While social justice, legal compliance, or maintaining industry standard employee environment protocols is typically the initial impetus behind [inclusion and diversity] efforts, many successful companies regard I&D as a source of competitive advantage, and specifically as a key enabler of growth.

—McKinsey & Company. Delivering Through Diversity, Jan 2018.

In the workplace, employee diversity can be a source of competitive advantage. Here are a few specific advantages:

• Leveraging a cross-cultural (in the broadest sense of the word) awareness to identify opportunities and avoid blind spots
• Increasing the productivity of employees who feel valued
• Improving an organization’s employer brand and, therefore, ability to recruit and retain talent
• Improving the market relevance and market value of a company/organization

For a financial performance view, let’s consider McKinsey Consulting’s research on diversity in the workplace. In a 2015 report titled Why Diversity Matters, McKinsey highlights the following findings, based on the composition of top management and boards:

• Companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians.
• Companies in the top quartile for gender diversity are 15 percent more likely to have financial returns above their respective national industry medians.
• Companies in the bottom quartile both for gender and for ethnicity and race are statistically less likely to achieve above-average financial returns than the average companies in the data set (that is, bottom-quartile companies are lagging rather than merely not leading).
• In the United States, there is a linear relationship between racial and ethnic diversity and better financial performance: for every ten percent increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes (EBIT) rise 0.8 percent.
• Racial and ethnic diversity has a stronger impact on financial performance in the United States than gender diversity, perhaps because earlier efforts to increase women’s representation in the top levels of business have already yielded positive results.

In their 2018 publication, Delivering Through Diversity, McKinsey Consulting again reported finding a “positive, statistically significant correlation between executive team diversity and financial performance.” Although correlation is not causation, the report notes that “there is a real relationship between diversity and performance that has persisted over time and across geographies.”^[2] The conclusion drawn from their 2015 Why Diversity Matters report still applies: “diversity is a competitive differentiator shifting market share toward more diverse companies.”^[3]

In May 2020, the McKinsey Quarterly published “Diversity Still Matters” where they take a look at the risks and opportunities that Covid-19 presents to inclusion, diversity, and equality in business settings.