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More evidence that company diversity leads to better profits

By January 12, 2022No Comments

​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%.

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.