McKinsey Analysis: The Importance of Diversity for Business Success is increasing
- European companies with mixed management teams are over 60% more likely to be more profitable than average.
- The effect has increased significantly in the crisis years since 2020. German companies are catching up in terms of their proportion of women, but are lagging behind internationally.
The business environment has changed significantly in recent years, but the diversity of management teams continues to correlate positively with higher financial returns. Companies with more women in management positions worldwide are 39% more likely to be more profitable than companies with the least diversity. This correlation has doubled since 2015; in 2020, the figure was 25%. In Europe (data analysed from Germany, Switzerland, France, Italy, Spain, Norway and Sweden), the diversity bonus is even more pronounced, with a 62% higher probability. Looking at the factor of ethnic diversity (internationality of management teams), the value is also 39% worldwide. This is according to the study "Diversity Matters even more", for which the management consultancy McKinsey analysed data from more than 1,200 companies in 23 countries.
On the other hand, companies in the lowest quartile for both gender and ethnic diversity are 66% less likely to perform better financially than the average. "Investing in diverse teams and having an inclusive corporate culture is also paying off more than ever in economic terms. If you don't take care of this, you risk being left behind. In Europe, diversity is even more of a differentiating factor, as mixed teams and an inclusive culture are even less pronounced across the board than in the USA, for example. Especially in difficult economic times, it pays off all the more to consider diverse perspectives and make more robust decisions," says Julia Sperling-Magro, McKinsey Partner and Head of the People & Organisational Performance Practice in Germany and Austria.
Germany remains at the bottom of the league for women in leadership
Gender diversity continues to gain ground worldwide. The average proportion of women in management teams – which include the Executive Board and up to three levels below – is 20%, which is one third more than in 2020. In Germany, the proportion of women is only 15%, although there has been a significant increase of seven percentage points since 2020. German companies are in a better position when it comes to the proportion of women on their boards, i.e., executive and supervisory boards: At 30%, their share is twice as high as in the management teams two to three levels below the board. However, this figure has stagnated since 2020 and remains the lowest among the European countries analysed.
"It is crucial not to rest on legal requirements, but to build a diverse talent pipeline throughout the company in the long term," says Sperling-Magro. It is not enough to rely on existing networks to develop candidate pipelines. The study shows: The most successful organisations start building diverse talent pipelines and networks early and actively nurture these relationships to fill upcoming board vacancies.
There is also a correlation between greater gender diversity in management positions and diversity in the company as a whole: A 10% increase in the proportion of women in leadership positions in 2019 led to an average increase of 2.1% in the proportion of female employees and managers in 2021, with 15% of women on boards still in their first year of employment. Nevertheless, only 5% of the companies surveyed worldwide still have no women on their boards – a significant improvement since 2019.
Diversity also correlates with sustainable corporate governance
The study also investigated how leadership diversity is linked to sustainable and holistic corporate governance, i.e., the positive impact on society, the workforce and the environment. The analysis revealed a clear correlation between all factors: the greater the diversity in management teams, the better companies perform in the assessment of their climate strategy and in the indicators for attracting and retaining talent. For example, a 10% increase in the proportion of women in management teams is associated with an increase of almost six points in the assessment of climate strategy and more than three points in the area of social commitment and philanthropy.
A 10% increase in the proportion of women in a management team is associated with a 2.1 point increase in the score for the indicators for attracting and retaining talent and for working conditions.
Click here to see the whole analysis for the Central Europe.