Four reports released by McKinsey over an eight-year period suggest that the business case for diversity, equity, and inclusion (DEI) is stronger than ever.
Diversity Matters Even More is the latest report from the leading consultancy, and builds on Why Diversity Matters (published in 2015), Delivering Through Diversity (2018), and Diversity Wins (2020).
Tracking progress and impact over this period shows that the business case for DEI is the strongest it has been, with genuine and meaningful progress made.
Now McKinsey says the new report reveals that leadership diversity is strongly linked with growth ambitions, greater social impact, and more satisfied workers.
The report says that at a time when companies are under pressure to maintain financial performance in difficult economic times, creating a culture of transparency and inclusion, and focussing on social impact can actually help deliver that performance.
Diversity Matters Even More is an extensive and comprehensive snapshot of the state of DEI, with interviews and insights from 1,265 companies in 23 countries contributing.
As well as analysing the relationship between diversity and financial performance, this is the first time McKinsey has also examined the holistic impact of diversity on the environment, local communities, and workers.
Highlights from the report include the business case for gender diversity on executive teams has more than doubled since 2015. McKinsey points to the financial outperformance gap, with the top-quartile companies in 2015 when it comes to gender diversity having a 15% likelihood of greater success. In 2023, that figure reached 39%.
Similar trends are seen when it comes to ethnic diversity. However, there is still a lack of ethnic representation on executive teams, and the progress made is slowing.
Five strategies for diversity transformation
Based on findings from its four diversity reports, McKinsey has conducted a deep dive into the diversity data, and also conducted company interviews to gain insights from diversity leaders.
These interviews revealed five strategies to turn words into action:
- Commit to a systematic, purpose-led approach to benefit all stakeholders. Companies should frame and pursue their DEI aspirations as core to their mission and embedded into their strategic goals.
- Embed your strategy in company-wide business initiatives while tailoring to local context. While DEI strategy is typically shaped at the top, giving local teams license to tailor to local contexts is key to building ownership and local impact.
- Prioritise belonging and inclusive practices to unlock performance. Diverse representation will have the most impact within a culture that fosters inclusion and belonging.
- Embolden and activate champions and allies by providing adequate resources and support.
- Act on feedback, including dissenting voices. A culture of feedback on DEI strategy from the workforce and wider stakeholders can provide valuable insights, identifying both strengths and opportunities for change.
In summary, despite a challenging business environment, McKinsey says the business case for diverse leadership teams is clear and growing stronger. The latest report also shows a significant link between diverse leadership and better scores on environmental and social measures.
Companies should move beyond simply increasing diverse representation to integrating DEI in a purpose-driven approach to drive positive impact.