McKinsey's report suggests that diversity is lacking among the 1,000-plus companies it analyzed . The diverse boards won on every front you would care about. 4 "Is Gender Diversity Profitable?" Peterson Institute for International Economic, Feb 2016. Wang, Mingzhu and Elisabeth Kelan. The share in the United States is 19 percent and in the United Kingdom is 15 percent. We use cookies essential for this site to function well. Among our sample, South Africa has the highest levels of diverse representation on executive teams, with 16 percent of executive positions held by blacks. Cited most frequently is McKinsey's study, Diversity Matters which found a statistically significant correlation between diversity and financial performance. Although levels of diverse representation in top teams are still highly variable globally—with progress being slow overall—there are practical lessons from successful companies that have made inclusion and diversity work. We wanted to turn that around a little bit and instead of saying, “We’re not making any progress,” really look at the companies that have made progress. In this episode of the Inside the Strategy Room podcast, Steve Van Kuiken, global leader of the McKinsey Technology practice and coauthor of a recent article about ways boards can shape the cloud agenda, speaks with two . Please email us at: McKinsey_Website_Accessibility@mckinsey.com. The reason is one of the best practices we found was about building a pipeline. Most transformations fail. Found inside – Page 22McKinsey (2011b) Changing companies' minds about women. ... McKinsey (2013) Lessons from the leading edge of gender diversity. ... Post, C. and Byron, K. (2015) Women on boards and firm financial performance: A meta-analysis. Board diversity matters, so let's have more. 4 "The Effect of . —are 33 percent more likely to outperform their peers on profitability. McKinsey's researchers delved into the leadership composition of over 1,000 companies in 15 countries, and compared the make-up against their financial performance. The companies that do this well have released some of the ingoing criteria that they used to use and are now thinking a bit more expansively. . You need the right culture and structure. Are there any other things you’d want to comment on as far as the trickle down there, if you will? We know from research, such as our Women in the Workplace 2017 report, that women are underrepresented in line roles. Thank you so much, Celia. Even in retail, which one would argue has the most women at entry level and women as customers, it was a variety of percentages of gender diversity on the boards. Found insideMy personal experience is that Boards that are more diverse are more effective and give more rounded advice to the ... Hunt, V., Prince, S., Dixon-Fyle, S. and Yee, L. (January 2018), Delivering through Diversity McKinsey & Company, ... The number of women on boards has plateaued at low levels since 1998. This paper looks at why more women on the board leads to better governance practices - and makes dollars and sense. Are there any particular industries that did a better job of this? Apparently there was a decline in profits of the Norwegian companies after this mandate, which the author ascribes to the presence of . Digital upends old models. Gender-diverse companies are 15 percent more likely to outperform, while ethnically diverse companies are 35 percent more likely to outperform. Other studies have found that black women suffer a double burden of bias that keeps them from the uppermost levels of corporate leadership. Top-team ethnic and cultural diversity is correlated with profitability. Please use UP and DOWN arrow keys to review autocomplete results. Celia Huber: Which expands the universe. tab. in industries and jobs that could create additional opportunity to the behaviors of the workplace itself. • Board diversity helps to draw in and motivate talented employees. In our expanded 2017 data set this number rose to 21 percent and continued to be statistically significant. Diversity 2014 Egon Zehnder European Board Diversity Analysis. That’s comparable to the 35 percent outperformance reported in 2014, with both figures being statistically significant (Exhibit 4). Here are some diversity recruiting job boards that can connect you with disabled candidates. Providing deep, expert insight and advice for what needs to change and how to change it, this is the definitive book for reimagining and creating a talent-driven organization that wins. It is also a reliable indicator of a gender equality policy and advancement, adopted by countries and companies. The book traces the logic behind the decision patterns of female involvement in governance and management. In contrast to McKinsey, we found statistically insignificant relations between McKinsey's measures of S&P 500 firms' executive racial/ethnic diversity as of mid-2020 and their 2015-2019 industry-adjusted EBIT margins. About the Board Diversity Charter. They recognize the necessity of building an inclusive organizational 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. In the past several years, Celia has led groundbreaking work on the issue of gender diversity on boards and how companies can accelerate their diversity efforts and benefit from them. Creating an effective inclusion and diversity strategy is no small effort and requires strong, sustained, and inclusive leadership. Boards that included women were found to have: Higher ROEs; Lower debt to equity . So, it is as relevant today as it was when we did the research and wrote the article. What are some of the ways that a woman who’s interested in getting involved in boards could plug into that? That was not true. We focused on our US and UK data sets to examine ethnically and culturally diverse representation among US and UK companies, considering the pipeline starting with university graduates. This Handbook on Diversity and Inclusion Indices critically examines many of the popular and frequently cited indices related to DEI benchmarking and progress tracking. relief and raises critically important choices. U.S. Board Diversity Trends in 2019 from Harvard Law School; Why Diversity Matters Diversity on corporate boards matters. with board diversity representation. Board representation of Black, Latinx, and Asian people is typically way lower . 1 We use cookies essential for this site to function well. Companies report that materially improving the representation of diverse talent within their ranks, as well as effectively utilizing inclusion and diversity as an enabler of business impact, are particularly challenging goals. If I already have women board members, they can sometimes help me expand my network. US Fortune 500 companies with the highest percentages of women board directors reported, on average, 53 per cent higher return on equity than those with the least, according to research firm Catalyst. Now, as previously, companies in the fourth quartile on both gender and ethnic diversity are more likely to underperform their industry peers on profitability: 29 percent in our 2017 data set. Article originally published by the American City Business Journal on October 4, 2021. As organizations increasingly grapple with digital transformations, large technology investments, and shifts to the cloud, these issues regularly appear on board agendas. Learn about I think the boards that are successful are looking at innovative and creative ways of expanding their pipeline that way. And companies are still uncertain about how they can most effectively use diversity and inclusion to support their growth and value-creation goals. Please email us at: Learn more about cookies, Opens in new Sean Brown: Were you seeing any industry trends? It showed that women occupied at least 33 percent of board seats among the top 50 companies. Diversity wins is the third report in a McKinsey series investigating the business case for diversity, following Why diversity matters (2015) and Delivering through diversity (2018). The business case for board diversity is becoming increasingly evident. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. Please click "Accept" to help us improve its usefulness with additional cookies. Striving to increase workplace diversity is not an empty slogan — it is a good business decision. Reinvent your business. I wouldn’t go as far as to say that that is a determinant of which boards were finding more gender diversity, because I will tell you in every instance, it was a shared vision from the CEO and the chairman, and in fact, the CEO was as much a driver if not more than the chairman. What we did was rank the S&P 500 by gender diversity on their boards, and then looked at the top 50 companies. It’s not just about the board. Would you want to talk a little bit about how they’re bringing women into the boards from other industries? As you think about moving down this journey, you need to think about how all the members of the board fit together. Once the board is sufficiently diverse, the commitment to diversity can come from the top and a corporate culture of diversity and inclusion can take shape. Found insideMcKinsey & Company , Diversity Wins : How Inclusion Matters , May 2020 , https://www.mckinsey.com/-/media/McKinsey/ ... See Deb DeHaas , Linda Akutagawa , and Skip Spriggs , “ Missing Pieces Report : The 2018 Board Diversity Census of ... I will tell you in the interviews I did there was typically a split role between the CEO and the chairman. Several other findings on gender diversity, ethnic diversity, and diversity around the world are also interesting. There are clear and compelling hypotheses for why this relationship persists including improved access to talent, enhanced decision making and depth of consumer insight and strengthened employee engagement and license to operate. Hunt, Vivian, Dennis Layton and Sara Prince. Found inside10 EWOB 2019 Gender Diversity Index, “European Women on Boards Gender Diversity Index,” EWOB 2019 Gender ... Nick Noel, and Shelley Stewart, “It's Time for a New Approach to Racial Equity,” McKinsey & Company, December 2, 2020, ... A 2019 study by McKinsey & Company finds that organisations in the top quartile of gender diversity are more likely to outperform on profitability . Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. I need to think about all the players. Ethnic and cultural diversity on executive teams is low. In a recent research study, we applied McKinsey's methods to the firms in the S&P 500 Index as of 31 December 2021. Article Podcast transcript. In the United Kingdom, the disparity is even greater: 22 percent of university students identify as black and minority ethnic, yet only 8 percent of UK executives in our sample do. Sean Brown: From McKinsey’s Strategy and Corporate Finance Practice, I’m Sean Brown, and welcome to Inside the Strategy Room. 2 "Women on Boards: Global Trends in Gender Diversity on Corporate Boards" MSCI, Nov 2015. Of course, you and I both know there are not a lot of women CEOs, so that pool is naturally very limited. Sean Brown: Wonderful. tab, Engineering, Construction & Building Materials, McKinsey Institute for Black Economic Mobility. cookies, McKinsey_Website_Accessibility@mckinsey.com, black women suffer a double burden of bias. Sean Brown: What about how they’re cultivating and identifying these potential board candidates? Having led this research and now looked at the impact over the last few years, how do you feel about it? Singapore, the United Kingdom, and the United States follow South Africa with 11 to 12 percent of ethnically diverse executives. To think through the next level down, what is the skill set that I really want to bring? Overall, employees with a low perception of inclusiveness in their organization state that they have already given up on career opportunities due to their environment—and this is particularly true for women. So, we’re thinking through what those companies that have been successful have done to make a difference, as opposed to dwelling on the numbers and the overall trend. They promote ownership by their core businesses, encourage role modeling, hold their executives and managers to account, and ensure efforts are sufficiently resourced and supported centrally. Flip the odds. We have a deep and long-standing commitment to advancing gender parity, diversity, and inclusion in business, in society and within our firm. Awareness of the business case for inclusion and diversity is on the rise. The Bloomberg Law 2021 series previews the themes and topics that our legal analysts will be watching closely in 2021. January 2015. What are the mechanisms in play to increase diversity at the top? Mary Fetherolf. Our flagship business publication has been defining and informing the senior-management agenda since 1964. Tailor the strategy to maximize local impact. So that’s the first step. A 2020 McKinsey report tracking the trajectories of hundreds of companies since 2014 detailed the impacts of diversity on profitability. McKinsey released a new Diversity Matters report that finds that the companies in the top quartile for gender and racial or ethnic diversity are more likely to outperform above national industry means. Where do you think it’s going? According to a recent analysis, under-represented ethnic and racial groups . It was a pleasure. representation on boards, 2007) and McKinsey (Women matter. ANALYSIS: Mandated Board Diversity Takes Center Stage in 2021. Yet progress on diversification initiatives has been slow. There are generally four different types of diversity: internal, external, organizational, and worldview—and you should aim to understand and represent them all. Found inside... FTSE Index' is published annually by Cranfield School of Management (online) 8 Huber, C and O'Rourke, S, 2017, 'How to Accelerate Gender Diversity on Boards', McKinsey Quarterly 9 Hunt, V et al, 2018, 'Delivering through Diversity', ... For example, McKinsey & Company's 2020 Why Diversity Matters Report finds that diverse companies are 36% more likely to have above-average financial performance compared to less-diverse peers . Craft a targeted portfolio of inclusion and diversity initiatives to transform the organization. Such strategies include attracting and retaining the right talent and strengthening decision-making capabilities. collaboration with select social media and trusted analytics partners At the same time, we talked to some engineering companies and software companies that have also done the same thing, and arguably in areas where it is more difficult to find women. Boards can better influence and lead their companies in . and organizational performance. - McKinsey Global Institute, Article A 2020 opinion piece by the firm, tied to its most recent diversity report, highlighted the . Found inside – Page 2658 S. Devillard, S. Sancier-Sultan & C. Werner, Moving mind-sets on gender diversity: McKinsey global survey results (McKinsey & Company, January 2014) see http:// mckinsey.com. 9 Catalyst, 2014 Catalyst census: Women Board Directors, ... For example, executive teams where women account for more than 30% of the total are more . The CEO of Estée Lauder had a very nice analogy that, in his mind, it’s like a symphony. our use of cookies, and Additional research confirms this trend - a 2015 study from McKinsey & Company . That’s not just the CEO and the board chair—rather, the whole board should think that it’s important. First, it helps cultivate an . Diverse executive boards generate more money (continued) Credit Suisse echoes McKinsey's findings in its own study, finding that large businesses with women on the board outperformed male-only boards. McKinsey Inclusive Consumer Survey, October 2021. Define inclusion and diversity priorities that are based on the drivers of the business-growth strategy. Evidence that board diversity benefits firms is mixed. tab. The combination of the increasing regulator expectations and accompanying shareholder interest will likely compel high profile companies to become more intentional in diversifying their boards. In a study of 366 public companies in Canada, Latin America, the U . You want the candidate to know the board and the board to know the candidate so that both she and the board are ultimately successful when she decides to take a position. - McKinsey Global Institute. Black Americans comprise 10 percent of US graduates but hold only 4 percent of senior-executive positions, Hispanics and Latinos comprise 8 percent of graduates versus 4 percent of executives, and for Asian Americans, the numbers are 7 percent of graduates versus 5 percent of executives. In spite of this, the percentage of women in the boardroom is barely increasing. But challenges in building an equitable and inclusive workplace persist. Gender diversity, a corporate performance driver. Celia Huber: A lot of companies tell us, in my industry or for certain technical skills, I cannot find anyone. 2. Found inside – Page 208McKinsey & Company survey, “The Digital Tipping Point: McKinsey Global Survey Results,” June 2014, ... Caroline Fairchild, “How Macy's Quietly Created One of America's Most Diverse Boards,” Fortune, February 18, 2015, ... Our flagship business publication has been defining and informing the senior-management agenda since 1964. However, there is also diversity of functional expertise, of experience in other industries and diversity of political views. Thank you McKinsey for continuing your research into diversity and business performance. Sixty-eight percent say their social values shape their shopping choices. One large S&P company looked for e-commerce and technical skills, and instead of looking at other large companies, looked at the start-up world, found a great CEO and founder of her own company, and brought her on the board.
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