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McKinsey & Company releases “Diversity Matters” Report

Excerpt taken from “Diversity Matters,” McKinsey & Company, November 24, 2014

For several years McKinsey & Company has been developing research and initiatives on the topic of diversity in the workplace. The first report, “Women Matter”, published in 2007, identified a positive relationship between corporate performance and elevated presence of women in the workplace in several Western European countries, including the UK, France, and Germany.

McKinsey has since expanded the focus of its research on the relationship between performance and diversity to include diversity in race and ethnicity and sexual orientation as well as gender.

The research proceeded through the creation of proprietary datasets for 366 public companies across a range of industries in the United Kingdom, Canada, the United States, and Latin America. The data collected included the composition of top management and boards in 2014 and financial data—total revenue, earnings before interest and tax (EBIT), and return on equity (ROE)—for the years 2010 to 2013.

In addition to capturing gender information, the dataset also included ethnic and/or racial information from publicly available sources. We measured the relationship between leadership diversity and financial performance with the aid of the Herfindahl–Hirschman Index (HHI), a tool used for decades by economists to determine the level of competitiveness within markets and industries. By adapting the index, the Diversity Matters team was able to recognise a company that, for example, has two board members from two different ethnic minorities as being more diverse than a company with the same size board that has two board members from the same ethnic minority.

Click here to view the full report on the “Diversity Matters” project, including their findings on the relationship between diversity and performance; why diverse companies perform better and how companies can become more diverse.