Workplace Diversity And Why It Matters | SupportBiz

Human Resources

Workplace Diversity And Why It Matters

Greater gender and ethnic diversity in corporate leadership doesn’t automatically translate into more profit

Workplace diversity has been a much debated topic in recent times, especially in the technology industry which has wrestled with diversity over the past year, following the disclosures by big companies including Google, Apple and Intel, among others, that their workforces are dominated by men, and often white men. While diversity in business offers a more open culture and promotes humanitarian values, a recent research makes it increasingly clear that companies with more diverse workforces also perform better financially.

A McKinsey report reveals that companies in the top quartile for gender or racial and ethnic diversity are more likely to have financial returns above their national industry medians. Moreover, it states diversity as competitive differentiator that shifts market share toward more diverse companies over time.

While correlation does not equal causation or in other words, greater gender and ethnic diversity in corporate leadership doesn’t automatically translate into more profit, the correlation does indicate that when companies commit themselves to diverse leadership, they are more successful, says the report.

“More diverse companies, we believe, are better able to win top talent and improve their customer orientation, employee satisfaction, and decision making, and all that leads to a virtuous cycle of increasing returns. As a result, they are also likely to bring some level of competitive advantage for companies that can attract and retain such diverse talent,” says Vivian Hunt a director in McKinsey and co-author of the report.

McKinsey in this research, looked at metrics such as financial results and the composition of top management and boards.1 Some of the findings include:

Companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians.

Companies in the top quartile for gender diversity are 15 percent more likely to have financial returns above their respective national industry medians.

Companies in the bottom quartile both for gender and for ethnicity and race are statistically less likely to achieve above-average financial returns than the average companies in the data set (that is, bottom-quartile companies are lagging rather than merely not leading).

The research also shows racial and ethnic diversity has a stronger impact on financial performance in the United States than gender diversity, perhaps because earlier efforts to increase women’s representation in the top levels of business have already yielded positive results.

According to the authors, we’re not suggesting that achieving greater diversity is easy. Women—accounting for an average of just 16 percent of the members of executive teams in the United States, 12 percent in the United Kingdom, and 6 percent in Brazil—remain underrepresented at the top of corporations globally. The UK does comparatively better in racial diversity, albeit at a low level: some 78 percent of UK companies have senior-leadership teams that fail to reflect the demographic composition of the country’s labor force and population, compared with 91 percent for Brazil and 97 percent for the United States.

These numbers underline the work that remains to be done, even as the case for greater diversity becomes more compelling.

Despite the buzz and efforts in this ares, workplace diversity advocates believe a lot remains to be done in this area. For example, they believe the tech industry’s hiring efforts iself remain abysmal. At Twitter, only 10 percent of tech jobs in its global workforce belong to women. Among its U.S. employees, just 4 percent of those lucrative positions are filled by black or Latino people. Data also shows the numbers aren’t much different at places like Facebook, Google and Yahoo. Even Apple, which can point to above-average diversity, still counts just 20 percent of its tech hires as female, and black or Latino workers make up only 13 percent.

Public awareness of this disparity has been growing since these and many other tech firms — under pressure from diversity advocates — began releasing employee data last summer. Promises to do better are being followed up with financial commitments. In January, Intel announced a $300 million five-year effort to increase diversity. Apple, at its recent iWatch launch, announced a multiyear $50 million partnership with nonprofits aimed at identifying and supporting women and minorities pursuing computer science majors. Google too has offered college scholarships to high school and undergraduate female, black, Latino and Native American students interested in computer science or engineering degrees.

Vivian and his co-authors state, as we live in a deeply connected and global world, it should come as no surprise that more diverse companies and institutions are achieving better performance. Going beyond hiring diverse employees, companies should be attracting, developing, mentoring, sponsoring, and retaining the next generations of global leaders at all levels of organizations. “Given the higher returns that diversity is expected to bring, we believe it is better to invest now, since winners will pull further ahead and laggards will fall further behind,” he sums up.

(This article was first published on