New research makes it increasingly clear that companies with more diverse workforces perform better financially.

See this recent report from Vivian Hunt, Dennis Layton and Sarah Prince for McKinsey & Company Publications.

Executive summary extract:

The relationship between diversity and performance highlighted in the research is a correlation, not a causal link.

This is an important distinction, but the findings nonetheless permit reasonable hypotheses on what is driving improved performance by companies with diverse executive teams and boards. It stands to reason—and has been demonstrated in other studies, as we indicate—that more diverse companies are better able to win top talent, and improve their customer orientation, employee satisfaction, and decision making, leading to a virtuous cycle of increasing returns. That in turn suggests that diversity beyond gender and ethnicity/race (such as diversity in age and sexual orientation) as well diversity of experience (such as a global mindset and cultural fluency) are also likely to bring some level of competitive advantage for firms that are able to attract and retain such diverse talent.

Moving the needle on diversity is harder than completing a typical transformation due to barriers like unconscious bias. This makes it even more important that companies have a robust transformation programme that explicitly addresses unconscious bias, and that there is visible commitment from the leadership team. This may require challenge from within or beyond the company: data-driven diversity programmes can often highlight unconscious biases that impair the exercise of good judgment throughout the organization, even when best practices are systematically followed and best intentions are assumed and exercised. However, case studies from the emerging field of behavioral economics and what is known as “nudge theory”, as well as our own experience in working with clients, provide evidence that such change is possible.

Diversity matters because we increasingly live in a global world that has become deeply interconnected. It should come as no surprise that more diverse companies and institutions are achieving better performance. Most organizations, including McKinsey, have work to do in taking full advantage of the opportunity that a more diverse leadership team represents, and, in particular, more work to do on the talent pipeline: attracting, developing, mentoring, sponsoring, and retaining the next generations of global leaders at all levels of the organisation. Given the increasing returns that diversity is expected to bring, it is better to invest now, as winners will pull further ahead and laggards will fall further behind.