I was reading a recent McKinsey white paper, Delivering through Diversity. The report builds on a widely read 2016 report, Why Diversity Matters, enlarging the company sample set, examining a broader range of financial outcome measures, and collecting more qualitative data. The critical takeaway from the most recent report is that it “reaffirms the global relevance of the correlation between diversity (defined here as a greater proportion of women and ethnically/culturally diverse individuals) in the leadership of large companies and financial outperformance.”[1] The authors are careful to point out the correlation is not causation. Their results, they note, cannot make the case definitively that having more women or people of color increases firm performance.
This is the persistent challenge in establishing the link between diversity and bottom line performance. So many variable affect financial performance that, in most cases, it is almost impossible to say that more social identity diversity—diversity by gender, or ethnicity—is better for firm performance. What we do know is that the kind of diversity associated with those identities makes a difference. Diversity of background, cognitive style, and experience enhances innovation, team performance and team management. However, these are not directly related to the holy grail of financial gain.
This research is valuable because it supports the well–established fact that diversity creates value. The issue is whether the indicator of female or person of color is what is providing that value. It’s more likely that ways of thinking, problem solving, or incorporating unique personal and professional experiences is the critical resource. If that is true, it suggests a possible interesting paradox for recruiting people of these social identities. As populations of women and people of color become more a part of the fabric of an inclusive organizations, those same organizations may lose the value of that uniqueness over time as they continue to recruit women and people of color.
The idea is that organizations socialize those who enter into them. People who thrive in the organization do so because they adopt the norms and ways of thinking that are dominant in the organization. Those who do not adopt those norms are more likely to exit. That pattern would persist no matter the identity of the person. As organizations recruit more women and people of color, they will begin to lose the benefit of the deep diversity that the initially recruited women and people of color brought. It reminds me of the early experience of affirmative action. When I entered my affluent prep high school, I was an inner city black kid who entered into a different world. The setting was foreign and though the adjustment was often difficult, I was better and I think I made the institution better because I brought a radically different way of being to the school. Today, the black kids who enter are smart, but also better prepared to operate in the prep school environment. They are more affluent and more prepared to attend a prep school. The metrics have not changed: there is no difference between a black kid from my generation and a black kid from the present generation. But when it comes to deep level diversity, there is a world of difference.
The value of diversity comes from the capacity of the organization to invite and extract the uniqueness from individuals of diverse identities in the service of the mission of the organization. Inclusion and diversity can’t be only about identifying a static difference—say, women—and loading up on more women in the organization. That might make a difference in the short run. But in the long run, the differences that matter most will be those that invite people who challenge the organization’s regular way of operating. And if the organization is truly ready for these mavericks, that organization will thrive.
[1] From Hunt, Vivian, Sara Prince, Sundiatu Dixon-Fyle, and Lareina Yee. “Delivering through Diversity.” McKinsey & Company, 2018. p. 1.
