THE BUSINESS CASE
The Data
Studies show diverse organizations perform better.
Supporting diversity and inclusion positively impacts employee retention and belonging. But it also drives performance across the company.
In a study by Harvard Business Review, diverse companies were 70 percent more likely to expand their reach to new markets compared to companies that didn’t actively source diverse candidates. Additionally, the research highlighted that the diverse companies were 45 percent more likely to grow in market share. Harvard Business Review’s research isn’t the only study asserting that diverse companies do better than others.
In a 2019 McKinsey study, diverse companies were 25 percent more likely to have above-average profitability. The research reveals that they perform better because they have different perspectives and sources of tacit knowledge. More voices are heard in these companies.
The greater the representation, the higher the likelihood of outperformance. Companies with more than 30 percent women executives were more likely to outperform companies where this percentage ranged from 10 to 30, and in turn these companies were more likely to outperform those with even fewer women executives, or none at all. A substantial differential likelihood of outperformance—48 percent—separates the most from the least gender-diverse companies.
In the case of ethnic and cultural diversity, our business-case findings are equally compelling: in 2019, top-quartile companies outperformed those in the fourth one by 36 percent in profitability, slightly up from 33 percent in 2017 and 35 percent in 2014. As we have previously found, the likelihood of outperformance continues to be higher for diversity in ethnicity than for gender.
Yet progress, overall, has been slow. In the companies in our original 2014 data set, based in the United States and the United Kingdom, female representation on executive teams rose from 15 percent in 2014 to 20 percent in 2019. Across our global data set, for which our data starts in 2017, gender diversity moved up just one percentage point—to 15 percent, from 14—in 2019. More than a third of the companies in our data set still have no women at all on their executive teams. This lack of material progress is evident across all industries and in most countries. Similarly, the representation of ethnic minorities on UK and US executive teams stood at only 13 percent in 2019, up from just 7 percent in 2014. For our global data set, this proportion was 14 percent in 2019, up from 12 percent in 2017.
Sourced from McKinsey & Company
Deloitte reports that companies with solid DE&I cultures “are twice as likely to meet or exceed financial targets as those without, three times as likely to be high-performing, six times more likely to be innovative and agile, and eight times more likely to achieve better business outcomes.”
Sourced from Deloitte
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