Back in 2015 McKinsey ran the numbers and came up with the conclusion: Companies with more diverse leadership teams make more money.
Just to be sure, McKinsey repeated its analysis with a broader data set of 1,000 companies covering 12 countries.
The new report Delivering through Diversity reinforces the link between diversity and company financial performance.
“We observe a real relationship between diversity and performance that has persisted over time and scale, and across geographies,” the authors write.
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“There are clear and compelling hypotheses for why this relationship persists including improved access to talent, enhanced decision making and depth of consumer insight and strengthened employee engagement and license to operate.”
But this evidence-based reality has often been ignored by the c-suite, and progress on inclusion initiatives has been slow.
According to McKinsey the 346 companies included in its 2015 research (mostly based in the US and UK) have increased average gender representation on their executive teams only 2 percentage points, to 14 per cent, and ethnic and cultural diversity by 1 percentage point, to 13 per cent.
The 2018 analysis found companies in the top quartile for gender diversity on executive teams were 21 per cent more likely to outperform on profitability and 27 per cent more likely to have superior value creation.
And it’s not just gender. Companies in the top quartile for ethnic/cultural diversity on executive teams were 33 per cent more likely to have industry-leading profitability.
There’s also a penalty for blokes who only hire other blokes that look and sound like them. Companies in the bottom quartile for both gender and ethnic/cultural diversity were 29 per cent less likely to achieve above-average profitability than all other companies in McKiney’s data set.
“In short, not only were they not leading, they were lagging,” the report states.
Australia leads on gender diversity
Somewhat surprisingly Australia outperformed the US and UK in terms on the percentage of women in leadership roles.
According to McKinsey’s analysis, women hold 21 per cent of executive roles at Australian companies. That compares to 19 per cent in the US and 15 per cent in the UK.
The same holds true for board positions with Australian companies at 30 per cent, US companies at 26 per cent, and UK companies at 22 per cent, according to McKinsey’s analysis.
“The disparity among these countries is interesting, given that women’s participation in the workforce is similar in all three and given that they dominate among top performers, representing 47 per cent of the data set but more than 70 per cent of the top-quartile companies,” the report states.
UPDATE 22/01/18: According to figures from the Australian Institute of Company Directors released in December 2017, female representation across ASX 200 boards is only at 26 per cent.
The AICD’s Quarterly Gender Diversity Report tracks progress towards the Institute’s target of achieving 30 per cent female representation across ASX 200 boards by the end of 2018.