Delivering through diversity
The Delivering Through Diversity report by McKinsey & Company reaffirms the global relevance of the link between diversity—defined as a greater proportion of women and a more mixed ethnic and cultural composition in the leadership of large companies—and company financial outperformance.
In this report, the data analysis measures not only profitability (in terms of earnings before interest and taxes, or EBIT) but also longer-term value creation (or economic profit), exploring diversity at different levels of the organisation, considering a broader understanding of diversity (beyond gender and ethnicity), and providing insight into best practices.
The report expands on the 2015 report, Why Diversity Matters, drawing on an enlarged data set of more than 1,000 companies covering 12 countries.
- The statistically significant correlation between a more diverse leadership team and financial outperformance demonstrated three years ago continues to hold true on an updated, enlarged, and global data set.
- Companies in the top-quartile for gender diversity on executive teams were 21% more likely to outperform on profitability and 27% more likely to have superior value creation. The highest-performing companies on both profitability and diversity had more women in line (i.e., typically revenue-generating) roles than in staff roles on their executive teams.
- Companies in the top-quartile for ethnic/cultural diversity on executive teams were 33% more likely to have industry-leading profitability. That this relationship continues to be strong suggests that inclusion of highly diverse individuals – and the myriad ways in which diversity exists beyond gender (e.g., LGBTQ+, age/generation, international experience) – can be a key differentiator among companies.
- The penalty for bottom-quartile performance on diversity persists. Overall, companies in the bottom quartile for both gender and ethnic/ cultural diversity were 29% less likely to achieve above-average profitability than were all other companies in our data set. In short, not only were they not leading, they were lagging.
- On gender, while there is plenty more to do, some companies lead the way in both absolute average diversity and representation in top-quartile – Australia, UK, and US companies make up over 70% of this group. On ethnicity, there is less global progress, but South African and Singaporean companies have a higher representation in the top-quartile versus overall representation in data set, suggesting material progress on ethnic diversity.
- Executive summary
- Diversity and financial performance in 2017
- Diversity around the world
- Delivering impact through I&D
- About the authors
This report was originally published by McKinsey & Company.