For years, many companies—and their Chief Diversity Officers in particular—have struggled to make Diversity and Inclusion something more than simply “the right thing to do.” It necessitated the creation of a strong, positive business case while still existing in the realm of possibilities. Any number of studies have attempted to monetize the benefits of a strong culture of diversity and inclusion; I find McKinsey’s recent findings of particular interest.
In 2015, McKinsey first reported the strong, positive impact of gender diversity on profitability and value creation. In their updated 2017 dataset, they found companies with executive-level gender diversity had a 21% likelihood of outperforming their industry peers on EBIT margin, and a 27% likelihood of outperforming industry peers on longer-term value creation. The key is having women in executive, line roles where the bulk of strategic and operational decisions are made.
McKinsey’s 2017 findings indicate top-team ethnic and cultural diversity is strongly correlated with profitability. Companies with the most ethnically-diverse executive teams—not only with respect to absolute representation but also of variety or mix of ethnicities—are 33% percent more likely to outperform their peers on profitability. At the Board of Directors level, the impact is even more significant where outperformance versus peers is 43%. Thus, there is a strong, significant financial penalty for a lack of gender and ethnic diversity.
Can your company afford to financially underperform by a third of your profits?