The business case for diversity and inclusion – in numbers
Suzanne Locke 18 October 2022
We often get asked by human resources departments what the business case is for embedding diversity, equity and inclusion (DEI) into the organisational culture. Here are some statistics you can take to your executive or board – both international and regional – to help you.
IBM: 61% of ‘exceptional’ DEI-leading companies report higher revenue growth
In a 2019 study,
Women, Leadership and the Priority Paradox
,
IBM’s Institute for Business Value (IBV), found that women hold only 18 percent of senior leadership positions among 2,300 organisations surveyed worldwide.
Promoting women was not a formal business priority at 79 percent of surveyed organisations.
However IBM’s IBV discovered a small cohort of “exceptional” organisations (about 12 percent of respondents) that it found to be “more proactive” in the push for gender equality in leadership.
These companies reported that they were out-performing their competition in profitability, revenue growth, innovation and employee satisfaction:
-
61 percent reported higher revenue growth for companies that prioritise equal opportunities for growth
- 60 percent that they were more innovative than competitors
- 73 percent said they were sector leaders in customer satisfaction.
McKinsey: Women leaders leaving, DEI work going unrecognised
First there was The Great Resignation, then Quiet Quitting and now, says McKinsey, the Great Breakup of women from their employers.
The ‘broken rung’ at the first step of management has become more pronounced, it says: for every 100 men promoted to their first managerial position, only 87 women are promoted.
And now there is another pipeline issue: for every woman at the director level being promoted, two women directors are choosing to leave their company.
In a survey of 40,000 employees in Corporate America, McKinsey says women: face “micro-aggressions”; endure “headwinds” that signal it will be harder to advance; and find the work they are doing for employee wellbeing and inclusion “spreading them too thin” and going “mostly unrewarded”.
IBM: Only one in four companies making women’s advancement a priority in 2021
In its 2021 follow-up,
Women, Leadership and Missed Opportunities
,
IBM’s IBV said, “The number of women serving in senior leadership positions has barely budged over the past two years, with no gains in board seats or the C-suite.
“Perhaps most concerningly, today there are fewer women in the pipeline to fill executive roles than in 2019.”
Only one in four organisations made the advancement of women a top 10 priority, it added.
PIIE: 15% rise in profitability from women in leadership
Thinktank the Peterson Institute for International Economics (PIIE) surveyed 22,000 organisations globally in 2016 for a report titled
Is Gender Diversity Profitable?.
It found that taking a company’s corporate leadership from no women to a 30 percent female share (at both the executive management ‘C-suite’ and board level) can lead to a 15 percent rise in profitability.
It also reported that having women on a board was statistically correlated with having more women in the C-suite, as it encouraged other women to pursue senior roles.
McKinsey: Executive gender diversity highly likely to affect profitability
In its 2020 report,
Diversity Wins
, McKinsey found that companies in the top quartile for gender diversity on executive teams were
25 percent more likely to have above-average profitability than companies in the fourth quartile.
Companies with more than 30 percent women executives were more likely to outperform those with fewer, or no, women executives. When it came to ethnic and cultural diversity, the same companies out-performed the lowest by 36 percent in profitability.
McKinsey also found that companies with historically high levels of executive-level diversity were 62 percent more likely to outperform their national industry median in profitability.
“The most diverse companies are now more likely than ever to outperform less diverse peers on profitability,” it reported.
McKinsey: 48% difference between most and least gender-diverse companies
In its 2018 study,
Delivering Through Diversity
, the first in which McKinsey looked beyond EBIT to long-term performance, the consultancy found that organisations with
less than 20 percent of women in the executive team reported decline, flat or slow profitability.
Companies with low gender and ethnic diversity were 29 per cent less profitable than their peers, it reported. The study looked at a data set of more than 1,000 companies.
McKinsey: 10% increase in gender diversity grows EBIT by 3.5% in UK
In its first diversity-focused 2015 report,
Diversity Matters
,
McKinsey found that companies in the top quartile for gender diversity in 366 public companies in Canada, Latin America, the UK and the US were
15 percent more likely to have financial returns above their national industry medians.
They were 35 percent more likely if they were in the top quartile for racial and ethnic diversity.
It put a specific metric on this in the US: for every 10 percent increase in racial and ethnic diversity in the senior executive, earnings before interest and taxes (EBIT) rose 0.8 percent.
Gender diversity also helped EBIT rise in the US, but not as much; McKinsey speculates that this could be because “earlier efforts to increase women’s representation in the top levels of business have already yielded positive results”.
But in the UK, for every
10 percent increase in gender diversity at the executive level, EBIT rose by 3.5 percent.
PwC: Increasing MENA women in work could increase GDP by $2trn
PwC’s 2022 report,
MENA Women In Work
, shows that advancing women’s equality can add $12 trillion to global growth.
In the Middle East and North Africa, increasing the number of women in the workforce could raise the region’s gross domestic product (GDP) by up to 57 percent, or $2 trillion, it found from analysis of World Bank data.
It also found that in Egypt, Saudi Arabia and the UAE, the region’s three largest economies, less than 20 percent of all senior managers are female.
MGI: Full gender equality would add $101 bn to UAE economy
McKinsey Global Institute (
MGI)’s 2015 report,
The Power of Parity
, stated that full
gender equality worldwide could add $12 trillion to the global economy,
$0.6 trillion to MENA and, in the
UAE alone, could contribute
$101 billion to the local economy within a decade – equating to $10,985 per person.
In a follow-on report in 2016,
Delivering the Power of Parity
, MGI said MENA had the most to gain in the world (except in India) by increasing the labour force participation rate.
US Center for Talent Innovation: Diverse companies 70% more likely to capture new markets
Research done in 2013 by the
US Center for Talent Innovation
and Hewlett Consulting concluded that diverse companies were
70 percent likelier to report capturing a new market in the past year – companies it referred to as having ‘2D diversity’.
It surveyed 1,800 US professionals with 40 case studies to coin the term ‘2D diversity’.
These companies had leaders with at least three inherent and three acquired diversity traits, where inherent referred to traits we are born with, such as gender or ethnicity, and acquired diversity involved experience, such as working in another country or selling to women consumers.
Cloverpop: Diverse teams deliver 60% better business decisions
A report undertaken by enterprise decision management tool Cloverpop (later acquired by Clearbox Decisions) in 2017,
Hacking Diversity with Inclusive Decision-Making
, showed a direct link between inclusive decision-making and better business performance:
- Inclusive teams make better business decisions up to 87 percent of the time.
- Teams that follow an inclusive process make decisions twice as fast, with half the meetings.
- Decisions made and executed by diverse teams delivered 60 percent better results.
Juliet Bourke: 30% reduced risk, 20% enhanced innovation
In her 2016 book,
Which Two Heads Are Better Than One?
, published by the Australian Institute of Company Directors,
Dr Juliet Bourke reported that diversity of thinking was a “wellspring of creativity” that enhanced innovation by 20 percent.
She also said it reduced the risk of ‘group think’ by 30 percent, and “smooths the implementation of decisions” by creating buy-in and trust.
The important of inclusive leadersip is a “clarion call” for board chairs, CEOs and team leaders, she wrote.
At the time, Dr Bourke was also a Deloitte global DEI thought leader and its Australian DEI consulting lead.
Glassdoor: 76% of jobseekers say a diverse workforce is important in a hiring company
Some 37 percent of employees and job seekers said they wouldn’t apply to a company that had negative satisfaction ratings among people of colour.
After the last recession, young jobseekers were more inclined to take any available job, according to Daniel Zhao, senior economist at Glassdoor.
“The difference now is we’ve spent the last 10 years moving toward a world where companies are much more engaged around issues – not just DEI but culture and employee engagement,” he said.
“A lot of trends the pandemic has either accelerated or derailed, and this is a trend that will last through.”
CAP: Cost of staff turnover high
One final note. The cost of staff turnover is high: businesses spend an average of
one-fifth of an employee’s annual salary to replace that worker, according to
2012 analysis by the Center for American Progress (CAP)
, rising to
213 percent for highly paid or very senior staff.
Saving that money could actually fund your DEI programme.
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