According to the 2018 McKinsey Report, “Delivering through Diversity,” the consulting firm discovered that the more diverse (defined as a greater proportion of women and racially ethnic make up in the leadership of large companies) the executive team, the better their financial performance.
The methodology of the study included analyzing the profits and value created by more than 1,000 companies in 12 countries. The top 25 percent of companies with strong gender diversity were 21 percent more likely to see above-average profits than companies in the bottom quarter. Even more compelling was that the companies that were more racially diverse had a 33 percent likelihood of financially outperforming other companies, both were statistically significant.
Digging deeper into the correlation (not causation) discovered by McKinsey between having racially mixed executive teams and better financials we know that Black Americans make up about 10 percent of U.S. graduates but only comprise 4 percent of senior-executive roles. Hispanics make up roughly 8 percent of American graduates and yet still only occupy 4 percent of top-level executive positions. In the United Kingdom, the disparities increase. College graduates who identify as Black were 22 percent, but only occupy 8 percent of U.K. executive roles.
So what drives this correlation? McKinsey believes that more diverse companies can attract top talent, better understand their customers, improve employee engagement and decision-making and obtain a license to do business in targeted locale.