Study: Is There A Payoff From Top-Team Diversity? (McKinsey 2012, Thomas Barta, Makus Kleiner, Tilo Neumann)
Finding: Companies with diverse executive boards have notably higher earnings and returns on equity.
InPower Insight: Increase the diversity of your executive top-team to increase your company financially.
Good news if you’re a company looking to increase your financial performance and/or returns on equity – invite more diverse team into your C-Suite and top executive slots. This study by McKinsey demonstrates that companies with greater executive diversity (both gender and cultural) enjoy greater financial performance and returns on equity.
Researchers Thomas Barta, Markus Kleiner and Tilo Neumann did a thorough study of 180 publicly traded companies in France, Germany, The United Kingdom and The United States from 2008 – 2010, focusing objectively on two diversity categories (women and foreign nationals) on senior teams. The results of this study were astounding and more importantly, consistent. For companies in the top quartile of executive-board diversity, returns on equity (ROE) were on average 53% higher, and the earnings before interest and taxes (EBIT) were an average of 14% higher. France was the only country who’s ROE was not consistent with the other country’s results, and yet their EBIT was up 50% from non-diverse companies.
Demonstrating that strategic intent to diversity leadership works, one of the companies that ranked in the top quartile for diversity and performance has made diversity a strategic goal by doing things such as setting hard targets for increasing the number of women in management. Their percentage of women in management is up from 21% three years ago to 30% today, with a goal of 35% by 2015.
The McKinsey researchers are showing that companies that strive to pursue top team diversity and make it a best practice, are likely to see increases on their financial performance and returns on equity.
Career Coaching Tip: These findings are useful for any manager or leader looking to increase the productivity of their team. Diverse teams, in terms of gender, culture, leadership styles and ways of problem-solving produce better business results. Look at the teams reporting to you. How diverse are they? What can you do to diversify? Better team results make you look better. Share this information with others in your firm responsible for hiring.
Keywords: gender impact on business, diversity, women executives, women leaders, women in business, mckinsey, return on equity, earnings before interest and taxes, ROE, EBIT, c-suite