Despite growing recognition of the importance of Diversity, Equity, and Inclusion (DEI) initiatives in modern workplaces, the integration of physically disabled employees and its broader implications remain under-explored. This paper investigates the complex dynamics of disability-inclusion initiatives within organizations, particularly focusing on their impact on non-disabled coworkers’ productivity and the role of frontline managers’ managerial capacity. Utilizing a mixed-method approach that combines natural experiments and semi-structured interviews, we provide nuanced insights into the unintended productivity implications of DEI policies concerning physically disabled individuals. We find that although companies walk the talk, they are walking the tightrope. Specifically, our findings reveal a paradox: while frontline managers support disability-inclusion initiatives, limited managerial capacity leads to a reallocation of resources, inadvertently affecting the productivity of non-disabled employees. This effect is particularly pronounced among underperforming employees but is mitigated under female supervisors, who tend to prioritize performance feedback and focus on supporting subordinates’ negative emotion management rather than boosting the morale. Our study contributes to the limited body of DEI literature on physical disability by examining productivity implications for coworkers and advancing the understanding of gender and leadership effectiveness in the context of disability-inclusion. The insights gained offer valuable policy implications for business practitioners seeking to navigate the challenges of integrating physically disabled employees without compromising overall productivity.