McKinsey’s New Report Finds That Diversity Does Not Equal Inclusion
Earlier today consulting behemoth McKinsey released a 2020 report entitled Diversity Wins: How inclusion matters. McKinsey has quickly become reliable source for empirical diversity, equity, and inclusion (DEI) research. In 2015, the company released pivotal data that demonstrated clear linkages between greater profitability and racial/ethnic and gender diversity within organizations. The 2020 report is the third installment in McKinsey’s series of research that has been aimed at examining the business case for diversity in executive positions. McKinsey conducted the research for this report before the global pandemic of Covid-19 transformed the world of work as we know it. When looking at how companies are navigating the pandemic, the report notes, “companies that already see inclusion and diversity (I&D) as a strength are likely to leverage it to bounce back quicker and they will use this time to seek new opportunities to boost representation and inclusion to strengthen performance and organizational health.” Despite this glaring evidence that DEI should be a priority amidst the global pandemic, the report notes that some organizational leaders have indicated that DEI is a “luxury we cannot afford.” Corporate leadership needs to understand the larger implications and impacts of deprioritizing DEI initiatives—one of which being the widening of structural and systemic inequities for diverse talent.
Some important highlights from the McKinsey Report include:
•Within the United States, women make up 45% of the workforce
•Within the United States, 90% of companies have at least one female on their executive team
•Within the United States, the average female representation on executive teams is 21%
•It will take United States executive teams 29 years to reach gender parity
Interestingly enough, North American progress seems to be slower than the rest of the world when it comes to gender and ethnic diversity on boards and executive teams. It’s clear from the report that more gender and ethnic diversity on both boards and executive teams would have promising impacts on organizations, so prioritizing increased representation can prove advantageous. In February of 2020 Goldman Sachs made headlines when they announced that starting in the summer of 2020 companies would not be taken public in the United States and Europe unless they have at least one diverse board director. If other companies decide to follow Goldman Sachs’ lead, this will have positive reverberations for organizational DEI efforts.
Overall, much of the key findings of the 2020 report echo similar data from the 2015 Why diversity matters McKinsey report. The 2020 report found that companies with greater gender diversity were 25% more likely to experience above-average profitability compared to their counterparts. Similarly, companies with greater ethnic and cultural diversity were 36% more likely to experience above-average profitability compared to their counterparts. One extremely vital and somewhat novel concept that the report emphasized was the idea that diversity does not equal inclusion. The report notes that “even where companies are more diverse, many appear as yet unable to cultivate work environments which effectively promote inclusive leadership and accountability among managers, equality and fairness of opportunity, and openness and freedom from bias and discrimination.” While representation is important, it alone does not guarantee equity and inclusion. Organizations struggling to understand why they are unable to retain diverse talent should assess policies, practices and procedures. What criteria is used to evaluate job candidates and employee promotions? Is there representation among the hiring/search committee? What are you doing to ensure pay parity? How often are your performance management systems evaluated for fairness? Looking at the organizational systems can provide strong indications of the culture of inclusion (or exclusion) that a company is cultivating.
Two other major findings of the report are the need to strengthen leadership accountability for DEI and the increased need for strong policies and procedures to deal with microaggressions. To address the need for stronger leadership accountability, organizations should consider inviting management to design DEI programs and initiatives. Employees that are instrumental in designing a DEI intervention will be more invested and involved with that intervention and will take an interest in the success of the intervention. Think about putting management in charge of designing some of these DEI interventions for greater accountability. As far as dealing with microaggressions, implementing bystander intervention training into your workplace can prove helpful. Bystander intervention training teaches employees effective strategies on how to address and intervene when they witness bad behaviors taking place. Equipping employees with the tools to tackle hostile behaviors can help foster greater inclusion and belonging.