Why diversity matters

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

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February 17, 2015 |
Steven Burns
Why diversity at work matters

In the U.S., there is a linear relationship between racial and ethnic diversity and better financial performance, a study by McKinsey found. Photo: Monisha Pushparaj/Wikimedia Commons

New research from McKinsey makes it increasingly clear that businesses with more diverse workforces perform better financially.

The report discovered 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. Companies in the bottom quartile in these dimensions are statistically less likely to achieve above-average returns. And diversity is probably a competitive differentiator that shifts market share toward more diverse companies over time.

“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,” writes co-authors Vivian Hunt, Dennis Layton, and Sara Prince. “This in turn suggests that other kinds of diversity—for example, in age, sexual orientation, and experience (such as a global mind-set and cultural fluency)—are also likely to bring some level of competitive advantage for companies that can attract and retain such diverse talent.”

McKinsey’s latest report examined data for 366 public companies across a range of industries in the U.S., Canada, Latin America, and the United Kingdom. Here are a few highlights:

  • 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. 
  • In the U.S., there is a linear relationship between racial and ethnic diversity and better financial performance.
  • Racial and ethnic diversity has a stronger impact on financial performance in the U.S. than gender diversity.
  • While certain industries perform better on gender diversity and other industries on ethnic and racial diversity, no industry or company is in the top quartile on both dimensions.

Read more from McKinsey

Steven Burns | The Business Behind Design

Steven Burns, FAIA spent 14 years managing the firm Burns + Beyerl Architects, and during that time the firm’s earnings grew at an average rate of 24% per year. After founding his own software company, Steve took his management expertise to BQE Software, where he is refining their business strategy and product development for the company’s groundbreaking project accounting solution, BQE Core.

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