Yahoo Finance Anti-Israel student protests putting ‘handbrake’ on corporate diversity spending, says MindGym
Anti-Israel student protests on university campuses and Ron DeSantis’s so-called war on woke have put a “sudden handbrake” on corporate diversity spending, the boss of MindGym has said.
MindGym, a workplace training company hired by FTSE 100 and S&P 100 companies, said that a “material decline” in clients spending on diversity, equality and inclusion initiatives triggered a slump in its revenues.
Shares slumped by as much as 32pc in early trading, wiping £11m off its market cap. It later recovered much of these losses but still closed almost 12pc lower at 34p.
The company said a “change in priorities” among its clients contributed to a 18pc decline in revenue to £44.9m during the year to March.
Octavius Black, chairman of MindGym, said that the decline was driven by its US operations following political upheaval during the past year.
He pointed to the backlash faced by Harvard University president Claudine Gay after she was accused of mishandling anti-Semitism on its college campus following the October 7 attacks in Israel.
Ms Gay, who was the second woman and first black person to lead the elite university, stepped down in January after just six months in the role after being criticised for her attitude towards anti-Israel protests and treatment of Jewish students.
Critics have also questioned whether her appointment focused more on meeting an ethnic and gender diversity agenda rather than academic rigour.
Mr Black also cited the US Supreme Court’s decision to end affirmative action in college admissions and Ron DeSantis’s war on “woke” ideology.
MindGym, which has included Microsoft, Unilever and GSK among its clients, was co-founded by Mr Black, who attended Eton with former prime minister David Cameron.
Company bosses are increasingly questioning the value of diversity initiatives as soaring wage bills and other costs focus attention elsewhere.
In March, a report by Inclusion at Work Panel, an independent group of private and public sector experts, found that many of so-called ESG practices, including diversity training, had little to no tangible impact in increasing diversity or reducing prejudice.
Kemi Badenoch, the Business Secretary, who commissioned the report said that many of the diversity and inclusion initiatives had been “counterproductive” despite millions of pounds spent by businesses.
Mr Black said training programmes related to white privilege and gender identity – which are not offered by MindGym – are “counterproductive” and that unconscious bias training doesn’t work.
He said: “We don’t think that is the best way to address this challenge because the risk is that all those programmes create backlash and a backfire effect.”
He added that companies have “gone with the fad rather than the facts” by rolling out diversity and inclusion policies in response to activist employees and clients wanting to avoid social media attacks.
The diversity drive among employers in the UK has been “polarising”, Mr Black said, and that political debates should be restricted to out-of-work hours.
He added: “Do you want your employees out on campaigns, marching the streets, or getting people to sign a petition? Absolutely.
“Those are the kind of people you want to hire: they’re keen, enthusiastic, they take action. But do you want that to happen at work where there’s a variety of views? You probably don’t.”
MindGym on Monday also blamed its poor performance on increased caution around how human resources (HR) departments spent their budgets.
Mr Black said: “Business leaders are giving greater scrutiny to HR investments which has extended buying cycles and in some cases recalibrated overall spend.
“For example, during the year we won a number of large projects only for our HR client to then discover that their budget had been altered and so the scope needed to be reduced or the programme postponed.”
MindGym noted that businesses now require more stakeholders to sign-off on HR budgets and want to see more evidence about the feasibility of projects before signing off on them.
The entrepreneur also said that MindGym is now operating in a more “crowded market” for its consultancy services after record investment in HR platforms and technology.
Mr Black said: “While clients are increasingly disenchanted with the low employee take-up and negligible impact of many of these new platforms, this temporary growth in new offers increased competition for HR budgets.”
MindGym said that it was required to launch a “significant cost reduction programme” as a result of its revenue slump, cutting annual spending by £11m.
This included stopping spending on its digital products, which led to an impairment charge of £6.6m during the period. MindGym also recorded a £1.8m in staff restructuring costs after cutting about 100 roles.
This helped narrow losses and restored the company’s balance sheet during the second half of its “challenging” financial year, according to accounts published on Monday.
MindGym swung to £12.1m in losses in 2023 to 2024 from £3m in pre-tax profits in the previous year. Its gross profit margin dipped by 220 basis points to 86.2pc.
Mr Black said that MindGym will likely focus less on diversity, equity and inclusion and instead do more work advising businesses how they can improve performance, leadership and productivity using evidence-based practices.
The 56-year-old is now executive chairman of MindGym, having been replaced as chief executive by Christoffer Ellehuus, former Korn Ferry boss, in April.
Mr Ellehuus said that it will “take time” before MindGym sees the benefits of its new strategy, which will include simplifying its offering to clients.
The company, which uses 300 self-employed coaches worldwide to deliver its training programmes, uses behavioural science to help companies to improve how they operate.
