V Hunt, S Prince, S Dixon-Fyle, L Yee – McKinsey & Company Report – January 2018
This new research report by McKinsey is a follow-up to their 2015 report “Why Diversity Matters” and extends the mounting body of evidence supporting diversity as a means to better organisational performance. Significantly it is an attempt to determine whether the perceived benefits of diversity are simply localised phenomena or whether they are more generalised benefits which apply regardless of where an organisation is situated. The 2018 report expanded in scope and numbers on the 2015 report and while the earlier report had found statistical evidence showing that diversity had financially beneficial effects the later report shows that the benefits are even larger.
The report is divided into two distinct parts. The first is to assess whether diversity in organisations can be shown to be of benefit regardless of a country’s ethnic makeup, its geographical situation and its state of economic development. Data was drawn from more than 1000 companies in 12 countries.
The report first measured both profitability and value creation in relation to the degree of gender diversity. It found a positive correlation between gender diversity at executive level and both profitability as well as value creation; a 21% difference in profitability between most diverse and least and 27% when it comes to value creation.
The difference is even more emphatic when ethnic diversity is considered. When executive teams are more ethnically diverse organisations are 33% more likely to outperform their peers( no figures are given with respect to value creation).
The noteworthy conclusion is that both gender diversity and ethnic diversity are correlated with better financial performance across geographic regions, although there are some variations between different countries. However, the report also notes that in all the countries surveyed there remain substantial challenges to achieving meaningful diversity goals with regard to both gender and ethnicity.
The second part of the Report focuses on the now widely accepted proposition that both inclusion and diversity are necessary and complementary ingredients for businesses to achieve long-term benefits.
It sets out 4 imperatives for a coherent and successful inclusion policy.
- Articulate and cascade CEO commitment
- Define inclusion and diversity priorities
- Craft a portfolio of D&I initiatives
- Tailor the strategy to maximise local impact
The authors of the report conclude that there is ample evidence to show strong correlations across the globe between gender, ethnic and cultural diversity and better financial outcomes. They concede that it is a hard road to achieving sustained diversity and inclusion but for those companies and their leadership willing to undertake the task, benefits will undoubtedly accrue.
Read the full report: Delivering Through Diversity