In May of 2021, Jason Fried and David Heinemeier Hansson, the co-founders of Basecamp, an American web software company, made the decision to limit political speech on the company’s open internal communication channels.

The new policies were a response to growing internal tensions on their team and were laid out in a memo on Frieds blog, where he explained: "You shouldn’t have to wonder if staying out of [a political discussion] means you’re complicit, or wading into it means you’re a target. These are difficult enough waters to navigate in life, but significantly more so at work…It saps our energy and redirects our dialogue towards dark places. Its not healthy, it hasn’t served us well. And we’re done with it on our company Basecamp account where the work happens."

This was a particularly controversial move during a time when employees worldwide were expecting their workplaces to address social issues publicly and were significantly accelerating demands for more discussions about diversity in the workplace in the wake of George Floyd's death in 2020. In response to the memo and the policy changes it announced, fully one-third of Basecamp's work- force took severance packages and quit. Many took to social media, expressing disappointment and anger. Journalists proclaimed that the co-founders had made a huge blunder. But had they?

In recent years, record numbers of organizational leaders have been engaging consultants or hiring specialized staff to deliver diversity and inclusion (D&I) programs and audits for their teams. At its best, this flurry of activity may indicate well-meaning intentions to create better workplaces for employees and make positive contributions to society. Yet in its most widespread form, D&I training has limited value. There is no empirical evidence that it does much to support positive social action, reduce bias, increase a sense of belonging or create more collaborative teams. More worryingly, D&I initiatives can obscure, and even thwart, a leader's most important role: clearly laying out a business strategy and mobilizing the organization around it.

Handing off conversations to consultants enables leaders to take a back seat. As Irene, a finance executive in Toronto, summarized for me, "I think my CEO sees this as a big 'tic. The company needs to show they’ve made a commitment. I'm sure they’ll write it up as 'great things are happening!' — but nothing has happened other than training."

Caroline, a senior HR director at a global social enterprise, took it a step further: “I've had two CEOs now who have taken a very passive stance and basically said, 'I don’t know much about this work and have a lot of learning to do, but of course I support it.' That creates a really unhelpful dynamic where no one is really driving the ship.”

Leaders might choose to stay distant from D&I activities because they are frequently viewed as people conversations, and thus the purview of HR. Type "diversity and inclusion practices" into Google and you will get advice on hiring and promotion, diverse representation on boards of directors and inclusive company policies. Companies across Canada, from grocery to retail to banking, have made commitments to diversity that largely focus on employee initiatives. In practice, however, D&I inevitably affects organizational strategy, including questions about who your customers are, how you market to them and even what services or products you provide. Once organizations start to discuss how D&I relates to its people internally, it inevitably leads to conversations about who and how to serve externally.

James, an executive for a Canadian education nonprofit, offered an illustrative example: "Once we started having more active conversations about D&I with our staff, it became clear that concerns went far beyond internal issues. Since our inception, we have served as a kind of ‘big tent’ for any interested young people. This often meant that some socioeconomic, racial or geographic groups were more likely than others to join our programs. We began to ask if we should begin to segment our target markets differently, prioritizing and privileging certain communities. This was not a small decision. Identifying who we served had implications for where staff were stationed, what staff roles would be filled — even what content got disseminated."

Many employees active in D&I see this connection explicitly. Alphabet, Google's parent company, for example, has recently seen a unionization movement within its workforce. One of the movement's four main goals reads: "We have the freedom to decline to work on projects that don't align with our values." Another self-organized employee statement sent to me by a Toronto executive states: "We will identify and remove barriers to accessibility in our work, fundraising activities, events, communications and workplace." These goals speak to the heart of their organizations' strategies.

When the push comes from employees without significant engagement by the leadership team, D&I activities can lack both cohesion and impact and may ultimately veer the organization away from its core mission. Irene explained, "If you have a free for all and no one is driving strategy, it doesn't work. You need leadership who will ask questions like, 'How will we know that what you are proposing is going to have the impact you hope it will have? How does this relate to our mission?'"

Caeli Widger runs a boutique recruiting agency in Los Angeles. She wrote to me, "Suddenly, in the last 18 months, my clients are asking for 'diversity' in the candidates we send them. But rarely is there a thoughtful discussion behind this request, or any kind of specific strategy for how they might attract diverse individuals. It's demoralizing for my team." Matt, a Canadian independent investment advisor, shared his frustrations this way: "ESG [environment, social, governance] funds have changed in the last few years. They aren't focusing on performance anymore," he says. "Products are being created based on things like specific social issues or the identities of a company’s leadership team. How do I help my clients understand how these products will help them grow their money? It’s almost impossible."

When leaders distance themselves from D&I conversations, they lose the chance to help contextualize D&I goals within their organizational strategy as well as their moral authority to credibly lead a decision-making process. Caroline explains, "When we learn something new, we don't throw away all our priors. D&I should be the same. Our business is still our business. We have to integrate new approaches to diversity within the context of what we already understand."

A McKinsey report titled "Delivering Through Diversity" makes this point clearly: "Companies succeeding on I&D are able to clearly articulate the link between their I&D goals and specific business growth priorities." Insisting on having clear areas of focus also helps the organization define its terms. "How do you define inclusion?" asks Cheryl Phillips, the president of CLP & Associates and past vice president at Masco Corporation. "If everyone has a different definition, it's a problem. Does it mean we are to embrace different cultures? Something else? Unless we come up with a definition that is widely accepted, everybody is going to be doing their own thing." Leaders can approach D&I initiatives more strategically by following three principles.

GET SPECIFIC: There is a distinction to be made between issues that arise in a specific organization (with its various people, customers, products and internal dynamics) and the more amorphous systemic societal issues that make up much of our political discourse. Conflating these can obfuscate what is really going on within the organization itself. D&I consultants are unlikely to be experts in your organization and will therefore be inclined to tackle more generic challenges (such as "more employee voice" or "diversifying your workforce") that do not accurately diagnose the unique issues faced by your company. Instead, take the time to talk with your employees and listen carefully to the challenges they are facing. Surveys might tell you that an employee feels ‘excluded from important decision-making,’ but talking to them will tell you why.

Part of getting specific also means homing in on your own values as a leader and clearly articulating how these intersect with both the needs of your stakeholders and your organizational strategy. This process may lead to some conflict and even disappoint and frustrate some staff members. But that is preferable to never drawing any lines at all. If leaders cannot clearly articulate what they stand for, they can't engage directly and honestly with their stakeholders. The key is not to automatically agree with your staff, but instead to listen with curiosity and articulate clearly where you stand, especially if you disagree. When operating under intense (and sometimes punishing) public scrutiny, this is easier said than done. But "staying out of it" is ultimately a losing proposition.

GET UP TO SPEED: Leaders need to understand the intellectual landscape that comprises the current D&I movement. It is not enough to have a vague sense that issues like identity, employee voice and political engagement have become more important. Instead, they must take the time to understand which ideas are the most prevalent and how vocabulary is being used. The term racism, for example, has transformed in meaning over the years. In order to develop an independent and rigorous perspective, leaders can read mainstream authors like Ibram X. Kendi and Robin DiAngelo, but should also explore thinkers like John Mcwhorter, Coleman Hughes, or any number of writers from the website Free Black Thought who often oppose them. It may seem like a time-consuming task, but when leaders lack an informed perspective, it becomes too easy to become self-contradictory and seem hypocritical to employees.

Getting up to speed also means developing an educated understanding about the problems with popular D&I training. For example, while typical D&I workshops talk explicitly about "diversity of identity" (represented by gender, race, etc.), there is far less focus on fostering differing opinions — the very mechanism that makes diversity matter in teams. Irene, the finance executive, summarized for me her experience with one such training: "The message was clear: Don’t raise too many ideas. Our job was to listen to a theory about power dynamics in the workplace framed as fact. There was no room for dissent." James, the non-profuct exec, explained, "The most important question I ask when vetting D&I trainers is, 'What would you do if someone in the group disagrees with you?' In one recent instance, three out of four trainers I screened replied with a version of, 'I would take them aside to understand their mistake.' One added, 'Patiently.'" Inhibiting dialogue, by definition, cannot help an organization become more inclusive.

DEFINE A PROCESS: It is well established that people from all levels and functions should participate in organizational problem-solving, and D&I is no exception. Where leadership becomes important is to explicitly connect efforts to the organizational mission and to clarify a process by which productive advances can be made.

Frank Dobbin, a professor of sociology at Harvard University who studies the impact of diversity training, recommends creating cross-functional teams that mix senior and junior staff to dig in on one specific issue and develop data-driven solutions. Irene relayed her experience with this kind of process: “We did a diagnostic about women in the workforce and realized that retention was an issue. Flexibility seemed to be one of the critical levers, so we drove through a flex program and polled people for feedback. It was focused. We identified a precise issue, came up with a solution and then implemented it.”

“It can’t be a loose collection of people who have no explicit mandate,” cautions Caroline. “Our global head of HR encountered issues creating a D&I working team because there wasn’t enough clarity or structure. The team didn’t really know what they were supposed to do but then ended up creating their own mandate and became frustrated when their ideas didn’t land with leadership.” Caroline’s leaders lacked clarity themselves, so they could not offer it to the committee.

Which brings us back to Basecamp. Were the decisiveness of Fried’s memo and the policies it outlined a blunder? Time (and markets) will tell, but Basecamp continues to hire at a rapid clip and has even gone out of its way to name the "no politics" stance within job descriptions. Fried himself has few regrets: "We can feel wonderful about our contributions to the world without feeling like we have to take everything on that could ever be wrong," he says. People will inevitably have different priorities, Fried wrote in his infamous memo. "Companies, however, must settle the collective difference, pick a point, and navigate towards somewhere, lest they get stuck circling nowhere."

This article first appeared in the Spring 2022 issue of Rotman Management magazine. Published in January, May and September, each issue features thought-provoking insights and problem-solving tools from leading global researchers and management practitioners. Subscribe Today.