Moving beyond the diversity, equity and inclusion war of words

Two colleagues step into a cab. She is a junior at an asset management firm, he is her senior. They exchange pleasantries, and he asks about her toddler’s nursery.

On a separate day, the senior colleague shares another cab, this time with a male junior. He asks the junior whether he is being assigned to the right projects and if he’s getting good exposure during meetings.

The senior colleague may feel like he is being inclusive, recognising his female colleague as a person rather than just an employee. But the two conversations are not of equal value in career terms.

As Alex Edmans, Professor of Finance at London Business School, writes:

This is just one example Alex uncovered when speaking to practitioners across the asset management industry.

It is described in his report, Cognitive Diversity in Asset Management, commissioned by The Diversity Project (now Inclusion in Finance) and launched in the House of Lords in June 2025.

“The problem is broader than simply the topics of conversation,” he writes. “Junior women felt they were not pushed to the same standards as their male peers… Such behaviour may be intended as inclusive but has the unintended consequence of both making junior women feel they have less potential and hindering them from reaching their potential.”

It is a small moment, but for Alex it encapsulates something bigger: the gap between what diversity, equity and inclusion (DEI) sets out to do and how it is practised. And that gap, he argues, is central to one of the most polarised debates in business today.

Pros and cons

Advocates say DEI helps organisations find talented people who might otherwise be overlooked and build teams where the whole exceeds the sum of its parts.

Opponents counter, as Alex puts it, that it, “Can undermine meritocracy by prioritising demographic characteristics over ability.”

In the US, that objection has fuelled significant pushback. The Governors of Florida and Texas have introduced restrictions on DEI offices, training and funding in public universities, restrictions that also cover mentoring and inclusion efforts (exactly the kind of “baby out with the bathwater” response Alex warns against) while many companies have quietly removed references to DEI from their annual reports, even though some of those initiatives covered mental health or disability.

Alex believes both sides have oversimplified the issue. In his new paper, The End of DEI, he writes: “The backlash against DEI has been as forceful as its advocacy – and often displays the same lack of nuance as many DEI policies.”

The paper is provocatively titled, but not, he stresses, “because it is anti-DEI”. Instead, he argues that “the polarisation surrounding DEI reflects a failure of practice rather than of purpose”. DEI's aims are worth pursuing in his view; what needs to change is how organisations go about it.

If we can bridge that gap between the principle of DEI and its practice, he states, then it need not be divisive. “Instead, it can grow the pie for the benefit of all,” he maintains.

Alex says he wrote the paper because he wanted to take both sides seriously. He is even wary of the word ‘backlash’, he adds, because it implies a purely emotional reaction “when actually some of the pushback can be legitimate”.

His answer is not to abandon DEI’s goals but to change how we pursue them; Alex suggests that organisations focus on three key areas: potential, synergy and inclusion.

Potential is about judging people on what they could contribute in the future, not just what they've achieved already. Synergy is about building the best team rather than only seeking out the best individuals. And inclusion is about creating a culture in which people – and their ideas – can make a difference.

This is not a rebrand, Alex insists. What is required is a fundamental change in how organisations hire, build teams and run their workplaces.

Potential

The first shift Alex proposes is in how organisations make assessments about people. When hiring or promoting, “What matters is their likely future contribution rather than past achievements,” he writes.

In practice, this means that it: “Can be fully meritocratic to select someone with lower current performance (such as exam scores) if they are on a steeper trajectory.”

Demographics can still count here, Alex adds, but they only form part of the picture.

A woman working in STEM may have made it to where she has despite being overlooked by teachers or left out of group projects. A candidate from an ethnic minority may have faced stereotyping that impacted what they were able to achieve.

But background in its broadest sense matters too, he argues. “A white male applicant may have grown up in poverty, been the first in his family to attend university, or been raised by a single parent,” Alex argues. “It is too simplistic to assume that all white males have faced fewer obstacles than all non-whites or females.”

This is also why Alex is sceptical of quotas. When there are hard-and fast-rules, he claims, people follow the letter rather than the spirit: a company could meet a gender quota by hiring a lot of Oxbridge-educated women, while doing nothing for socioeconomic diversity.

Potential is notoriously hard to measure, but for Alex that is precisely where the opportunity lies. “We want to hire based on factors that are often overlooked, because then we will get a competitive advantage,” he explains, pointing to Billy Beane's data-driven approach in Moneyball, and to Brentford FC, where an unconventional take on recruitment helped propel the club into the Premier League.

But hiring for potential doesn’t mean simply following your gut. “Potential should not be confused with subjective intuition,” Alex writes. Leaders should, he advises, decide in advance what success in a role looks like, and assess each candidate against those criteria.

Synergy

The second shift is from individuals to teams.

Different perspectives provide one source of synergy, and demographic diversity can play into this. But cognitive diversity – covering expertise, experience, information and ways of thinking – goes much further, he argues, writing that a team comprising only men “may contain optimists and pessimists, scientists and artists, and big-picture thinkers and spreadsheet wizards”.

Synergy can also be found in complementary skillsets. A football team needs goalkeepers as well as strikers to win matches, even if the players rarely share ideas.

But sometimes, he argues, difference isn’t what’s needed to create a synergistic team at all – if team members “speak different languages” it can make it harder to work together

Indeed, some of the greatest breakthroughs in finance came from teams with very similar expertise, he writes, such as the Black–Scholes option-pricing formula.

Finding the right balance depends on the task – Alex cites a study which found that software teams benefited from diversity when generating ideas, but from alignment when planning and coordinating.

Inclusion

The third element is the I in DEI – inclusion – but the shift, Alex says, is in raising its status, rather than leaving it as an afterthought.

He is highly critical of “add diversity and stir” approaches, which assume that recruiting a diverse team is an end in itself. In Alex’s formulation, inclusion comes third only as a matter of chronology, he says – in the way circulation comes after airway and breathing in first aid – last in the sequence, but just as critical.

Core to this is psychological safety – fostering a climate in which people feel they can speak up freely, disagree agreeably and acknowledge mistakes.

Crucially, though, Alex states, this does not mean creating a space in which no one is challenged. While being wrong shouldn’t bring stigma, ideas should be judged on their merit

In a further experiment Alex cites, groups told to debate and criticise each other’s ideas generated more ideas than groups told not to criticise, a result that held in both the US and France. The rule, Alex says, is to challenge the argument, not the person, “to play the ball, not the man or woman”.

Alex suggests several ways leaders can put this into practice: let junior colleagues speak before senior ones; have chairs explicitly invite contrarian viewpoints; visibly reward challenge, even when it doesn’t change the decision; ask people to explain the assumptions behind their recommendations, so others can question the reasoning rather than the person; and create one-to-one opportunities for juniors to challenge their seniors.

Inclusion done badly, however well meant, can backfire – once again highlighting the gap between principle and practice.

“Inclusive practices can be unintentionally non-inclusive,” Alex warns. A friendly question about nursery in place of one about projects and exposure can lead to missed mentoring, lower expectations and unrecognised potential.

Real inclusion, he argues, means holding everyone to the same high standards. The goal, Alex writes, is: “A culture where people will contribute bold and innovative ideas, debate and refine them without fear of stigma, and uphold high standards so every team member can perform at their best.”

Shift the focus from demographic headcounts to potential, synergy and inclusion, Alex concludes, and DEI need no longer be a battle over which side you are on.

Reframing it this way, he writes, “lowers the temperature of the debate”. And the stakes are high: “More successful companies, more intellectually vibrant universities, and a more cohesive society.”