That a company with more diverse representation in senior management will likely achieve greater profits is not breaking news. Those realities came to light in a 2015 report from McKinsey & Company, and in another, a year later, from the Peterson Institute for International Economics.
Compounding these findings is another report from McKinsey, a management consulting firm, titled “Delivering Through Diversity,” released last week, which shows that gender diversity in management positions actually increases profitability more than previously thought. In the firm’s previous analysis, companies in the top 25th percentile for gender diversity on their executive teams were 15% more likely to experience above-average profits. The latest data shows that likelihood has grown to 21%.
Diverse companies are more likely to achieve above-average profits.McKinsey and Company
When it comes to gender-diverse boards of directors, data on increases in profitability vary by region and company health—though firms within the U.S. and the U.K. show gender diversity to be a plus for profits, but not by much. According to McKinsey, the varying results in different regions could be a result of differences in government-mandated board gender quotas (which might dilute personnel quality), and the power that boards in different nations have to drive financial performance.
But gender is not the only side of the story. Companies with more culturally and ethnically diverse executive teams were 33% more likely to see better-than-average profits. In McKinsey’s previous study—conducted with 2014 numbers—that increase had been 35%. At the board of directors level, more ethnically and cultural diverse companies were 43% more likely to see above-average profits, showing a significant correlation between diversity and performance.
In compiling its report, McKinsey used publicly available information from 1,007 companies located in 12 different nations located in North and Latin America, Europe, Asia/Pacific and Sub-Saharan Africa. The data was collected between December 2016 and November 2017. Financial data came from the Corporate Performance Analytics database by McKinsey and S&P Global.
Disparities and High Points
McKinsey’s report suggests that diversity is lacking among the 1,000-plus companies it analyzed. Among U.S.-based firms, Black Americans held only 4% of senior executive positions, despite the fact that they represent 10% of all university graduates in the country. Hispanics and Latinos—8% of college graduates—also held 4% of all senior executive positions at U.S.-based companies in the study. Asian Americans held 5% of those types of roles, while representing 7% of college grads.
In the U.K., according to McKinsey’s findings, Black and Minority Ethnic people make up 22% of all university graduates, yet among the U.K. companies in the study only 8% of all executive roles were held by members of that group.
White females make up about 70% of women in executive roles among U.S. companies in McKinsey’s analysis.McKinsey and Company
In the U.S., women of color represented the smallest portion of executive roles, with Black, Hispanic and Asian women making up roughly 30% of all female-held executive jobs. White women made up the other 70%.
By country, Australia had the largest share of women in executive roles, at 21% among all the firms included in McKinsey’s analysis, and 30% representation among board members. Women made up 19% of executive roles at U.S. firms, and 26% of board positions. In the U.K., women held 15% of executive jobs and 22% of board seats.
Source: Forbes,