We focused on our US and UK data sets to examine ethnically and culturally diverse representation among US and UK companies, considering the pipeline starting with university graduates. Now, as previously, companies in the fourth quartile on both gender and ethnic diversity are more likely to underperform their industry peers on profitability: 29 percent in our 2017 data set.Įthnic and cultural diversity on executive teams is low. The penalty for not being diverse on both measures persists. Yet these top-quartile companies also have a greater proportion of women in line roles than do their fourth-quartile peers: 10 percent versus 1 percent of total executives, respectively (Exhibit 3). In our data set, this holds true even for top-quartile gender-diverse companies experiencing above-average financial performance. We know from research, such as our Women in the Workplace 2017 report, that women are underrepresented in line roles. We tested the hypothesis that having more women executives in line roles (typically revenue generating) is more closely correlated with financial outperformance. We found that having gender diversity on executive teams, specifically, to be consistently positively correlated with higher profitability across geographies in our data set, underpinning the role that executive teams-where the bulk of strategic and operational decisions are made-play in the financial performance of a company.Įxecutive teams of outperforming companies have more women in line roles versus staff roles. For ethnic and cultural diversity, the 2014 finding was a 35 percent likelihood of outperformance, comparable to the 2017 finding of a 33 percent likelihood of outperformance on EBIT margin both were also statistically significant (Exhibit 1).įor gender, the executive team shows the strongest correlation. In our expanded 2017 data set this number rose to 21 percent and continued to be statistically significant. In the original research, using 2014 diversity data, we found that companies in the top quartile for gender diversity on their executive teams were 15 percent more likely to experience above-average profitability than companies in the fourth quartile. Diversity and financial performance in 2017 The new analysis expands on our 2015 report, Why diversity matters, by drawing on an enlarged data set of more than 1,000 companies covering 12 countries, measuring not only profitability (in terms of earnings before interest and taxes, or EBIT) but also longer-term value creation (or economic profit), exploring diversity at different levels of the organization, considering a broader understanding of diversity (beyond gender and ethnicity), and providing insight into best practices. Our latest study of diversity in the workplace, Delivering through diversity, reaffirms the global relevance of the link between diversity-defined as a greater proportion of women and a more mixed ethnic and cultural composition in the leadership of large companies-and company financial outperformance. And companies are still uncertain about how they can most effectively use diversity and inclusion to support their growth and value-creation goals. Yet progress on diversification initiatives has been slow. While social justice typically is the initial impetus behind these efforts, companies have increasingly begun to regard inclusion and diversity as a source of competitive advantage, and specifically as a key enabler of growth. Awareness of the business case for inclusion and diversity is on the rise.
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