Diversity Counts

Adapted From: McKinsey | Vivian Hunt

“New research makes it increasingly clear that companies with more diverse workforces perform better financially.”  Authors Vivian Hunt, Dennis Layton, and Sara Prince reported this finding recently.

They found that diversity is the probable competitive differentiator that shifts market share toward more diverse companies over time.

More diverse companies are believed to be more able to win top talent and improve their customer orientation, employee satisfaction, and decision making.  Also, a global mind-set and cultural fluency are likely to bring some level of competitive advantage for companies that can attract and retain such diverse talent.

Research covering some 366 public companies across a range of industries in Canada, Latin America, the United Kingdom, and the United States, suggests that diversity correlates with better financial performance.

“In the United States, there is a linear relationship between racial and ethnic diversity and better financial performance: for every 10 percent increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes (EBIT) rise 0.8 percent.”

“In the United Kingdom, greater gender diversity on the senior-executive team corresponded to the highest performance uplift in our data set: for every 10 percent increase in gender diversity, EBIT rose by 3.5 percent.”

Even as the case for greater diversity becomes more compelling, more work has to be done. We live in a deeply connected and global world and more diverse companies and institutions are achieving better performance.

Organizations should take full advantage of the opportunity that diverse leadership teams represent such as talent pipelines: attracting, developing, mentoring, sponsoring, and retaining the next generations of global leaders at all levels of organizations.

It is better to invest now given the higher returns that diversity is expected to bring.

“We all want something to offer. This is how we belong. It’s how we feel included. So, if we want to include everyone, we have to help everyone develop their talents and use their gifts for the good of the community. That is what inclusion means—everyone is a contributor. And if they need help to become a contributor, then we should help them, because they are full members in a community that supports everyone.”—Melinda Gates