Diversity supports strong financial results

A question that I often get as a gender equality consultant is: “is there a financial payoff for companies that invest in diversity?” The short answer is yes. McKinsey and Company has done a lot of research in this area. While they haven’t been able to prove that diversity causes strong financial results, they have established a strong relationship between the two.

A McKinsey study published in April 2012 looked at 180 public companies in 4 different countries (France, Germany, the UK and the US). They ranked the companies according to how many women and foreign nationals they had on senior teams. They found that the companies that were in the top 25% in terms of these diversity measures had an average of 53% higher return on equity than those in the bottom 25% in terms of diversity. (Return on equity is a measure of how profitable the company is). Let’s pause here and really think about this. Diverse companies were 53% more profitable. That’s very significant.

In addition, earnings at the most diverse companies were an average of 14% higher than those at the least diverse companies. (When I say earnings, I mean earnings before interest and taxes).

What McKinsey is demonstrating through their analysis is that diversity is systematically related to achieving better financial results. This is across industries, and in different countries. They’re still investigating why these relationships exist, and how they function. However, we are sure of one thing: there is a strong relationship between public companies’ financial success and their diversity situations.

Publicerad den 18 maj, 2012 av Alice Marshall
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Alice Marshall
Gender Equality & Diversity Consultant
Alice Marshall is a gender equality consultant at Add Gender. She wrote her Master's thesis at Stockholm University about best practices for gender equality in the IT industry. She is the only gender equality consultant in Sweden specializing in IT. She is very interested in gender equality and diversity as a strategy to make businesses more profitable, innovative and fun to work for. Before completing her Master's degree, she worked for Ernst & Young and Harlem Village Academies in New York.

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