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https://www.mckinsey.com/business-functions/organization/our-insights/delivering-through-diversity https://www.mckinsey.com/business-functions/organization/our.

https://www.mckinsey.com/business-functions/organization/our-insights/delivering-through-diversity https://www.mckinsey.com/business-functions/organization/our... > Gender diversity is correlated with both profitability and value creation. In our 2017 data set, we found a positive correlation between gender diversity on executive teams and both our measures of financial performance: top-quartile companies on executive-level gender diversity worldwide had a 21 percent likelihood of outperforming their fourth-quartile industry peers on EBIT margin, and they also had a 27 percent likelihood of outperforming fourth-quartile peers on longer-term value creation, as measured using an economic-profit (EP) margin (Exhibit 2). > Top-team ethnic and cultural diversity is correlated with profitability. In our 2017 data set, we looked at racial and cultural diversity in six countries where the definition of ethnic diversity was consistent and our data were reliable.1 As in 2014, we found that companies with the most ethnically diverse executive teams—not only with respect to absolute representation but also of variety or mix of ethnicities2 —are 33 percent more likely to outperform their peers on profitability. That’s comparable to the 35 percent outperformance reported in 2014, with both figures being statistically significant (Exhibit 4).

lazyeye 4y ago
I simply do not trust these kind of statistics. Almost without exception the only people doing this kind of research are activists with an agenda. https://en.m.wikipedia.org/wiki/Motivated_reasoning https://en.m.wikipedia.org/wiki/Motivated_reasoning Not saying its true, not saying its not.
scifibestfi 4y ago
https://www.psychologytoday.com/us/blog/your-brain-at-work/201706/is-your-companys-diversity-training-making-you-more-biased https://www.psychologytoday.com/us/blog/your-brain-at-work/2... > Inclusion programs often trigger an “us versus them” mindset. > Although diversity and inclusion training is prevalent in corporate America, its impact is inconsistent. According to the evidence, sometimes the programs even have the opposite effect of what they intend. > One 2016 study of 830 mandatory diversity training programs found that they often triggered a strong backlash against the ideas they promoted. “Trainers tell us that people often respond to compulsory courses with anger and resistance,” wrote sociologists Frank Dobbin and Alexandra Kalev in the Harvard Business Review, “and many participants actually report more animosity toward other groups afterward.”
poszlem 4y ago
Do you believe those statistics enough to get rid of the laws that prevent discrimination? If the stats are true, then surely companies, who are known to value monetary gains above all else, would take care of the problem of lack of diversity based solely on their market performance.
- turtlesdown11 4y ago
  Textbook strawman argument, congrats
  - poszlem 4y ago
    How is that a strawman? What am I strawmanning? I am asking if you believe those research papers enough to actually put on the line something you believe in. I am not creating a strawman, but giving you a conclusion based on what the OP posted. If diversity actually increases profits (and not is merely correlated with it) then that should be a no-brainer.
    - turtlesdown11 4y ago
      > Person 1 asserts proposition X. Person 2 argues against a superficially similar proposition Y, falsely, as if an argument against Y were an argument against X.
- tzs 4y ago
  > If the stats are true, then surely companies, who are known to value monetary gains above all else 1. Companies are not known to value monetary gains above all else. 2. Even those that do often concentrate and very short term gains over things that would make them more money in the long run.
AlbertCory 4y ago
> 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. In our expanded 2017 data set this number rose to 21 percent and continued to be statistically significant. 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). Correlation does not imply causality, as you know. Possibly the more successful companies face more social pressure to improve their DEI numbers, whereas no social justice advocates push on the ones who are struggling. Sampling matters. McKinsey is merely picking some data that supports their case. If you actually want to show something, do a longitudinal study: first of all, pick cohorts that match up in most other respects, then compare their relative performance within the cohort after increasing their DEI numbers. Or not doing so.
- turtlesdown11 4y ago
  > If you actually want to show something, do a longitudinal study: first of all, pick cohorts that match up in most other respects, then compare their relative performance within the cohort after increasing their DEI numbers. Or not doing so. I agree these study parameters would yield much better data. The construction of such a study would probably prove challenging.
  - AlbertCory 4y ago
    It would, indeed, be difficult to do this. But just finding correlations doesn't convince anyone not already predisposed to believe the conclusions.
throwaway23597 4y ago
I mean honestly, you can't possibly think that just adding people of other gender / skin colors just magically improves profitability. There's clearly some lurking variables here that McKinsey purposefully ignored in order to draw this specific conclusion.
- turtlesdown11 4y ago
  I believe viewpoint diversity adds value to product ideation, design, execution, etc.
  - deleted 4y ago
    [deleted]
  - tristor 4y ago
    It does not necessarily follow that diversity of immutable characteristics creates viewpoint diversity. Ironically, most companies seem to actively stamp out viewpoint diversity as part of their corporate culture (both as part of and distinct from any DEI initiatives they may have).
  - AlbertCory 4y ago
    That's fine. You haven't cited any compelling evidence of it, though, as all the responses have pointed out.
brodouevencode 4y ago
> correlation Not off to a great start, so a few questions: 1. What's the timeline look like for most companies? Were they successful before, after, or all during diversity efforts? At some point it became the socially desired thing to do, so timing matters. 2. Which countries were surveyed? What are the current diversity/cultural influences there? 3. This seems specific to executive teams - is there any more data on regular staff? 4. The data seems a little old, is there newer data? 5. Were the diversity efforts intentional or organic? Meaning: did the company realize it needed more diversity or just by nature of hiring did the successful companies become diverse? It's important to understand the nuance in studies like this, and the linked article doesn't seem to provide that.
SuoDuanDao 4y ago
Do these studies ever determine causation or do they purely study correlation? I could imagine e.g. that a company with more female executives absent mandates would have a culture of better work-life balance. In a situation like that, would mandating more female executives push the culture towards more worklife balance or preferentially promote women who care less than average about worklife balance? Absent hard data my money would be on the latter.
gotoeleven 4y ago
I know no one will read the study but if they do they will find that this is entirely backwards looking--companies that did well in the prior years have more People of Diversity. Which makes sense, if you've done well recently you have more money to blow on affirmative action sinecures that provide political cover and give everyone a warm and tingly feeling. If it actually increased profitability then we wouldn't need these programs and social coercion, shaming, etc. Companies would be scrambling to hire the magic People of Diversity that bring in the profits.
gameman144 4y ago
I'd be curious whether DEI efforts can actually reproduce this, or whether this is just cargo cult wishful thinking. For instance, maybe companies with a really relatable mission or an open mind at the executive level also tend to attract diverse candidates. Those former factors would explain both the success and the diversity. If there were a study looking at companies with poor performance metrics who turned things around by pumping their diversity numbers, I'd be really interested in seeing that (since it'd show a nice casual link.) Without that, it seems plausible that successful companies are the ones able to engage in DEI efforts, even if they don't improve performance, or that minority candidates prefer working at successful companies.
bart_spoon 4y ago
Once again, it is necessary to point out the difference between correlation and causation. Is it possible that simply bringing in people of different ethnicities into your company leadership somehow leads to more profitability? Yes. But it seems far more likely the reverse is true. In a world where corporations want to demonstrate they are diverse and inclusive, and systemic forces are limiting the number of minorities who make it up the career ladders into leadership positions, minority leadership becomes a scarce commodity. The more profitable and successful a company, the more attractive the company and the more money they have to offer the limited number of minority executives for compensation, increasing the likelihood said executives join their teams.
- AlbertCory 4y ago
  Another way of hinting "sampling bias" as I did. > minority leadership becomes a scarce commodity ... one capable of attracting very good offers. An unsuccessful company is unlikely to be able to hire them.
za3faran 4y ago
Statistics 101: correlation does not imply causation.

lazyeye 4y ago

I simply do not trust these kind of statistics. Almost without exception the only people doing this kind of research are activists with an agenda. https://en.m.wikipedia.org/wiki/Motivated_reasoning https://en.m.wikipedia.org/wiki/Motivated_reasoning Not saying its true, not saying its not.

scifibestfi 4y ago

https://www.psychologytoday.com/us/blog/your-brain-at-work/201706/is-your-companys-diversity-training-making-you-more-biased https://www.psychologytoday.com/us/blog/your-brain-at-work/2... > Inclusion programs often trigger an “us versus them” mindset. > Although diversity and inclusion training is prevalent in corporate America, its impact is inconsistent. According to the evidence, sometimes the programs even have the opposite effect of what they intend. > One 2016 study of 830 mandatory diversity training programs found that they often triggered a strong backlash against the ideas they promoted. “Trainers tell us that people often respond to compulsory courses with anger and resistance,” wrote sociologists Frank Dobbin and Alexandra Kalev in the Harvard Business Review, “and many participants actually report more animosity toward other groups afterward.”

poszlem 4y ago

Do you believe those statistics enough to get rid of the laws that prevent discrimination? If the stats are true, then surely companies, who are known to value monetary gains above all else, would take care of the problem of lack of diversity based solely on their market performance.

turtlesdown11 4y ago
Textbook strawman argument, congrats
- poszlem 4y ago
  How is that a strawman? What am I strawmanning? I am asking if you believe those research papers enough to actually put on the line something you believe in. I am not creating a strawman, but giving you a conclusion based on what the OP posted. If diversity actually increases profits (and not is merely correlated with it) then that should be a no-brainer.
  - turtlesdown11 4y ago
    > Person 1 asserts proposition X. Person 2 argues against a superficially similar proposition Y, falsely, as if an argument against Y were an argument against X.
tzs 4y ago
> If the stats are true, then surely companies, who are known to value monetary gains above all else 1. Companies are not known to value monetary gains above all else. 2. Even those that do often concentrate and very short term gains over things that would make them more money in the long run.

AlbertCory 4y ago

> 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. In our expanded 2017 data set this number rose to 21 percent and continued to be statistically significant. 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). Correlation does not imply causality, as you know. Possibly the more successful companies face more social pressure to improve their DEI numbers, whereas no social justice advocates push on the ones who are struggling. Sampling matters. McKinsey is merely picking some data that supports their case. If you actually want to show something, do a longitudinal study: first of all, pick cohorts that match up in most other respects, then compare their relative performance within the cohort after increasing their DEI numbers. Or not doing so.

turtlesdown11 4y ago
> If you actually want to show something, do a longitudinal study: first of all, pick cohorts that match up in most other respects, then compare their relative performance within the cohort after increasing their DEI numbers. Or not doing so. I agree these study parameters would yield much better data. The construction of such a study would probably prove challenging.
- AlbertCory 4y ago
  It would, indeed, be difficult to do this. But just finding correlations doesn't convince anyone not already predisposed to believe the conclusions.

throwaway23597 4y ago

I mean honestly, you can't possibly think that just adding people of other gender / skin colors just magically improves profitability. There's clearly some lurking variables here that McKinsey purposefully ignored in order to draw this specific conclusion.

turtlesdown11 4y ago
I believe viewpoint diversity adds value to product ideation, design, execution, etc.
- deleted 4y ago
  [deleted]
- tristor 4y ago
  It does not necessarily follow that diversity of immutable characteristics creates viewpoint diversity. Ironically, most companies seem to actively stamp out viewpoint diversity as part of their corporate culture (both as part of and distinct from any DEI initiatives they may have).
- AlbertCory 4y ago
  That's fine. You haven't cited any compelling evidence of it, though, as all the responses have pointed out.

brodouevencode 4y ago

> correlation Not off to a great start, so a few questions: 1. What's the timeline look like for most companies? Were they successful before, after, or all during diversity efforts? At some point it became the socially desired thing to do, so timing matters. 2. Which countries were surveyed? What are the current diversity/cultural influences there? 3. This seems specific to executive teams - is there any more data on regular staff? 4. The data seems a little old, is there newer data? 5. Were the diversity efforts intentional or organic? Meaning: did the company realize it needed more diversity or just by nature of hiring did the successful companies become diverse? It's important to understand the nuance in studies like this, and the linked article doesn't seem to provide that.

SuoDuanDao 4y ago

Do these studies ever determine causation or do they purely study correlation? I could imagine e.g. that a company with more female executives absent mandates would have a culture of better work-life balance. In a situation like that, would mandating more female executives push the culture towards more worklife balance or preferentially promote women who care less than average about worklife balance? Absent hard data my money would be on the latter.

gotoeleven 4y ago

I know no one will read the study but if they do they will find that this is entirely backwards looking--companies that did well in the prior years have more People of Diversity. Which makes sense, if you've done well recently you have more money to blow on affirmative action sinecures that provide political cover and give everyone a warm and tingly feeling. If it actually increased profitability then we wouldn't need these programs and social coercion, shaming, etc. Companies would be scrambling to hire the magic People of Diversity that bring in the profits.

gameman144 4y ago

I'd be curious whether DEI efforts can actually reproduce this, or whether this is just cargo cult wishful thinking. For instance, maybe companies with a really relatable mission or an open mind at the executive level also tend to attract diverse candidates. Those former factors would explain both the success and the diversity. If there were a study looking at companies with poor performance metrics who turned things around by pumping their diversity numbers, I'd be really interested in seeing that (since it'd show a nice casual link.) Without that, it seems plausible that successful companies are the ones able to engage in DEI efforts, even if they don't improve performance, or that minority candidates prefer working at successful companies.

bart_spoon 4y ago

Once again, it is necessary to point out the difference between correlation and causation. Is it possible that simply bringing in people of different ethnicities into your company leadership somehow leads to more profitability? Yes. But it seems far more likely the reverse is true. In a world where corporations want to demonstrate they are diverse and inclusive, and systemic forces are limiting the number of minorities who make it up the career ladders into leadership positions, minority leadership becomes a scarce commodity. The more profitable and successful a company, the more attractive the company and the more money they have to offer the limited number of minority executives for compensation, increasing the likelihood said executives join their teams.

AlbertCory 4y ago
Another way of hinting "sampling bias" as I did. > minority leadership becomes a scarce commodity ... one capable of attracting very good offers. An unsuccessful company is unlikely to be able to hire them.

za3faran 4y ago

Statistics 101: correlation does not imply causation.