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Hello and welcome back to Communication Breakdown, a new podcast from the Observatory on Corporate

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Reputation.

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Thanks for joining us.

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I'm Steve Dowling in Silicon Valley.

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And I'm Craig Carroll in New York City.

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Each week, Steve and I take a look at strategies companies are using to shape headlines

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and sometimes save their skins.

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To post-game show for PR Pros this week, diversity critics hit a bull's eye with Target.

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The Minneapolis-based retailer becoming the latest company to reverse course on its commitments,

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just one day after its big box rival Costco saw shareholders vote overwhelmingly to support

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diversity programs, although that story may not be over.

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Target's chief community impact and equity officer explained the move in a memo to employees.

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She cited many years of data, insights, listening and learning, as well as, "the importance

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of staying in step with the evolving external landscape."

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The company posted a notice to its website around midday, Friday, and the story appeared

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almost simultaneously on CNBC.com, quoting the memo.

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Then, as we've come to expect, anti-wook provocateur Robbie Starbuck took a victory lap.

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(Robbie Starbuck): "Target was put on notice at the end of November that we were coming for them when we were able

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to flip the woke policies at Target.

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Knowing that a story was coming, Target executives wisely got together and figured out how

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to get rid of some of these woke policies.

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Target forwarded me this email that outlines why they're making these changes, by the way,

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and it says it's with the goal of driving growth.

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That's a good news for today.

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This was supposed to come from us first.

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It did get leaked, but you know what good news is good news?"

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Yeah, we'll talk about that leak in a moment.

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Target has nearly 2,000 stores nationwide, a smaller footprint than Walmart or McDonald's,

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which have each ended diversity programs in recent weeks under pressure from the right.

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But Target may hold special cultural significance.

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As a long-time corporate supporter of diversity, especially in the wake of George Floyd's murder,

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which happened just a few miles from Target's worldwide headquarters.

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Steve, we've been tracking the way companies are positioning these rollbacks since the trend

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started last summer.

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Are they getting any better at it?

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I think the short answer is yes, marginally anyway, but their explanations are still kind

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of vague and hand-wavy.

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I think the difference is unlike the earlier reversals by John Deere (and) Harley Davidson,

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ever since Walmart's announcement, which was right before Thanksgiving, these bigger companies

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have been trying a little harder to get out ahead of the story and provide some kind of

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context or rationale.

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Mark Zuckerberg of Meta said, "Feels like we're in a new era."

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Target says they're staying in step with the evolving external landscape.

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And setting Meta aside, I think most of the companies are trying to signal that they're

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still going to have the same results like a diverse workforce, a diverse supplier base,

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a welcoming environment for customers.

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They're just going to go about it a little less programmatically, if that makes sense.

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And certainly, they're going to go do it without letters "DEI" in front of it.

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So I'll just kind of break it down using the CPR Triangle: Claims, Perceptions, Reality.

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Claims- what Target is saying.

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They're saying that they're evolving their approach to reflect data insights and evolving

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external landscape.

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In other words, this isn't a retreat, it's an adjustment.

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Perceptions- meaning how it's being interpreted.

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Conservatives see this as a victory over woke policies, progressives see it as Target abandoning

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its values.

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And employees are likely confused.

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Do these values still stand or not?

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And then Reality- what Target actually does.

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Programs may not actually be going away.

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I think the issues that they're just repositioning them under a different name.

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Target's trying to protect itself from being put in a category that could exclude itself

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from key policy conversations.

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I think the question we should be asking is Target rolling back to the DEI?

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I think the question we should be asking is what's the real outcome they're aiming for?

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And I think to your point about reality, I think that's what people are really waiting

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to see what emerges, what transpires, because the companies are saying they're still committed

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to a diverse workplace.

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However, at the same time, they're saying they're going to make some changes.

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They're ending programs whether they were scheduled to or not. In Target's case,

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I think most things they said were going to end.

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They were already scheduled to end.

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But I think one of the things that is creating this concern, certainly from my point of view, is

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we keep hearing companies cite data and learnings in their explanations, but in a lot of cases

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they're not sharing that data or articulating the learnings.

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And then to explain it, what I think is widely understood, these are unpopular policy

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changes, but to explain it, they point to this what we've called the 'vibe shift'.

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Target says they're staying in step with the evolving external landscape.

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And it kind of scrambles your brain when you read it, if you parse some of these statements,

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so you start to understand what's going on.

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The "evolving external landscape" seems to be the pressure target and certainly many other

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companies are feeling from the right.

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Yeah.

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See, this is what I wonder, right?

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I mean, if Target had the right data to back up their DEI programs, would we even be

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having this conversation?

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Because to me, companies that successfully defend DEI, don't just say it's important,

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they prove it with numbers.

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They can point to hard data on retention, consumer loyalty, even risk mitigation, and say,

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this isn't just the social good, it's a business imperative.

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For me, that's one of the things that stood out with Costco's response, but when we don't

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have that data or he don't use it, you're left making decisions based on sentiment, not

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strategy, and that's where you lose control of the narrative.

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Because right now, I think part of the issue is that Target's in this awkward position

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where they're not really changing much operationally.

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They're just changing the language, and that puts them in a little bit of a dangerous spot.

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So the question is, is this adaptation or is this appeasement ?

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Because if the core programs are there- supplier diversity, hiring initiatives, ERGs- if

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they're still in place, the critics who pushed back for the rollback might not stop there,

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and at the same time, they risk alienating employees and customers who supported these

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initiatives.

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They could end up frustrating both sides, all while hoping the rebrand is enough to make

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the problem go away.

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To your point about appeasement versus adaptation, I think there is an element of appeasement

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here, and we should talk about that in a moment.

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But over a longer period of time, you've been seeing this process of adaptation.

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Target, I think it was a year or more ago, changed the name of their diversity program, their

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DEI program, to "Belonging at the Bullseye."

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Other companies have made similar moves.

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So we've been watching them adapt, but it's really important to point out here, I think

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customer opinions have not changed, and diversity remains important both to businesses and

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to the public, and popular, or at least acceptable, among a majority of customers.

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It's just that when you talk about diversity in a certain way, like directly about diversity,

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that's not acceptable to a relatively narrow audience.

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Despite that, there's a vibe shift that we've been talking about since the election, there's

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no evidence that anything has changed in public opinions.

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I'll give you an example.

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Early in January, before the inauguration, Axios and the Harris Poll found 61% of workers said

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diversity is good for companies.

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75% agreed more needs to be done to make sure everyone has a shot at advancement.

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Here's Ray Day of Stagwell Global, the company that runs that Harris Poll.

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(Ray Day): "With all the backlash on DEI, you would have thought you would have seen more negativity,

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but in fact, it's very consistent that we've been seeing for years.

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The acronym is a problem just like all acronyms.

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Americans are either confused by or they dislike DEI, ESG, IVF, but when you go underneath

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the covers, Americans still value diversity to ensure everyone is advancing.

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So, perhaps we have a communications problem with DEI, but the value of diversity in business

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is alive and well."

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And YouGov, I know this is statistically a different kind of poll, Craig, you're the PhD, not me,

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but YouGov found that 48% of the Americans they surveyed this month held favorable opinions

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about DEI versus 29% who find it unfavorable.

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That's a +19 favorable rating for diversity in the workplace.

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Yeah.

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For both of these polls, what stands out is that they're both reporting numbers that are

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tipping in favor of diversity that seem even at odds when you think about the split of

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the country right now in terms of red states and blue states, right?

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This certainly makes it more difficult for Target being one of America's favorite

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companies, right?

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I mean, they have always represented America, right?

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So they're not just a retailer, they're America's brand.

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They sit at the heart of American life.

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It's in every community.

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It caters in every demographic.

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They built their identity on being a place where everyone from suburban moms to city dwellers

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from those that are budget conscious to brand enthusiasts, they can find what they need.

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And I think that's what makes this moment so complex is that in a divided country, brand

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like Target doesn't have the luxury of picking aside.

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Unlike niche brands that can lean in more fully into like a specific audience, Target's

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got to navigate the landscape pretty carefully where one move could alienate half the country.

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But in this case, going back to the data that you're reporting on, that data is tips and

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favor of diversity.

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Yeah, and you want some evidence of that, Target's website, if you go to Target.com today,

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you'll see features for Black History Month and Lunar New Year.

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They have online shops dedicated to each.

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And so to those audiences who are just going to Target to shop, at least online and who aren't

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tuning into the news about DEI, there's no apparent change.

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But for those who are tracking this issue, I think the immediate reaction was, I would

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say, pretty strongly negative.

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And that was influenced a lot by the reaction of the LGBT community in the Twin Cities, where

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Target was born and where the company is still based.

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Target was a long time sponsor of the Twin Cities pride parade.

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And I don't think there was any indication that they were not going to continue in that

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role.

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But when the organizers of the parade heard that that diversity announcement from Target,

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the parade essentially kicked them out.

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They said, we don't want your money.

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We don't want your float.

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Bullseye be gone.

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And that's a $50,000 sponsorship.

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So the pride parade then turns around to its donors to make up the money, and they end up

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raising over $70,000 in 24 hours.

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And separately, I did hear voices on MSNBC in the wake of that Target announcement saying,

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maybe boycott Target or shop at Costco instead.

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And by the way, we need to get back to Costco before this episode is over.

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But we also read that some black influencers and suppliers are actually calling for a different

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strategy.

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This is according to Reuters.

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They say these influencers are urging their followers not to boycott over the policy

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change.

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They're saying a better approach would be for customers to flex their economic muscle and

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make it clear that it'd be a bad decision, a bad business decision for Target to drop

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products by Black owned companies.

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But by the way, we haven't seen any indication that Target was planning to do.

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And there's the interesting divide.

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Some activists are calling for a boycott and others are saying no.

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Let's use our economic power to ensure Black owned businesses don't have a place at Target.

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And that's a crucial distinction because the second approach recognizes that Target isn't

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necessarily undoing diversity efforts.

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But if they were to start dropping Black owned brands, that would be a meaningful shift

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in reality.

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And so we're seeing a moment where different communities are trying to figure out how

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to respond when a brand changes its posture, but not necessarily its actions.

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You know, do you punish them for the signal they're sending or do you make sure that they

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stay accountable where it really matters on the shelves and the supplier relationships

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and then hiring decisions?

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I think that's the real question moving forward.

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It's probably very hard to organize and impact, and economically impactful boycott on this

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issue, maybe on any issue.

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I just don't know that that many people are paying that much attention to it or going

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to change their shopping, their spending behavior as a result.

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But I think this one is a situation where the calls for a boycott or an organized effort,

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a seemingly organized effort to pull together a boycott, just that effort could be as impactful

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as an actual boycott itself because as we've seen when the companies are making these

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announcements - Target made its announcement on a Friday afternoon, Walmart made its announcement

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like the day before Thanksgiving or Tuesday before Thanksgiving - they're not looking for these

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stories to have long legs.

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They're looking for them to go away.

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And calls for a boycott or a viewer to see, "Mounting calls for a boycott, " choose your headline

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in that direction.

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It could bring the story back to the front page, and that's the situation these companies

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do not want to be in.

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I think it's really instructive on that point if we look at what has happened in the wake

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of Costco's shareholder meeting.

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Just to bring you back up to speed, Costco was under pressure, but they did not go quietly.

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The shareholder proposal to roll back Costco's diversity programs went down to a resounding

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defeat.

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Yeah.

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So what happened after that?

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Their CEO gets a letter from Republican Attorney's General from 19 states saying their policies

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are illegal.

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And perhaps just as important, they say they're out of step with Trump's executive order,

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which encourages the private sector to end DEI programs.

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So Target doesn't want that kind of heat.

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And you know what else Target doesn't want?

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And nobody in American business wants is tariffs.

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Walmart and Target, they're two of the biggest importers in the United States.

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Last year, he was during the port strike.

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We read they were the two biggest importers.

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And look who's right behind them, probably in the top five is Lowe's, which also rolled

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back diversity commitments last year.

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These are companies who you'd like to think an American president would listen to before

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pulling the trigger on 10, 25, 60, 100 percent, whatever, the latest number is being bandied

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about on tariffs.

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But if the White House thinks they're too woke, maybe they lose their seat at the table.

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So I think if you zoom out, you see some companies who are at real financial risk if Trump's

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economic tariff threats become reality.

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And it may be that they're looking at the equation and saying, if we give on diversity,

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maybe we stay off the White House naughty list.

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Yeah.

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I got to say this is something for communicators that were not as as a collective, not all

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that equipped to handle very well.

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This is why for me, I think this area of corporate affairs really adds something here to

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communications.

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Because up to this point, we've been talking about their stakeholders, their customer base

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or employee base.

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But now we're talking about, you know, with tariffs that there's another group here at

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play.

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What I want to hit on here is that one of the problems I think is how we think about the

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groups that we're interacting with.

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We're going back to this idea that we have a tendency to treat everybody as a stakeholder,

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not everybody is a stakeholder.

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The general public is not a stakeholder.

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They're just an audience.

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So often when we're talking about stakeholders, it's almost like they're this all encompassing

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single entity, but not all external voices actually have a stake in target operations.

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So right now, targets responding to two key groups, those who have a stake in what target

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is doing, customer, employees and investors, and also those who target has a stake in,

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which is regulators, government entities and policy makers.

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The real challenges, aligning these two groups because they often have conflicting interests.

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Well, this brings me back to what you mentioned earlier, which is appeasement.

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And as a strategy, appeasement does not have a great track record.

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But if we look at how we got here, and we've learned over the past few weeks that access to

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Trump carries a price tag.

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That's apparently the new cost of doing business or one of them.

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And these companies may be looking at that equation as I said, going, well, with this

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approach, hopefully we don't change much in terms of our outcomes regarding diversity,

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but we nod to Trump with the optics on diversity.

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It's a really unfortunate cost-benefit analysis.

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And some companies seem to be betting that they can eventually repair their relationships

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with customers, employees, and their advocates down the line if that's the cost of staying

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on Trump's good side for now.

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It feels to me like a Hobson's choice that taking a reputational hit now, hopefully recover

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from it later.

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I think the big question, Mark, in following a strategy like that is, what you're doing is

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you're betting that if you give on something, on one thing, you won't have to give up on

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more.

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But you're also showing that you're willing to make concessions.

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So what will you be asked to give up next?

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And DEI is the MAGA bludgeon of choice right now.

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It's apparently, according to some, including in the White House, it's White California Burns,

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that's why the Fed hasn't lowered interest rates, blaming it all on diversity, and absurd

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as it sounds that is a lot of pressure for companies.

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Who to your point have a stake, and not insignificant stake in what's coming down the

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pike from Washington?

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This idea of tariffs is not something most communicators are equipped to talk about, right?

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We're used to talking about relationships and reputation, right?

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And for me, this is a very clear difference, and why they're both important, but sometimes

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it's not about reputation itself anyway, but what category you get placed in that determines

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the outcomes.

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Companies can get included or excluded from opportunities based on how they're categorized.

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I think Target saw the risk of being placed in the progress of only box, potentially excluding

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themselves from influential policy conversations.

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So being in the wrong category can close doors regardless of your actual reputation.

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I think the issue there is what category do your customers put you in, and how strongly

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are they going to react?

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We saw what happened with the pride parade in the Twin Cities immediately after Target

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made this announcement.

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I think they got put in the not-so-diversity-friendly category by their critics at least, and there

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is certainly some nuance in all of this as companies have been readjusting to your earlier

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point as they adapt.

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I think things are so fraught right now that these announcements as they're coming out and

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now activists and other people paying attention have seen a string of them over the last several

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weeks and months.

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Trump delivering on these are things he promised to do, but the executive orders still were

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shocking if not surprising once he took power.

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Although we haven't seen action on tariffs as we pointed out, I think it's heightening

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people's anxiety about all of this.

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As we mentioned earlier, people don't really know where it's going to stop.

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Some people that may seem hyperbolic, they said they were going to do this, so are we surprised?

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But tensions are high right now, and people are worried about this and many other issues.

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Steve, this is where we have to talk about the massive growth between reputational shifts

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and real-world business consequences like tariffs, tax incentives, and regulatory oversight,

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because it's one thing for Target to take a reputational hit over DEI.

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It's an entirely different thing if that reputational shift translates into economic penalties

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that impact their ability to compete.

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If you look at what happened with Walmart and Amazon, these companies secure billions in

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government incentives and subsidies and tariff advantages, not because of the reputation

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for the public, but because of their positioning with policy makers.

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Reputation with the media or your local customer base is one thing, but being on the right

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side of economic decision making is another.

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I think that's the challenge for Target because if they don't make these DEI adjustments,

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do the risk falling out of favor with the political landscape that now controls access to

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key business advantages?

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Well, if they do make them, do they alienate employees, customers and local partners

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of Philoband?

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I know that's not an easy equation, but what's clear is that corporate influence that

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he isn't just about branding, it's about maintaining leverage and policy trade and

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regulatory circles.

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Yeah, I mean, having a great reputation as a business doesn't help much if you don't have

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a business any longer.

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I think that's the calculation, maybe to an extreme, that some companies are making because

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they see, I don't know, that it's an existential threat, but they can clearly see a significant

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threat to their businesses from tariffs and other economic policies that may be being

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considered.

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They're looking to make sure that they still have a seat at the table when it comes to

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decision time.

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Yeah, I think the question is, what's the bigger business player?

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They're making a short-term, reputational concession to protect long-term economic positioning,

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because if they don't, then they lose access to all those advantages.

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It's not just about reputations, whether they can remain competitive against companies

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who are playing the game a little bit more strategically.

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Target's move right now isn't just about protecting itself, but actually about protecting

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the very communities and stakeholders that they'll excluded.

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What if this wasn't a retreat, but a strategic repositioning that allows them to continue

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supporting DEI in ways that we can immediately see?

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Because here's the reality.

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If target becomes too politically vulnerable, they can lose the ability to do anything for

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these communities.

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If staying in the progressive only category meant that they risk losing access to the decision-makers

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who control tax incentives or procurement policies or economic partnerships, then staying

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rigid on DEI messaging can actually make them less effective at advancing these goals.

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Maybe this move is about keeping the wrong-term influence intact.

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Maybe it's about ensuring that their supplier diversity programs, community investments, or

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inclusive hiring practices stay alive, even if they have to evolve the way that they

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talk about them.

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The way to win the bigger fight is not to charge straight at it, but to make sure that you're

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still in the room where the real power is being negotiated.

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That may be, but I think it's one of those situations where you're making this gesture that

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says you're still important to us and your audience reacts by saying that you've got a funny

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way of showing it.

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I think in that situation it will come down to communications.

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The calculation is, will this undermine our efforts with the people we're trying to

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appease or impress or otherwise stay on the good side of right now?

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Then, if that is the case, it wouldn't surprise me if this is the calculation at some level,

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you're making this calculation that we can come back to these folks and they will receive

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us with a warm embrace.

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That may be true, but certainly the initial reactions like we saw at the Pride Parade

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in Minneapolis and some other corners, we're going to have to see how that reaction evolves.

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You would give me pause on making that kind of calculation because you have to wonder about

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your long-term relationships and think about all the effort that you put in over many years

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to develop those and how quickly you have decided to sort of roll the dice and getting

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them back at some point in the future.

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It's going to be very interesting to see how this plays out, especially over the next

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several weeks.

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I don't know which companies might be left on Robbie Starbucks, pardon the pun, target list.

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It will be interesting to see how Costco's situation plays out with these attorneys general

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who are, I think, a fair reading of that would be that letter would be that these attorneys

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general are making threats.

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We're going to have to stay tuned on it.

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Of course, we will.

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That's our show for this week.

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We want to thank Shawn P. Neal and the PeopleForward Network for making our podcast possible.

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If you'd like to tell us what you think or if you have a topic you'd like to suggest

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for our show, we would love to hear from you.

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Our email address is podcast@ocrnetwork.com.

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Communication breakdown is a production of the Observatory on Corporate Reputation.

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I'm Steve Dowling.

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And I'm Craig Carroll.

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Thanks for listening.

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We'll be back next week.

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