4 Strategies for Improving Growth through Diversity

In 2015 management consultancy McKinsey and Co published the Why Diversity Matters report, which sought to describe and define the range of benefits available to organisations with a clearly articulated and well-executed range of diversity and inclusion initiatives.

In early 2018, McKinsey released an updated report, with an expanded data set from 12 countries, which seeks to explain how diversity initiatives drive profitability and also assist with longer-term value creation. The distillation of this research resulted in four imperatives which organisations seeking to deliver best practice diversity and inclusion agendas should aim for.

McKinsey examined data from more than 1000 organisations in preparing the updated report and noted a clear correlation between diversity and profitability, with companies with greater ethnic and gender diversity at the executive level experiencing above average profitability compared with less diverse organisations.

Improved gender diversity in the executive team consistently resulted in higher profitability across countries in McKinsey’s latest data set, especially in organisations where women are in revenue generating roles, rather than staff roles. Similarly, the data showed that most ethnically diverse executive teams are 33 per cent more likely to outperform their peers on profitability.

McKinsey concluded that increased organisational understanding about the financial value of diversity, and the fact that diverse companies are more likely to attract the best people, be relevant to their customers and enjoy higher rates of employee satisfaction and engagement has resulted in an improved commitment to boost levels of underrepresented talent.

Despite this, the report showed that women and minorities are still underrepresented in the c-suite, and that organisations are struggling to effectively use inclusion and diversity as an enabler of business impact.

McKinsey observed that in companies where notable impact has been achieved and where the rewards are tangible and ongoing there was an organisational commitment to developing and implementing inclusion and diversity strategies that reflected their business ethos and priorities. McKinsey identified four key imperatives in successful organisations, which they argue are crucial to the success of inclusion and diversity initiatives:

1. An articulate and cascade CEO commitment to galvanise the organisation.
Companies increasingly recognise that commitment to inclusion and diversity starts at the top, with many companies publicly committing to an inclusion and diversity agenda.

Leading companies go further, cascading this commitment throughout their organisations, particularly to middle management. They promote ownership by their core businesses, encourage role modelling, hold their executives and managers to account, and ensure efforts are sufficiently resourced and supported centrally.

2. Inclusion and diversity priorities that are based on the drivers of the business-growth strategy.
Top-performing companies invest in internal research to understand which specific strategies best support their business-growth priorities. Such strategies include attracting and retaining the right talent and strengthening decision-making capabilities.

Leading companies also identify the mix of inherent traits (such as ethnicity) and acquired traits (such as educational background and experience) that are most relevant for their organisation.

3.  A carefully crafted and targeted portfolio of inclusion and diversity initiatives to transform the organisation.

Leading companies use targeted thinking to prioritise the inclusion and diversity initiatives in which they invest, and they ensure there is alignment with the overall growth strategy. They recognise the necessity of building an inclusive organisational culture, and they use a combination of “hard” and “soft” wiring to create a coherent narrative and program that resonates with employees and stakeholders, helping to drive sustainable change.

4.  A tailored strategy to maximise local impact.
Top and rapidly improving companies recognise the need to adapt their approach—to different parts of the business, to various geographies, and to sociocultural contexts.

McKinsey says that paying attention to all four of the imperatives described above will help to ensure that inclusion and diversity support a company’s growth agenda.

However, they caution that while gains in representation can be achieved quickly, embedding inclusion can take many years and may require action outside the organisation. McKinsey encourages companies to examine to craft a platform of inclusion and diversity initiatives that is based on best practice but tailored to suit their unique circumstances.

 

Learn more and read the full report here.