of least resistance.
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The results is I think a short-term win in avoiding controversy, but potentially long-term
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risk to accompany culture, reputation, and innovation.
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It's certainly a trend that's reflected more about the pressures of the moment than any
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true shift in what stakeholders value.
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Yeah, it's that disconnect you mentioned that resonates with me how DEI or diversity is
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presented and how it's perceived.
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And yeah, I agree that companies are maybe reluctant to be more forthright about that value
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when they feel it's being politicized.
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The thing is that the people who are politicizing it are the ones who are forcing the companies
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to make this change.
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And so therefore, they're sort of creating this environment in which the companies don't
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like to operate it.
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I think it's worth more discussion.
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But I wanted to talk first about some of the tactical considerations here in this announcement.
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It's a real head scratcher for me if some of the inconsistencies in this.
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Timing is always a factor.
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And it seems that the holiday shopping season was Robbie Starbucks target here, supposedly
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threatening this boy caught around Black Friday, who knows what would have materialized.
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But the holiday week might have also been part of Walmart strategy in the announcement,
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not to maximize, but to minimize impact.
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This came out news came out on November 26th.
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That was the Tuesday before Thanksgiving.
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You can think of it as like the last full news cycle before a long holiday weekend.
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And when you make an announcement in that window, you know you're burying it.
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But zooming out, you know, you made the point that companies have been saying that they've
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planned to make some of these changes even before Starbucks approached them.
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But I think if you look back, I mean, as recently as July, when this whole Starbucks campaign
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was getting started against the corporate equality index, Walmart actually back then said
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they had no plans to change their DEI initiatives.
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And they're, they're statement we should include because it was similar to what they said in
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this latest change.
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They say, there's a quote, we want everyone to feel they belong whether shopping or working
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in our stores, clubs and offices.
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So once again, as we talked about back in September, I think they're saying one of two things.
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They're either saying we were making a U turn on our values.
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We used to value equality now.
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We don't.
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Or they're saying we respect our employees, but not enough to say so.
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And that it's in itself is a statement of values.
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I go back to one of the things I just, I can't get past is how Walmart and these other
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companies have let these announcements roll out.
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And there's no official announcement from the company and you can understand why, right?
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It's a, it's a U turn.
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It in Walmart's case, it's a hundred million dollar U turn.
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That's the big financial commitment that you mentioned that they made in 2020.
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But more broadly, it comes across as a U turn on values and Robbie Starbucks gets to take
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a victory lap.
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That, that is a gift for Robbie Starbucks, a big wet kiss from the PR department.
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Not only does he get to take credit, he gets to deliver the news and put whatever framing
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on it that he wants.
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So it's a complete capitulation on the messaging.
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He shares the news on Twitter.
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Reporters call the company, which confirms and sometimes as in Walmart situation, they say
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two things.
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They say first, some of this stuff was already in the works.
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And second, there's inevitably some line about how things aren't really changing.
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Yeah.
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So look, there's some that's there.
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I mean, I'm just going to start with the first one about the U term.
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But for me, thinking about the U term, it's all a matter of scope and how much you're
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zeroing in or if you're able to zoom back out.
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And I think when you look at it from a zooming out perspective, there's a lot more going
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on here.
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I certainly think the micro level looks like a U turn.
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The lost opportunity here is to talk about that at the expansive work here, right?
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So yes, they are shutting down a center where they had a five year pledge.
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Now at the end of five years and sure they could have renewed it.
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Yeah.
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I mean, you could actually say they're not shutting it down.
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They're just not going to continue with it or they're letting it run its course.
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Right.
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Yeah.
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And that's what's happening there, right?
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So part of it is not controlling the narrative or putting their own story out there and
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not participating or when they are participating, it's purely from the lens of what Robbie
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Starbuck has said and then they have the response rather than controlling proactively what their
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story is, what their goal is, what it is that they're trying to accomplish here.
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And I think part of the issue here is that DEI as a concept has suffered after getting
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pummeled for the past year plus part of it, I think is that it was an election year, but
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there's definitely been a backlash that we've seen that we've discussed that there was a
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Pew Research poll just a few weeks ago that showed over the course of about 18 months February,
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23 through October, 2024.
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Workers who said that DEI is a bad thing went from 16% to 21%.
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So now about one in five think that DEI is bad.
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But at the same time, half the workers surveyed 52% say more DEI is a good thing.
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That's ticked down from 56% in 2023.
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So I think the theme that we've seen in polling over the past year is that employees are
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seeing DEI in a slightly more negative light.
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I don't know that you can still call diversity initiatives broadly popular, but they're
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not overwhelmingly seen as bad.
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And actually when people hear about specifically defined diversity goals, they tend to support
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them like 60%.
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We saw that in a Washington Post poll this summer, but DEI has become a buzzword.
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It's been a buzzword for quite a while.
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And so this is as much about how companies talk about diversity and maybe more importantly,
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how they're allowing critics like Robbie Starbucks to redefine those initiatives.
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Yeah, I'm going to push even further to say, you know, it's not only the way companies
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talk about it or Starbucks talks about it.
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It's also the way the survey respondents are thinking about it, right?
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Because when you're looking at somebody else's survey data like this, there's going to be
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times where the, you know, the respondents are responding to the label and other times
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where they were responding to responding to the heart of the problem.
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Like what is it they're trying to address?
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And that's something that no matter what direction we take, we got to recognize labels
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are important.
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We got to have shared labels.
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We got to understand what everyone's talking about here, but it's, but there's an actual
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substance behind this behind this initiative here.
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And that at the end of the day is, is the issue.
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And if all we're focused on is, oh, are we using the right word or this term is falling
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out of favor and now we need to call it something else?
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Well, you're just going to keep changing it over and over and over again if you haven't
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really addressed the heart of the issue.
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And what I see here, at least in Walmart's response here is that they are attempting a slight
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reframe, right?
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By focusing on inclusion and belonging as a larger concept rather than DEIs and construct.
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I mean, they're both about inclusion.
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And here is an opportunity that they see to some might look at it as a U term, but if we
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zone out, we can see, you know, if there's a whole lot of other initiatives that have been
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neglected because they focus so much on this that they are ignoring stakeholders right there
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and their own backyard.
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One other thing I'd say, part of this is that we're not clear in the difference between
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the, what the, the public thinks and what your stakeholders think.
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I think that's, I'll just add that into the mix too for something for us to think about
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here.
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I think you are right.
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We may be seeing the beginnings of a reframing and using language like belonging, although
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I don't know that that is necessarily as specific as concrete a concept or as measurable
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perhaps, but it'll be interesting to see if when we get to the, you know, annual meeting
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time proxy ESG page, annual reports that Walmart and many other companies do on what would
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previously called, you know, DEI diversity.
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It'll be interesting to see how the language starts to change.
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I believe that by all indications, companies want to keep diversifying their workforce even
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as they're giving into some of this pressure and handing the microphone to Robbie Starbuck.
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But they're going to have to do a better job talking about this value, whether wherever
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it is on the priority list because this anti-woke movement really seems to have the upper
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hand and they, they presented as a zero sum game, which I don't think it has to be shareholders,
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talk about stakeholders, shareholders want companies to be more profitable, customers want
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companies to play a positive role in society.
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We have seen that in the data, but customers are also recognizing in almost equal numbers
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according to some polls over the summer that companies are struggling with how to engage
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on social issues.
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And one of the things that comes to mind for me is outcomes and results.
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We don't see a lot of talk about outcomes and results from these initiatives.
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And our company is going to start making statements about performance being better, company-wide,
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employees being happier, or at a minimum, making the point that no one is disadvantaged by
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this to counter this idea that it's a zero sum game.
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Yeah, I think the issue here is they're not going to be able to do it even if they wanted
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to now.
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When this all started five years ago, the issue is responding to the moment and being
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on the right side of history, being in calibration with the expectations of society and not being
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in a different category from companies that were taking action and were trying to be a part
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of the solution rather than being part of the problem.
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And in that, we could call it a knee-jerk response, but whatever it needed to be responsive
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at the moment, it needed to be done and getting a statement out there and getting alignment
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and support in that direction is going to be the first step.
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So taking it, making the claim, this is what we're going to do, and then following in line
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to line up around that directive and making it so can then be done.
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And the issue was they've never revisited that to look at what does it mean from a sustainability
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perspective.
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And I don't mean like in an environmental sense, but truly in the enduring sense of, okay,
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if we're really committed to this and this is going to be a permanent part, they've got
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to have the business case for doing it.
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If you haven't made that business case so for yourself, then you're not going to have the
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metrics.
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You're not going to be able to fall through at the moments because the reality is if they
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had the data, the data to say, you know what?
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Guess what?
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It's working for us.
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Robbie Starbuck, you're wrong.
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They would have done that, but the reality is they didn't have the data.
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So it's not just simply a matter of cow-towing to Robbie Starbuck.
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It's just they didn't have the data in hand to say you're wrong.
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I don't think that they are completely without data or evidence that diversity as a concept
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is necessarily bad.
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And I think the company need to do a better job showing that, demonstrating.
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But I think you're right, though.
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I don't think they had that data that was bad.
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I think it's also that they didn't have data that it was good.
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They didn't have any data to refute them.
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I think you're right in that.
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I think when you talk about the moment in 2020 when many of these initiatives were kicked
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off, let's look at Wal-Mart as an example, they created a five-year program.
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Why five years?
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Was that that seems like a pretty arbitrary?
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But you know, at the time, probably a good sounding or good seemingly good period of time.
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But I think to your earlier point, it may not have been based on data or certainly on experience.
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And I think that the flip side of that, though, is that it strikes me as an effort that
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can't really be quickly implemented, because the companies that have struggled with implementing
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some of these programs, maybe they moved too quickly, but it also can't be quickly measured.
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And so just as, you know, we say 2020, who's to say that five years was, you know, the right
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period to launch an initiative for who's to say that after five years, this is the time
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to say, okay, well, it was a complete failure, because I don't think that the answer is
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either extreme there.
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Well, look, five years is a long period of time.
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Well, depending on what you're trying to change.
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Well, so for one thing, a three year is just going to be too short.
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It's something it's better than nothing, but a five year plan is more than three years,
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and you've got a budget.
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You're making a promise to make those allocations.
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And the thing is, five years is enough time to get your bearing straight and to put a
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plan in motion that you can then measure and evaluate for its success or not.
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And I think largely what it came down to is the back end was never delivered upon.
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They never took the time to measure along the way to get there because if they had, and
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if they'd seen evidence, they probably would have stuck it out.
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But on the other hand, if they had evidence to say, you know what, out, does this either
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backfired or didn't do what we thought, and we put our best into it.
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And now we have evidence to say it just didn't work out, but they don't have the data either
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way.
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And I think on an issue that is really a societal issue, and that is the interest in which I
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think many companies got into this, whether it was their own idea or they felt like they
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needed to play catch up, whatever.
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This is a societal issue, and I think it is fair for a societal issue to say that the time
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horizon might be longer than your traditional business cycle, especially when you're talking
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about people's careers and the entire trajectory of the workforce.
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In any case, I think this goes to our earlier point that companies need to figure out how
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to do a better job of talking about why they have these programs, what the long term outcomes
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could and should be, and also along the way the benefits that they're seeing because
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they have to be there.
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Like Bloomberg's Beth Kowitt pointed this out last week, shortly after the announcement about
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Walmart.
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And her point of view was that this was too easy for Robby Starbuck.
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He didn't have to actually mount a campaign.
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Walmart rolled pretty quickly.
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Usually what Robby Starbuck will do is he will announce to his followers that he's investigating
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a certain company, and that I think has the effect of getting that company sort of nervous
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and then he makes some kind of approach.
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We're not sure exactly what it is, but there is either an explicit or implicit threat of
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boycott for lack of a better framing.
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And he's trying to impress upon these companies that he has some army that is ready to unleash
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economic fury on a company if they're too woke.
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But Kowitt's assessment is that this time it wasn't really about Robby Starbuck.
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It's about Donald Trump.
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That the government is about to be filled with culture warriors and companies are worried
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about what that means for them in a regulatory sense.
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Are they going to get called out just named and shamed?
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You Craig, you've got your finger on the pulse of corporate communications.
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You're talking with CCOs all the time.
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Does that fit with what you're hearing these days?
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Well, I think what does fit here is that not all companies are unhappy about the
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about making changes.
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But to me, that's not the same thing is saying that they're worried about what's going to
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happen with the upcoming election or they're worried about Robby Starbuck.
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I think the reality is is that because companies don't have the data to support it one way or
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another, they made five year promises, five year claims.
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They have no evidence one way or the other that it's working out for them.
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It is getting hard.
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It is some are considering it distracting and it's an opportunity for them to get back
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and do with their businesses about.
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Having said that, that sounds like they're wanting to abandon it all together and that's
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not really what's going on.
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I think the issue here is taking control of the narrative and doing it their own way.
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The trouble is they're not communicating that very well.
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They might be doing it internally and saying, okay, this is what we're going to do, but
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it still feels reactionary, whether you're dealing with the Trump administration and the
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perceptions of how we think things are going to be different here in 2025 or the perception
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that they're cowtowing to Robby Starbuck because there's so much silence about which
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group that they're responding to.
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Nobody's believing that they are truly doing it on their own.
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I think it's because they don't come out and say, we're not doing this because Starbuck
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is saying this.
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We're not doing this because this is what we expect is going to happen with the upcoming
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administration.
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They're leaving both attributions largely unsaid and it creates this huge void that other
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people are filling in the association for them.
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If the boycott threat had any validity to it and I don't know that we have talked a lot
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about data and evidence here.
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I don't know that we have other than Bud Light, which I think was a somewhat different
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situation.
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Yeah, completely different example.
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Right.
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Because what we don't know but we could easily surmise is that there could be a strong
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degree of overlap between Robby Starbuck's army and the customer base for Walmart.
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Walmart has a pretty big footprint.
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If you look at the companies where Robby Starbuck started, tractor supply, John Deere, brown
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foreman, Harley Davidson, I think you could make the argument.
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First of those relatively small employee bases and tiny in comparison to Walmart.
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But these, I think, are companies that are perceived as middle America companies and rightly
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or wrongly, the assumption is that their customer base is more conservative.
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I don't think you can say the same about Walmart, which is the largest retailer in the country.
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What I see is going on here in terms of the overlap, part of it is from a languaging perspective.
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DEI has become associated with being divisive and becoming political and it's more about
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playing favorites rather than being fair.
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And that's sort of the perspective of people on the ground floor from Walmart's employee
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base or from their customer base here.
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But that I think is on to a certain extent that is on the communications departments at
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these companies because they are allowing someone outside to reframe the issue to describe
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the impact, to characterize the things that they are doing.
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And in these specific cases, they are literally letting the critics make the announcement.
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And I agree with you that the broader effort here on the part of the critics is to turn
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DEI into this convenient bogeyman label that they can slap on anything they want knowing
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that culture war, assuming that the culture warriors are empowered and they are going to
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be able to push companies around.
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But I tend to think that companies have a lot more leeway and power in the messaging
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here than they are exercising with these announcements.
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So do you think they should have engaged him directly?
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I mean, speak about him publicly.
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Name him through their media, through their messaging and through their communication
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channels.
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They've already effectively embraced him.
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They've already endorsed him by allowing these announcements to be made as some sort of
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technicality, I guess, that they didn't say.
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And now here's Robbie with our news.
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I just have a hard time imagining that happening with any other shareholder proposal or any
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other critic who comes at you and makes you move with it.
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And any other topic I've got to believe that they would have put their own words to it.
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They would have tried to frame it in a way that at least they were in control.
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But instead you have him going out and making the announcement in his own terms and then
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the company just sort of, I think, probably in an attempt to not draw more attention to
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it, they really just sort of do a tacit confirmation.
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For me, it's like the best way to deal campaigns like Starbuck's campaign isn't to ignore it,
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but to find a way to respond in a way that reclaims the narrative.
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You've got to find a way to engage strategically, transparently.
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They've got a, companies have got to demonstrate leadership and trust.
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And they've got to reinforce their values.
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But at the same time, they've got to find a way to disarm their critics.
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I mean, for me, for me, all the points that you're making are true, but they're doing
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none of those.
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That's right.
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Exactly right.
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Okay.
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So for me, that is what is missing here.
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And for me, that is the question as to why they are not doing any of these things here.
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I think this is a dynamic that you occasionally see, which is that sometimes when you have
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bad news, the instinct is to sort of stand perfectly still and hope nobody notices.
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But when you have 2.1 million employees, that's easier said than done.
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Yeah.
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I think there's a couple of things here.
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I know it's time to wrap up here.
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I think one question still in the table is, what are companies going to be doing in the
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future as we have more Robby Starbuck-like characters that emerge?
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Because as I see it, looking at the field, what's going on by not acknowledging him publicly
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and making any attempt to disarm him, as I think it's a fear of the unknown, like what type
26:15
of Pandora's Boxer we opening up if we do engage him?
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Could we get more damage done?
26:21
Ultimately, you're going to have to have data on this, right?
26:24
You're going to have to find out.
26:25
This is, you know, some might feel like this is too large to test what happens if we engage
26:30
directly.
26:31
But I think here it's going to increase more frequently because they have not chosen.
26:37
They're only going to give him more ammunition to keep doing what he's doing.
26:42
And it's going to open up more opportunities for other people, not necessarily French groups.
26:48
But any influencers are going anyway across the board as a stakeholder group.
26:54
And I think the second is, you don't want to have a knee-truck response, but you've got
26:59
to be very clear about what you're doing, why you're doing it, and have the evidence to
27:03
back it up and make the case for that.
27:07
Right now, they're always going to be playing the games of optics.
27:09
They're going to be performative because that's all they have.
27:14
If they don't have data to support why they're doing what they're doing, the only data that
27:19
they're going to do, go with this public opinion polls or criticism from very steak or vibes.
27:26
It arrives.
27:27
I agree with everything you've said.
27:28
The Robby Starbuck is feeling it, by the way.
27:30
He's already said that Target and Amazon are on his list.
27:35
He hasn't made threats specifically, but he's already called them out for doing the
27:40
sorts of things that he's been able to dissuade Walmart from doing.
27:44
I think the first quarter of 25 is going to be a really interesting time to see because
27:50
that's when you're gearing up for a shareholder meeting.
27:54
That's when the shareholders proposals start rolling in and you're also companies who
27:59
are preparing their annual reports, whether it's ESG or diversity or the other reports
28:05
that they've committed to.
28:06
To your earlier point, it'll be interesting to see how if and how language changes or how
28:11
forthright companies are about that.
28:14
I think my main takeaway from these episodes is these companies have to put an ore in the
28:20
water because right now they're not doing that.
28:23
They're allowing the activists to control their destiny or at least control their messaging.
28:29
I like that metaphor of the ore and the water here.
28:33
I think the ore in the water and steering their own way has a really powerful idea for
28:39
like how to move forward because right now the larger public perception is that the pendulum
28:44
is swinging the other way.
28:46
We've gone from one response of as a society or corporate America dealing with racial
28:52
equity and singing with one voice five years ago to now the pendulum swinging the other
28:57
way of cowtowing to an activist where they are it appears to be taking our backtracking
29:05
on all of the previous commitments and the idea of rowing their own way taking the
29:10
or their or some moving forward right is an opportunity to say here's the direction we're
29:15
going right.
29:16
This is what we're trying to accomplish.
29:18
We are focused on belonging and inclusion.
29:21
We're going to do it our way.
29:23
We're going to do it with the meets that meets the needs of our stakeholders and we've
29:27
got feedback data evidence that supports our business goals but because they aren't collecting
29:33
that or organizing in a way that is consistent with their values and there's this is you know
29:40
it's hard even say the degree of lack of alignment between what they say and what they're
29:44
doing if they've not invested the time to to test it out and to get the feedback and
29:50
then to speak out and say here's what our data says here's what our feedback says here's
29:56
what our stakeholders are telling us.
30:00
Couldn't agree more great closing thought and we will be watching as this plays out because
30:04
there is surely more to come that is our show for this week.
30:09
We want to thank Shawn P. Neal and the PeopleForward Network for making our podcast possible.
30:13
If you'd like to tell us what you think or if you have a topic you'd like to suggest
30:17
for our show we would love to hear from you.
30:19
Our email address is podcast@ocrnetwork.com.
30:25
In breakdown is a production of the Observatory on Corporate Reputation.
30:29
I'm Steve Dowling and I'm Craig Carroll thanks for listening we'll be back next week.
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(upbeat music)