Meritocracy vs diversity: The debate that’s baffling corporate India

GODREJ INDUSTRIES recently ran an experiment to check for bias in its hiring process in one of its group businesses — it masked gender identifications on resumes of candidates. The move resulted in a 49% improvement in CV shortlisting for women in some functions. The company, known for its forward-looking diversity, equity and inclusion (DE&I) initiatives, realised merely masking gender identifications at the time of hiring could help build a gender-balanced workforce, and ensure the company hired superior talent.

“Unconscious bias is a real factor in how we hire talent and build organisations. That bias is present in every system, and it’s expressed in different kinds of prejudices. We see DE&I work as minimising those biases, which means expanding the parameters we use to build organisations. It doesn’t replace talent or merit. By recognising the merit of people who have been held back by historical disadvantage, our talent pool expands,” says Nisaba Godrej, executive chairperson, Godrej Consumer Products Ltd.

Sanjiv Mehta, executive chairman, L Catterton India, has been a DE&I champion throughout his career. The Unilever lifer, during his stint as MD, Hindustan Unilever, pushed his hiring team to ensure there was at least one woman in the final shortlist of the best three. The job finally went to the most deserving candidate. “Diversity will only succeed if the process is fair and meritorious. If meritocracy is compromised, the business will not grow. During my tenure at HUL our diversity percentage went up from 18% to 48%, and market cap rose from $16 billion to $62 billion. It wouldn’t have happened had we not focussed on meritocracy.”

Hiring from a wider pool of talent gives an organisation access to diversity of thoughts and ideas, something that’s paramount for business. However, it can’t be done at the expense of meritocracy. The recent DE&I backlash in the U.S. has raised serious questions about whether diversity came at the expense of meritocracy. In fact, India Inc., whose diversity initiatives are fairly recent compared to developed countries, could actually learn from the mistakes made by the U.S., and course-correct.

According to a New York Times report, over 60% American companies have dropped the phrase ‘diversity equity & inclusion’ in their annual filings in 2024-25. Ever since President Donald Trump announced the scrapping of DE&I investment by the U.S. government, the likes of Amazon, Meta, Target, Uber and many others have refrained from talking openly about their DE&I initiatives. Trump has also issued an executive order, instructing federal agencies to investigate ‘illegal DE&I’ in the private sector.

What was the reason for the DE&I backlash? “In the U.S., too much focus has been placed on regulations and reporting, but not enough on actual integration at the top,” points out Ram Charan, author and global advisor to CEOs on corporate boards. “The reason for the backlash in the U.S. is because companies did it for the sake of doing it. They only looked at the optics and, therefore, meritocracy was compromised.”

“A lot of leaders also try to camouflage their lack of performance in business by talking about purpose, sustainability and diversity. That won’t work either. Business growth and philosophies such as DE&I have to function in tandem,” agrees Mehta of L Catterton India.

Consulting firm McKinsey & Co. was among the first to declare in the midst of the heightened backlash in the U.S. that it had no intention of scrapping its DE&I initiatives. “DE&I done properly enhances merit by removing bias. Done badly it creates a false trade-off between the two,” points out Vivek Pandit, senior partner, and global co-leader, private equity and principal investor group, McKinsey & Co. “DE&I became an easy target partly because it was never wholly embraced and partly because of an opportunity-scarce environment,” he adds.

Diversity & meritocracy not exclusive

Colgate-Palmolive (India) calls its DE&I strategy, EI&D (equity, inclusion and diversity). According to MD and CEO Prabha Narasimhan, meritocracy is at the heart of Colgate’s diversity strategy. “I think from an equity perspective. Eventually if you want to hire, you want to hire the best talent, and you want them to do the best they can. Equity as a principle is really important because I want to feel like I am going to get treated for the output that I create regardless of who I am, or where I came from, or what my background/gender is, or what any other orientation of mine is. Therefore, the ability to keep one’s focus on equity is really important.”

“We have never ever gone out there saying we will either reserve roles for women, or we are only looking for women. What we do ask people who send us candidates is to make sure that the slate is balanced so that we get an opportunity to see different types of people and then, of course, may the best person win,” Narasimhan further adds.

When one makes decisions about talent, representation is only a number, points out Godrej. “You look at multiple data points to hire the best talent and build the best organisation. Being inclusive allows us to bring different kinds of people into the organisation and build a culture of innovation and accountability. It makes us more open to different opinions and choices, not simply to reinforce bias through hierarchy. A diverse and inclusive environment is deeply important to how we support and grow talent. It’s also crucial to build a business that reflects the societies and markets we serve.”

“At HUL, DE&I is integrated into the way we work. We’ve embedded it into our talent strategies, supply chains, and product innovation, ensuring meritocracy while recognising that individuals come from diverse starting points. This approach has broadened our talent pool and skills. From hiring women in frontline roles to empowering rural women entrepreneurs through Shakti, our DE&I initiatives contribute to business growth,” says, B.P. Biddappa, executive director and chief people, transformation and sustainability officer, HUL.

The real question is, how can organisations effectively balance diversity without impacting meritocracy? “Eliminate the bell curve, implement proper training and expand apprenticeships,” says Charan. Any company which sacrifices meritocracy in a competitive environment will suffer and fail to achieve excellence in diversity. “Competitiveness is non-negotiable — diversity initiatives must align with business success. On the other hand, diverse people have talent and intelligence, but may not have had the right training or opportunities. The right people must be in the right jobs, whether they are diverse or not.”

The only way for companies to avoid backlashes to their DE&I strategies, says Charan, is by investing in training people from marginalised communities, be it women, LGBTQAI+, or minority. “Around 25% of people are in the wrong jobs — companies must accelerate efforts to match diverse talent with the right roles. If people are placed correctly, they will excel.” He recommends apprenticeship programmes and creating a pool of talent who can be hired across industries. “The real problem is that companies are not implementing merit-based competition externally. Meritocracy should be measured against external competition, not an internal bell curve.”

DE&I and meritocracy can complement each other when implemented correctly, believes Mukesh Aghi, president and CEO, US-India Strategic Partnership Forum (USISPF). “The key is to ensure DE&I initiatives expand the talent pool rather than dilute standards. Diversity is not just how we look, but diversity of thought and experiences as well. For example, in a consulting business, if everyone in one team has the same background of, say, engineering, then they would likely fall into groupthink categories and end up suggesting the same things, as opposed to different problem-solving approaches from different backgrounds and experiences.”

Organisations need to believe diversity can actually benefit, points out Sreyssha George, partner and MD, BCG. “If we are consulting to the world, we have to look like the world. Otherwise, there is no way we can do justice. I think organisations need to believe that themselves. With the kind of talent crunch we are seeing in the market, I think it is imperative you look at expanded talent pools. You have to think more actively about bringing more into the workforce, and not being narrow about your thinking.”

Diverse thinking leads to a 10% improvement in the performance of an organisation, claims BCG’s George. “But it will not work if you just add diversity and hope that old systems will allow the person to outperform. A lot of the consulting we do is to make sure you are aware of the new groups of people you are bringing in, and your organisation has some adaptability built into the system as well.”

Pandit of McKinsey says organisations such as McKinsey don’t support DE&I because it’s easy and sounds good, but because it’s hard work, and imperative to their success. “In our business, diverse leaders attract more talent, and different perspectives lead to better answers. The reality is anti-DE&I folks are celebrating, fence-sitters might vote with their budgets to save money, but the work is not stopping. Most companies are maintaining budgets and a few are increasing.”

India’s DE&I lens

Will the DE&I backlash in the U.S. have a trickle-down impact on India? Aghi of USISPF disagrees. “Conversations with organisations globally and in the U.S. indicate some are recalibrating their DE&I investments due to political and economic pressures, but many continue to see their value beyond compliance — particularly in talent attraction, retention, and customer engagement. In India, I don’t anticipate a sharp decline in DE&I initiatives. Indian organisations are at different stages in their DE&I journeys and don’t have the same global multiculturalism and immigrant identity as that of the U.S. Many companies in India remain committed due to a combination of legal mandates, societal shifts, and business imperatives.”

Godrej considers the DE&I headwind in the U.S. as an opportunity for India to lead the diversity, equity and inclusion narrative. “India has many imperfections, but we also have a history of leadership in inclusion. Godrej made the ballot boxes for India’s first election in 1952 — an election where universal adult franchise meant we had women suffrage before many other countries. I am excited about the echo of that bold history in our future, as we move towards 33% representation for women in Parliament. We pioneered non-violent movements for liberation and social justice. I hope we can continue to be pioneers for social progress.”

In fact, Aparna Mittal, founder, Samãna Centre for Gender, Policy and Law, and leading DE&I advisor and corporate lawyer, says one should be conscious about not tapping into the rhetoric that just because the U.S. has scrapped DE&I, India would follow suit. “Our regulatory framework, the extensive employment and labour laws, key tenets on equality and non discrimination laid down by the Constitution and the ESG framework pack in a lot for India Inc. to understand the value of DE&I frameworks and interventions.”

Nidhi Tiwari, partner at consulting firm Kearney, says policy interventions in India have contributed in strengthening the DE&I narrative. “Even for large companies it started as a tick-in-the-box activity because they were forced to look at it because of the policies. These companies eventually took pride in coming out and making announcements about their diverse workforce when they started seeing the results. They realised their productivity went up and that is when they embedded it in their business model.”

America’s anti-DE&I stand may not impact India, but the fact remains that for a majority of Indian companies (especially MSMEs and several large and mid-sized ones), diversity hardly matters. Only 1.6% of Fortune 500 India companies have women in leadership roles. Over 30% women exit the workforce by the time they reach the middle-management level. This is the time when they are in their early to mid-thirties, get married and have a family. A lot of organisations consider hiring women a burden as there could be a maternity leave in the offing. Women are entitled to six months of paid maternity leave in India, but many companies consider it an additional cost because they not only have to pay the woman who goes on leave, but also find a substitute to fill in for her role. So, they prefer not to hire women at all.

Mehta of L Catterton says organisations can ensure women don’t exit the workforce by creating an environment where they can be themselves. He talks about the daycare centre and kindergarten school on the HUL campus in Mumbai. “The moment you give confidence to a woman that her child is well taken care of, she will automatically deliver ideas that would be good for the organisation.” Mehta believes large corporations need to be role models for driving the diversity agenda in India. In fact, Budget 2024 had also called for public-private models for providing daycare services to children in and around factories to retain more women in the workforce.

Mittal of Samãna calls the argument that DE&I is anti-meritocracy, flawed. “We are not saying give somebody a job who doesn’t have the skills or merit. We are saying there are enough people who are highly qualified or have high potential, but due to systemic barriers and biases (and even gendering of roles for example), are not given the same opportunities. DE&I is all about giving people an equal opportunity, not discriminating against them.”

“If you look at the first 15-18 years of education, women always perform better if not as well as men. This is reflected in the gender parity report of the World Economic Forum. The one place where we come very close to men is education. That’s where we have over 96% parity, which falls to 35% when it comes to economic participation. How does meritocracy suddenly become such as big question mark after we come into the workforce? Organisations need to look at the problem internally,” argues Nitu Bhushan, CHRO, Pernod Ricard, South Asia.

Role of leaders

The idea of building a diverse yet meritocratic organisation needs to be driven by leaders who believe in it. Diversity, equity and inclusion must be deeply embedded in an organisation’s culture and business strategy, says Suresh Narayanan, chairman and MD, Nestlé India. “A truly inclusive organisation is built when leaders set the tone by holding themselves accountable, addressing biases and ensuring equitable access to opportunities for their teams. As we stand shoulder to shoulder, the principles of ‘enablement, enhancement, engagement, empowerment, and equity’ will help businesses create an environment that truly lays the foundation of inclusivity and diversity building, leading to a resilient and future-ready organisation.”

“Enablement provides access to mentorship, training and resources that levels the playing field for everyone. Enhancement celebrates and leverages the unique strengths, perspectives and experiences of employees, and fosters innovation. Engagement encourages belonging and participation in decision-making. Empowerment equips individuals to contribute meaningfully and stay accountable. Equity ensures equal opportunity for everyone,” Narayanan further explains.

Charan agrees the success of diversity has got a lot to do with the CEO’s attitude. “Some leaders are passionate, but many don’t know how to execute. Certain types of cognitive abilities are rare, and they exist across populations. Leaders must identify and develop them.”

“Leadership is such a privilege. It’s an opportunity to leave things better than you found them. For us, legacy isn’t just our numbers in one year, but the products we innovated, the management systems we improved, the organisations we made more inclusive and resilient — all things that lead to long-term flourishing. In that sense, leaders who bring rationality and love to what they do tend to have the most successful outcomes,” adds Godrej.

The DE&I backlash in the U.S. has one big lesson for corporations — a mere tick-in-the-box activity of having more women or people with other sexual orientations in the workforce is tokenism, which is bound to fail. “One thing one should never compromise is meritocracy. Never get into a quota system, you end up recruiting people who don’t need to be with you,” reiterates Mehta of L Catterton India.

The success of an organisation depends on the intelligence and capabilities of employees, not gender.