Is this why you released the follow-up report Delivering through Diversity in 2018?
The motivation for the update was to give a clearer view of the status, but also of what approach and interventions really work. We are increasingly seeing companies building their own business cases, and looking at more precise performance metrics across productivity, innovation, and customer retention. The new report tackles these business cases from inside the organization and provides a perspective on how to take action to impact growth and business performance.
Similar to 2015, we defined diversity as a greater proportion of women as well as ethnically and culturally diverse individuals. We looked at a larger data set of over 1,000 companies covering 12 countries. We measured likelihood of financial outperformance using two measures – profitability using average EBIT margin, and value creation using average profit margin. We then studied 17 companies representing all major regions and multiple industries to have a more granular view of where in the organization diversity matters most. Crucially, we also focused on how leading companies have successfully harnessed the potential of inclusion and diversity to help meet their growth objectives, and what lessons there could be for other organizations.
So, your latest research reaffirms the correlation between diversity and business performance?
That’s right. The statistically significant correlation between a more diverse executive team and financial outperformance demonstrated four years ago continues to hold true on an updated, enlarged, and global data set. Companies in the top quartile for gender diversity on executive teams were 21% more likely to outperform on profitability and 27% more likely to have superior value creation.
But it’s not just gender diversity, is it?
Companies in the top quartile for ethnic and cultural diversity on executive teams were 33% more likely to have industry-leading profitability. That this relationship continues to be strong suggests that inclusion of highly diverse individuals – and the myriad ways in which diversity exists beyond gender, including neurodiversity, sexual orientation, age, or international experience – can be a key differentiator among companies.
Despite this, we found ethnic and cultural diversity on executive teams to still be relatively low. And in the case of women on executive teams, they were twice as likely to be in staff roles than in line roles, for example those most closely associated with revenue-generation, and most likely to lead to CEO.