The recent news that online fashion retailer Asos had made the decision to remove diversity targets from its criteria for directors to receive their bonuses to help them focus on profitability is problematic for several reasons. First, there is an implied message that the choice is one or the other – either the focus is on diversity or profits – but the reality is the two are not mutually exclusive. There is ample research that shows diversity contributes to innovation, which in turn leads to having a competitive edge, which is particularly important during difficult financial climates.
This decision appears to be a reaction to a short-term problem. There is no evidence to suggest that focusing on diversity has impacted profitability. Asos is not alone in feeling financial pressures, with many organisations struggling because of the cost of living crisis and disposable income being reduced – but is that really related to having diversity targets?
As a leading fashion brand, following a financial loss last year, it is very right for Asos to increase its focus on profitability, as would be expected from any business. Profitability is achieved through either increasing revenue and/or reducing expenditure. Last year, 25 per cent of the company’s executive bonuses were based on diversity targets, including female and ethnic minority leadership targets. This high percentage being linked to diversity targets was commendable and sent a very clear message that this is important to the organisation, not limited to lip service or virtue signalling.
At 25 per cent of the executive bonus, diversity targets would have been a significant driver of activity in the organisation. Had the focus been reduced from 25 per cent to 20 per cent or even 15 per cent, the message would still be clear: diversity matters. To remove the diversity targets completely sends a very different message.
The flawed assumption of shifting the focus away from diversity to profitability is likely to lead to budgetary cuts across the business on diversity and inclusion initiatives. This shift is at odds with its claim to be “mission-led, purpose-driven and guided by our values”.
The mission statement is perfectly aligned with diversity and inclusion: “Our mission is to be the world’s number one destination for fashion-loving 20-somethings. We believe in a world where you have the freedom to explore and express yourself without judgement, no matter who you are or where you’re from. That’s why our purpose is to give fashion-loving 20-somethings the confidence to be whoever they want to be.”
This mission statement is further supported by four values, including being ‘authentic’ and ‘brave’: often some of the cornerstones required to move from diversity towards real inclusion and belonging.
Asos’s annual report for 2022 reported that 10 per cent of the combined leadership team had ethnic backgrounds and 22 per cent overall. In terms of gender, 45 per cent of the combined leadership team were women and 66 per cent overall. This is noteworthy representation that is now at risk of being undermined.
Diversity targets being removed from the executive means this specific decision is not aligned with the company’s stated mission and values. This can only have a negative impact internally, with existing diverse hires feeling cynical over what is said publicly and what is being practised. The values are now at real risk of turning into sound bites in a handbook on the extranet rather than driving the business forward.
To paraphrase Peter Drucker: ‘That which gets measured gets done.’ Executives keen to achieve their bonuses will put their time and energy into the areas they are being asked to report on and this focus by default gets passed down the hierarchy throughout all levels of the business.
During 2022, Asos was ranked number eight on the Inclusive Top 50 UK Employers list for promoting inclusion across all protected characteristics and throughout each level of employment within its organisation. It also won the D&I award at The Rewards 2021. These achievements would have all been part of the employee brand making Asos an employer of choice, critical to attracting new talent to retain customers and compete effectively.
If the diversity targets are so easy to drop, it further raises the question of how truly embedded diversity and inclusion actually was at Asos and how sustainable these initiatives are going forward.
As an established global brand that has positioned itself as a leading advocate of diversity and inclusion, this backtracking sends a negative message that diversity is not really important. This has wider implications for the entire fashion industry, which could begin to rethink its commitments in creating more diverse and inclusive organisations that reflect the customers they are trying to serve.
Asos has stated it is still committed to achieving diversity targets by 2030, which feels like the issue has just been kicked into the long grass and will be for someone else to address. As fashion disasters go, this is not one to showcase on the catwalks and is likely to have longer-term damage to the brand, undermining its supposed renewed focus on profitability.
Shakil Butt is founder of HR Hero for Hire