In May 2020, McKinsey and Company released a report called “Diversity Wins: How Inclusion Matters.” This report tracks current hiring practices across 1,000 large companies from 15 countries to see how inclusion and diversity (I&D) affects performance.
In this report, McKinsey was able to take the COVID-19 pandemic into consideration, evaluating how companies were able to work through the pandemic and how diversity played a role in their success.
Check out a few key highlights from the report and consider how you can apply these trends to your business. Just because you don’t operate a large-scale company doesn’t mean the information isn’t valuable to your team.
Diverse Companies Are More Likely to Outperform Their Competitors
The McKinsey diversity and inclusion study provides concrete data to support what many companies have believed for years: a more diverse workplace is a more successful one.
Companies were ranked by their diversity levels (often using representation as a key metric) and then compared to their productivity, profits, and overall performance. McKinsey found that more diversity means higher profitability. A few highlights from the research include:
- Companies with more than 30% of women on their executive teams (the top quartile) outperformed those in the bottom quartile by 48%.
- When it comes to ethnic and cultural diversity, companies in the top quartile outperformed those in the bottom by 36% in terms of profitability.
The idea that diverse teams are more profitable continues to spread. In 2017, companies in the top quartile for gender diversity only outperformed those in the bottom by 21%. The top companies in ethnic and cultural diversity outperformed others by 33% in 2017 comparatively.
There are many reasons why diversity can lead to higher profits. First, hiring employees from different backgrounds leads to different perspectives and unique input for optimal solutions. You have a larger pool of ideas and viewpoints because of your diverse team.
Additionally, when employees work in a more diverse environment, they are more likely to make themselves heard. Good ideas from women aren’t ignored by a “boys club,” while ethnically diverse workers feel safer speaking up and are more likely to be given leadership roles. Not only are more ideas shared, but engagement and morale increases, driving up productivity.
The Gap in Diversity Within Companies is Growing
Despite the data proving that more diverse teams are also more productive and profitable, the majority of companies haven’t made any meaningful gains to increase I&D efforts. Only a third of companies really took active steps to increase diversity within executive teams, while 50% of companies made little to no progress.
McKinsey placed companies in 5 different categories to label their progress: diversity leaders, fast movers, resting on laurels, moderate movers, and laggards.
Additionally, the survey found that diversity doesn’t always mean inclusion. While more than half (52%) of employees view their employers in a positive light when it comes to diversity, 61% view their employees in a negative light when it comes to inclusion. This gap shows that just because someone has a seat at the table doesn’t mean his or her voice is actually heard or valued.
COVID-19 Was a Test of Workplace Diversity
The coronavirus pandemic will likely end up being a key indicator of which companies took their I&D efforts seriously. The survey developers speculated that diversity efforts would be placed on hold during the pandemic as teams went into crisis mode and may have been reversed as companies reprioritized. However, they found that diversity helped many organizations work through the pandemic and navigate challenges successfully.
“Companies whose leaders welcome diverse talents and include multiple perspectives are likely to emerge from the crisis stronger,” the survey authors write. “In short: diversity wins, now more than ever.”
In fact, this report was originally supposed to be released in March 2020. However, the researchers held on to the data through the pandemic to see how the crisis would play out and continue to collect insights from companies on their diversity efforts and corporate success.
Inclusion Requires Bold Actions From Companies
Improving diversity and inclusion isn’t as simple as adjusting hiring practices. Teams need to make I&D an essential part of their daily work habits. A few action items that McKinsey and Co. recommend include:
- Tackle microaggressions, which are just as harmful as bullying, harassment, and exclusionary behavior.
- Enable equitable opportunities through fairness and transparency. Take steps to reduce bias—even unconscious bias—in promotions and hiring.
- Hold leadership accountable for prioritizing I&D. Make these efforts essential at all levels, from the executive team to junior leadership.
Promoting I&D efforts isn’t a focus that companies can rush through in a quarter or a year to meet HR requirements. The businesses that make diversity and inclusion part of their core values and long-term culture will have more success and financial sustainability in the long run than those that tokenize or exclude team members. Companies need to actively work toward a more inclusive workplace, not passively assume its diversity levels are acceptable.