We've known for a long time that strong diversity and inclusion within companies is a powerful enabler of business performance. But new research from McKinsey shows that companies whose leaders welcome diverse talents and include multiple perspectives are likely to emerge from the pandemic crisis stronger. If companies deprioritize D&I during the crisis, the impact will be felt not just on the bottom line but will exacerbate inequalities in the long term.
McKinsey's latest research entitled Diversity Wins is the third in a series of reports investigating the business case for diversity. Its findings reaffirm the correlation between diversity in the leadership and financial outperformance; however, more crucially, it reveals that the current rate of progress has been too slow. Since 2017, female representation on executive teams has only increased on average 0.5 percentage points per year.
Topline findings include:
1. A Systemic, Business-Led Approach to D&I Works
Looking at the difference in numbers since when McKinsey pulled the first data set in 2014 (used in the 2015 report, Why Diversity Matters), it's clear that some companies are making real headway in boosting diversity, while others are stalled or even slipping backward. The "diversity winners" have made the progress they have by adopting systematic, business-led approaches that actively pursued:
- Ensuring the representation of diverse talent.
- Strengthening leadership accountability and capabilities for D&I.
- Enabling equality of opportunity through fairness and transparency.
- Promoting openness and tackling microaggressions.
- Fostering belonging through unequivocal support for multivariate diversity.
2. Change is Slow
U.S. executive teams will take another 29 years to reach gender parity and 24 years to reach fair share based on current representation growth rates:
- The average female representation on executive teams is 21%
- 90% of companies have at least one female on their executive team
Overall, while leadership diversity has been improving, North America has been progressing slower than global for:
- Gender on boards (0.04% vs global 1.54%)
- Ethnic diversity on boards (0.91% vs global 3.20%)
- Gender on executive teams (0.58% vs global 0.64%)
- Ethnic diversity on executive teams (0.64% vs global 2.68%)
3. The Link Between Strong D&I and Business Performance is Growing
- The likelihood of financial outperformance is even stronger than what is observed with 2019 global averages for gender and ethnic diversity on executive teams:
- Gender, executives - U.S. at 38% vs Global at 25%
- Ethnic, executives, U.S. at 48% vs Global at 36%
True diversity and inclusion means empowering employees and job seekers by respecting, embracing, and even celebrating, what makes them different. Businesses must stay alert to bias and unfair practice within the workplace and provide clear channels of communication for employees that may be unfairly discriminated against.
Learn more about Diversity and Inclusion in the Workplace.