What Jacob Grumbach Just Got Right About DEI and the Bottom Line

Jacob Grumbach is a political scientist at UC Berkeley whose work sits at the uncomfortable intersection of corporate governance, political pressure, and firm performance. He is not an HR consultant selling a framework. He is a researcher who ran the numbers on a question that most executives have been too nervous to answer honestly: does folding on diversity, equity, and inclusion (DEI) under political pressure actually help business results? The answer, rigorously arrived at, is no.

The finding that belongs in your next board deck: S&P 500 companies that maintained their DEI commitments through 2024 and into 2025 outperformed their DEI-retreating peers on financial metrics — a result Grumbach's research, covered by HR Dive (2025-07-16), makes difficult to dismiss as ideological wishful thinking.

Why did DEI-committed companies outperform?

Grumbach's explanation is structural, not aspirational. Companies that abandoned DEI programs in response to executive orders and activist pressure did so reactively, signaling to investors, employees, and customers that their strategic commitments are negotiable under political heat. That signal has a cost. Talent pipelines narrow. High-performers from underrepresented groups — who have options — begin recalculating their loyalty. And the internal loss of institutional trust, once spent, is not quickly replenished. The research does not argue that DEI programs are magic; it argues that the abandonment of stated commitments is a measurable liability, and the data from S&P 500 companies across a meaningful time window backs that up. HR Dive (2025-07-16) reports Grumbach's advice to HR specifically: hold the line, document the business rationale, and treat the political moment as a stress test of organizational integrity, not a compliance problem to route around.

DEI commitment — as Grumbach uses the term — means maintaining structured programs, retaining dedicated staff, and keeping measurable goals intact, not issuing press releases. It is a behavioral measure, not a reputational one, which is what makes the performance correlation credible.

What should HR leaders actually do with this research?

The first thing to recognize is that Grumbach's work gives HR a different kind of currency in board conversations. For years, the argument for DEI was primarily moral and secondarily legal. Now there is a third leg: competitive performance data from the S&P 500, covering firms large enough that size cannot explain the gap. That changes the framing from "we should do this because it's right" to "we have evidence that peers who retreated underperformed." Boards respond differently to those two sentences.

The second thing to recognize is what the research does not say. It does not promise that any DEI program, regardless of design or execution, will lift financial results. The outperformance finding is correlated with commitment and structural continuity — not with the existence of a diversity statement on a careers page. Chief human resources officers (CHROs) who interpret this as vindication for programs they've never honestly evaluated are misreading the signal.

This matters particularly now because the pressure to retreat has been uneven across industries. HR Dive (2025-07-16) notes that Grumbach sees the current environment as a sorting mechanism: firms that treat DEI as a strategic capability will separate from those that treated it as a PR function. The sorting is happening in real time, which means the window for a defensible position — grounded in evidence rather than optics — is open but not indefinitely so.

Meanwhile, the HR function itself is under strain that makes this harder. HR Dive (2025-07-16) reported separately that people teams say job demands have grown significantly while resource support has not kept pace, according to Lattice's research — meaning the professionals most responsible for holding DEI commitments steady are doing so with thinner capacity than before.

Grumbach's contribution, then, is not simply an academic paper. It is ammunition — the specific, sourced, peer-reviewed kind — at a moment when HR leaders are being asked to defend commitments against pressure that is explicitly political and often deliberately loud. The argument "we have performance data from the S&P 500 showing that retreat costs more than commitment" is not a values argument. It is a strategy argument. That distinction is worth more than any workshop on inclusive leadership right now.

The question for every CHRO heading into Q3 planning is not whether their organization believes in DEI. It is whether their organization is willing to behave consistently with that belief when the cost of consistency becomes visible.