The Opportunity Cost of Undoing DEI During the Current Tech Layoffs

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By Marion Davis

As the tech layoffs in Silicon Valley continue to increase in number, many individuals may find it difficult to look past the immediate present. 

However, the current trends in Big Tech layoffs will undoubtedly lead to a cautionary tale in the future of how the undoing of diversity, equity, and inclusion (DEI) led to a colossal opportunity cost for tech goliaths.

As of the beginning of April 2023, more tech layoffs have occurred than for the entirety of 2022 and from a concentrated half the number of companies. These tech layoffs have primarily been from Big Tech companies and disproportionately affected women and minorities.

The following sections will explore the current tech layoff practices and what the present undoing of DEI work means for the future of Big Tech. 

LIFO and the Undoing of DEI in Tech Layoffs

The traditional last in, first out (LIFO) approach is prevalent among Big Tech layoffs. However, with increases in diversity as a recent occurrence in many Big Tech companies, especially at the executive level, LIFO is primarily targeting these diverse newcomers. Subsequently, companies like Meta and Twitter are rapidly reversing progress with each round of tech layoffs. 

LIFO Targets Diverse Employees Disproportionately 

With DEI efforts only ramping up in recent years at Big Tech, the end result is that more recent hires make up a large part of a company’s diversity numbers. 

With LIFO, companies such as IBM, Nike, and Airbnb are undoing DEI while simultaneously claiming a public commitment to hiring diversely. 

These companies may be doing more harm than good to both the companies and the new employees through any diverse hiring initiatives that channel diverse new employees into the LIFO churn. 

Diversity Does Little in an Unstable Environment

Key metrics such as retention and belongingness of minority employees within Big Tech must first be explored and improved upon to create a stable foundation that supports creativity and innovation. Increasing diversity levels within a hostile environment does not produce inclusion.

In one example, women who are former employees at Twitter are involved in a discrimination lawsuit against the company. These professionals reported that they felt they had “targets on their backs” as women at the company.

Workplace bullying has a drastically detrimental effect on employees’ mental well-being and likewise prevents employees from being able to focus on innovative solutions for work tasks.

Hiring diversely does very little more than create further volatility if these same employees are a high-risk category for being next on the chopping block.

The Future of Big Tech

Some portrayals of Big Tech layoffs have painted a grim picture for tech as a whole. In reality, the Big Tech layoffs primarily appear to be a knee-jerk reaction to large companies rapidly hiring during the pandemic bubble and then sliding to a halt in 2022. Laying off employees will likely not have as significant a long-term effect on Big Tech companies as who was laid off.

A Move Backward in Diversity

As of 2022, Meta noted diversity numbers of 6.7% and 4.9% for Hispanic and Black employees, respectively. The company noted a 2024 goal of doubling these numbers. 

However, data currently indicates that all women and especially minority women are being laid off in disproportionate numbers.

For gender diversity, women made up 37.1% of all Meta employees, an increase of 0.4% from 2021 after a slide backward in gender diversity in 2020. 

These numbers are similar to the general lack of gender diversity in tech in Silicon Valley with women, in general, making up only 39% of the workforce and yet 46% of the layoffs as of January 2023.

In November 2022, Meta laid off more than 11,000 employees, and in March of this year, Mark Zuckerberg announced plans to lay off another 10,000 employees and close 5,000 open positions.

With current trends in disproportionate Big Tech layoffs, these dismissal choices will likewise produce a backward slide in the retention of diverse groups of employees. Cautionary tales are growing in prevalence in the media that Twitter and similar companies are not the place to be as a woman employee.

The Opportunity Cost of Choosing to Forgo Diversity and Inclusion

Insufficient diversity and inclusion come at a heavy cost for organizations. 

A 2022 Bank of America report examined the opportunity cost of underwhelming DEI efforts, noting that lack of diversity is costing companies trillions of dollars.

Companies with workforces that are more diverse than the US national average had 19% higher revenues from new product or service ideas within the past three years–termed innovation revenue. The standard across all industries for revenue from launching new products and services is 25% of companies’ total revenue.

Diversity in this situation specifically must be present at the leadership level as well to increase acceptance of ideas presented by anyone on the team other than cishet non-disabled white men. 

As an example, if Company A has an annual revenue amount of $1 billion, $250 million can be expected to come from innovation revenue. If Company A had average diversity numbers and increased minority representation at the executive level with leaders who now are more receptive to diverse employees’ ideas, Company A would find greater profitability in these ideas, potentially increasing their innovation revenue line by 19%, increasing the $250 million annually to $297.5 million. In this instance, if Company A were to choose to avoid DEI work, the opportunity cost would be equivalent to $47.50 million annually in revenue.  

With the layoffs in Big Tech disproportionately affecting women and minorities and specifically these demographics within senior leadership, companies like Twitter and Meta are largely eliminating a line of innovation revenue.

Without representation at the executive level, Big Tech’s diversity statistics for lower-level employees will function as little more than a publicity stunt and not as true inclusion with diverse employees’ ideas likely to be dismissed. 

Final Thoughts

With the pandemic came the pandemic bubble for Big Tech. 

Companies like Twitter saw the number of active users on the platform skyrocket during lockdowns around the world. Despite this increase in traffic, Twitter did not see an increase in ad revenue as companies tightened their marketing budget belts.

Regardless, Big Tech saw an opportunity to monetize this traffic and hired accordingly in large numbers.

As the pandemic bubble burst in 2022, Big Tech responded in a reactionary way, first creating a hostile work environment and then overwhelmingly targeting diverse members of leadership in tech layoffs.

In all, Big Tech believed they saw an opportunity during the pandemic, but in reality, their decisions that resulted in the undoing of DEI produced an opportunity cost far greater.

Marion Davis is a contributing writer at EmployDiversityNetwork.com. She is a disabled DEIA consultant and writes on the value of diversity and inclusion across multiple industries, specifically as relates to disability and intersectionality.