Despite a rapidly changing business landscape, the business case for diversity, equity, and inclusion (DEI) not only holds, but grows even stronger. In our research, we continue to explore the link between diversity and holistic impact.
Diversity Matters Even More is the fourth report in a McKinsey series investigating the business case for diversity, following Why Diversity Matters (2015), Delivering Through Diversity (2018), and Diversity Wins (2020). For almost a decade through our Diversity Matters series of reports, McKinsey has delivered a comprehensive global perspective on the relationship between leadership diversity and company performance. This year, the business case is the strongest it has been since we’ve been tracking and, for the first time in some areas, equitable representation is in sight. Further, a striking new finding is that leadership diversity is also convincingly associated with holistic growth ambitions, greater social impact, and more satisfied workforces.
At a time when companies are under extraordinary pressure to maintain financial performance while navigating a rapidly changing business landscape, creating an internal culture of transparency and inclusion, and transforming operations to meet social-impact expectations, the good news is that these goals are not mutually exclusive. On the contrary, our research suggests a strong, positive relationship between them. And in an increasingly complex and uncertain competitive landscape, diversity matters even more.
For this report, the fourth edition of Diversity Matters, we drew on our largest dataset yet—spanning 1,265 companies, 23 countries, and six global regions, and multiple company interviews. We also extended our research and interview focus beyond the relationship between diversity and financial performance, for the first time exploring the holistic impact of diversity on communities, workforces, and the environment.
The most compelling business case yet
There have been far-reaching changes in the business environment over the past few years, yet, companies with diverse leadership teams continue to be associated with higher financial returns. Our expanded dataset shows this is true across industries and regions, despite differing challenges, stakeholder expectations, and ambitions.
The business case for gender diversity on executive teams1 has more than doubled over the past decade. Each of our reports—2015, 2018, 2020, and now 2023—has found a steady upward trend, tracking ever greater representation of women on executive teams. At each time point we have assessed the data, the likelihood of financial outperformance gap has grown: Our 2015 report found top-quartile companies had a 15 percent greater likelihood of financial outperformance versus their bottom-quartile peers; this year, that figure hits 39 percent (Exhibit 1). READ MORE
by by Dame Vivian Hunt, representing views from UnitedHealth Group, and Sundiatu Dixon-Fyle, Celia Huber, María del Mar Martínez Márquez, Sara Prince, and Ashley Thomas, representing views from McKinsey
Source: mckinsey.com
Less than half of leaders report that they are outstanding or exceptional at creating accountability, defined as holding everyone responsible for delivering exceptional performance. Gallup data further show that managers are even more pessimistic about their leaders’ abilities to hold teams accountable.
Despite claims of seeking change, CEO succession often prioritizes familiarity and risk aversion, leading boards to reproduce similar executive profiles. This “homosocial reproduction” limits strategic possibilities, as companies select for comfort and “legibility” over genuine transformation, hindering adaptation and strategic evolution.
A recent survey found that 65% of employees admit (the actual figure is probably higher) engaging in regular “productivity theatre”, as in performing tasks to appear busy without actually doing meaningful work. Conversely, there are those who do substantial work without formal recognition or pay.
