diversity case study pdf

Diversity wins: How inclusion matters

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). Our latest report shows not only that the business case remains robust but also that the relationship between diversity on executive teams and the likelihood of financial outperformance has strengthened over time. These findings emerge from our largest data set so far, encompassing 15 countries and more than 1,000 large companies. By incorporating a “social listening” analysis of employee sentiment in online reviews, the report also provides new insights into how inclusion matters. It shows that companies should pay much greater attention to inclusion, even when they are relatively diverse.

In the COVID-19 crisis, inclusion and diversity matter more than ever

For business executives the world over, the COVID-19 pandemic  is proving to be one of the greatest leadership tests of their careers. Not only must they protect the health of their employees and customers, they must also navigate far-reaching disruption to their operations, plan for recovery, and prepare to reimagine their business models for the next normal.

In this challenging context, the task of fostering inclusion and diversity (I&D) could easily take a back seat—and the painstaking progress made by many firms in recent years could be reversed. As this report shows, however, I&D is a powerful enabler of business performance. Companies whose leaders welcome diverse talents and include multiple perspectives are likely to emerge from the crisis stronger. As the CEO of a European consumer-goods company told us: “I know we have to deal with COVID-19, but inclusion and diversity is a topic too important to put onto the back burner.”

On the other hand, some companies appear to be viewing I&D as a “luxury we cannot afford” during the crisis. We believe such companies risk tarnishing their license to operate in the long term and will lose out on opportunities to innovate their business models and strengthen their recovery.

If companies deprioritize I&D during the crisis, the impact will be felt not just on the bottom line but in people’s lives. Research and experience warn that diverse talent can be at risk during a downturn for several reasons—for example, downsizing can have a disproportionate impact on the roles typically held by diverse talent. As companies send staff home to work, this could reinforce existing exclusive behaviors and unconscious biases and undermine inclusion. In addition, inequality with regard to sharing childcare and homeschooling responsibilities, as well as the quality of home workspace (including broadband access), could put women and minorities at a disadvantage during this time of working remotely.

Companies need to seize this moment—both to protect the gains they have already made and to leverage I&D to position themselves to prosper in the future.

There is ample evidence that diverse and inclusive companies are more likely to make better, bolder decisions—a critical capability in the crisis. For example, diverse teams have been shown to be better able to radically innovate and anticipate shifts in consumer needs and consumption patterns. Moreover, the shift to technology-enabled remote working presents an opportunity for companies to accelerate building inclusive and agile cultures—further challenging existing management routines. Not least, a visible commitment to I&D during the crisis is likely to strengthen companies’ global image and license to operate.

By following the trajectories of hundreds of companies in our data set since 2014, we find that the overall slow growth in diversity often observed in fact masks a growing polarization among these organizations. While most have made little progress, are stalled or even slipping backward, some are making impressive gains in diversity, particularly in executive teams. We show that these diversity winners are adopting systematic, business-led approaches to inclusion and diversity (I&D) . And, with a special focus on inclusion, we highlight the areas where companies should take far bolder action to create a long-lasting inclusive culture and to promote inclusive behavior.

(Our research predates the outbreak of the global pandemic, but we believe these findings remain highly relevant. See the sidebar, “In the COVID-19 crisis, inclusion and diversity matter more than ever,” for more on why I&D must remain a priority even as the context shifts, or read “ Diversity still matters ” for an even deeper dive. You can also explore a related interactive  for another lens on the issues.)

A stronger business case for diversity, but slow progress overall

Our latest analysis reaffirms the strong business case for both gender diversity and ethnic and cultural diversity in corporate leadership—and shows that this business case continues to strengthen. The most diverse companies are now more likely than ever to outperform less diverse peers on profitability.

Our 2019 analysis finds that companies in the top quartile for gender diversity on executive teams were 25 percent more likely to have above-average profitability than companies in the fourth quartile—up from 21 percent in 2017 and 15 percent in 2014 (Exhibit 1).

Moreover, we found that the greater the representation, the higher the likelihood of outperformance. Companies with more than 30 percent women executives were more likely to outperform companies where this percentage ranged from 10 to 30, and in turn these companies were more likely to outperform those with even fewer women executives, or none at all. A substantial differential likelihood of outperformance—48 percent—separates the most from the least gender-diverse companies.

In the case of ethnic and cultural diversity, our business-case findings are equally compelling: in 2019, top-quartile companies outperformed those in the fourth one by 36 percent in profitability, slightly up from 33 percent in 2017 and 35 percent in 2014. As we have previously found, the likelihood of outperformance continues to be higher for diversity in ethnicity than for gender.

A McKinsey Live event on 'Creating an inclusive environment for transgender employees'

A McKinsey Live event on 'Women in the Workplace 2021: The state of women hangs in the balance'

Yet progress, overall, has been slow. In the companies in our original 2014 data set, based in the United States and the United Kingdom, female representation on executive teams rose from 15 percent in 2014 to 20 percent in 2019. Across our global data set, for which our data starts in 2017, gender diversity moved up just one percentage point—to 15 percent, from 14—in 2019. More than a third of the companies in our data set still have no women at all on their executive teams. This lack of material progress is evident across all industries and in most countries. Similarly, the representation of ethnic-minorities on UK and US executive teams stood at only 13 percent in 2019, up from just 7 percent in 2014. For our global data set, this proportion was 14 percent in 2019, up from 12 percent in 2017 (Exhibit 2).

The widening gap between winners and laggards

While overall progress on gender and cultural representation has been slow, this is not consistent across all organizations. Our research clearly shows that there is a widening gap between I&D leaders and companies that have yet to embrace diversity. A third of the companies we analyzed have achieved real gains in top-team diversity over the five-year period. But most have made little or no progress, and some have even gone backward.

This growing polarization between high and low performers is reflected in an increased likelihood of a performance penalty. In 2019, fourth-quartile companies for gender diversity on executive teams were 19 percent more likely than companies in the other three quartiles to underperform on profitability—up from 15 percent in 2017 and 9 percent in 2015. At companies in the fourth quartile for both gender and ethnic diversity, the penalty was even steeper in 2019: they were 27 percent more likely to underperform on profitability than all other companies in our data set.

Learn more about delivering through diversity

We sought to understand how companies in our original 2014 data set have been progressing, and in doing so we identified five cohorts. These were based on their starting points and speed of progress on executive team gender representation and, separately, ethnic-minority representation (Exhibit 3). In the first two cohorts, Diversity Leaders and Fast Movers, diverse representation improved strongly over the past five years: for example, gender Fast Movers have almost quadrupled the representation of women on executive teams, to 27 percent, in 2019; for ethnicity, companies in the equivalent cohort have increased their level of diversity from just 1 percent in 2014 to 18 percent in 2019.

At the other end of the spectrum, the already poor diversity performance of the Laggards has declined further. In 2019, an average of 8 percent of executive team members at these companies were female—and they had no ethnic-minority representation at all. The two other cohorts are Moderate Movers, which have on average experienced a slower improvement in diversity, and Resting on Laurels, which started with higher levels of diversity than Laggards did, but have similarly become less diverse since 2014.

We also found that the average likelihood of financial outperformance in these cohorts is consistent with our findings in the quartile analysis above. For example, in 2019, companies in the Resting on Laurels cohort on average had the highest likelihood of outperformance on profitability, at almost 62 percent—likely reflecting their historically high levels of diversity on executive teams. Laggards, on the other hand, are more likely to underperform their national industry median in profitability, at 40 percent.

How inclusion matters

By analyzing surveys and company research, we explored how different approaches to I&D could have shaped the trajectories of the companies in our data set. Our work suggested two critical factors: a systematic business-led approach to I&D, and bold action on inclusion. On the former we have previously advocated for an I&D approach based on a robust business case tailored to the needs of individual companies, evidenced-based targets, and core-business leadership accountability.

To further understand how inclusion matters—and which aspects of it employees regard as significant—we conducted our first analysis of inclusion-related indicators. We conducted this outside-in using “social listening,” focusing on sentiment in employee reviews of their employers posted on US-based online platforms.

While this approach is indicative, rather than conclusive, it could provide a more candid read on inclusion than internal employee-satisfaction surveys do—and makes it possible to analyze data across dozens of companies rapidly and simultaneously. We focused on three industries with the highest levels of executive-team diversity in our data set: financial services , technology , and healthcare . In these sectors, comments directly pertaining to I&D accounted for around one-third of total comments made, suggesting that this topic is high on employees’ minds.

We analyzed comments relating to five indicators. The first two—diverse representation and leadership accountability for I&D—are evidence of a systematic approach to I&D. The other three—equality, openness, and belonging—are core components of inclusion. For several of these indicators, our findings suggest “pain points” in the experience of employees:

• While overall sentiment on diversity was 52 percent positive and 31 percent negative, sentiment on inclusion was markedly worse, at only 29 percent positive and 61 percent negative. This encapsulates the challenge that even the more diverse companies still face in tackling inclusion (Exhibit 4). Hiring diverse talent isn’t enough—it’s the workplace experience that shapes whether people remain and thrive.
• Opinions about leadership and accountability in I&D accounted for the highest number of mentions and were strongly negative. On average, across industries, 51 percent of the total mentions related to leadership, and 56 percent of those were negative. This finding underscores the increasingly recognized need for companies to improve their I&D engagement with core-business managers.
• For the three indicators of inclusion—equality, openness, and belonging—we found particularly high levels of negative sentiment about equality and fairness of opportunity. Negative sentiment about equality ranged from 63 to 80 percent across the industries analyzed. The work environment’s openness, which encompasses bias and discrimination, was also a significant concern—negative sentiment across industries ranged from 38 to 56 percent. Belonging elicited overall positive sentiment, but from a relatively small number of mentions.

These findings highlight the importance not just of inclusion overall but also of specific aspects of inclusion. Even relatively diverse companies face significant challenges in creating work environments characterized by inclusive leadership and accountability among managers, equality and fairness of opportunity, and openness and freedom from bias and discrimination.

Winning through inclusion and diversity: Taking bold action

We took a close look at our data set’s more diverse companies, which as we have seen are more likely to outperform financially. The common thread for these diversity leaders is a systematic approach and bold steps to strengthen inclusion. Drawing on best practices from these companies, this report highlights five areas of action (Exhibit 5):

• Ensure the representation of diverse talent. This is still an essential driver of inclusion. Companies should focus on advancing diverse talent into executive, management, technical, and board roles. They should ensure that a robust I&D business case designed for individual companies is well accepted and think seriously about which forms of multivariate diversity to prioritize (for example, going beyond gender and ethnicity). They also need to set the right data-driven targets for the representation of diverse talent.
• Strengthen leadership accountability and capabilities for I&D. Companies should place their core-business leaders and managers at the heart of the I&D effort—beyond the HR function or employee resource-group leaders. In addition, they should not only strengthen the inclusive-leadership capabilities of their managers and executives but also more emphatically hold all leaders to account for progress on I&D.
• Enable equality of opportunity through fairness and transparency. To advance toward a true meritocracy, it is critical that companies ensure a level playing field in advancement and opportunity. They should deploy analytics tools to show that promotions, pay processes, and the criteria behind them, are transparent and fair; debias these processes ; and strive to meet diversity targets in their long-term workforce plans.
• Promote openness and tackle microaggressions. Companies should uphold a zero-tolerance policy for discriminatory behavior, such as bullying and harassment, and actively help managers and staff to identify and address microaggressions. They should also establish norms for open, welcoming behavior and ask leaders and employees to assess each other on how they are living up to that standard.
• Foster belonging through unequivocal support for multivariate diversity. Companies should build a culture where all employees feel they can bring their whole selves to work. Managers should communicate and visibly embrace their commitment to multivariate forms of diversity, building a connection to a wide range of people and supporting employee resource groups to foster a sense of community and belonging. Companies should explicitly assess belonging in internal surveys.

For deeper insights, download Diversity wins: How inclusion matters , the full report on which this article is based (PDF–10.6MB).

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Related articles.

Diversity still matters

Getting Serious About Diversity: Enough Already with the Business Case

It’s time for a new way of thinking. by Robin J. Ely and David A. Thomas

Summary .   

Leaders may mean well when they tout the economic payoffs of hiring more women and people of color, but there is no research support for the notion that diversifying the workforce automatically improves a company’s performance. This article critiques the popular rhetoric about diversity and revisits an argument the authors made 25 years ago: To fully benefit from increased racial and gender diversity, organizations must adopt a learning orientation and be willing to change the corporate culture and power structure.

Four actions are key for leaders: building trust and creating a workplace where people feel free to express themselves; actively combating bias and systems of oppression; embracing a variety of styles and voices inside the organization; and using employees’ identity-related knowledge and experiences to learn how best to accomplish the firm’s core work.

“The business case has been made to demonstrate the value a diverse board brings to the company and its constituents.”

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Managing Workforce Diversity in Organization: A Case Study on Aetna Health Care Service

2020, Journal of Islamic Studies

HIGHLIGHT The study has recommended the Aetna to change the traditional recruitment policy and give more concentration on employee retention rate. Technology driven talent management practices should be the time worthy policy of the Aetna. Focusing more on LAMP and MCC frameworks would enhance the effectiveness and efficiency in recruitment, retention, and talent management policies for the Aetna. ARTICLE HISTORY ABSTRACT Submit : Apr 22, 2020 In the last few decades, globalization has changed the business strategies of the companies. The current case study has tried to evaluate the Aetna's diversity approaches named 'The Aetna Way' policy along with its complexity of implementation in people management issues. The finding consists of investigation background; talent management process and its significance for the company; the Aetna's recruitment and retention policies and then tried to compare the Aetna's policies with close competitors and top performing companies; and the study points or recommendations.

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More diversity equals more profit? A fact check on diversity in companies.

Let’s take a look at the buzzword “diversity”, which many companies and organizations employ as a slogan. We asked experts about it – and they dispelled many a diversity myth. What also became clear is that true diversity requires a great deal of effort.

Marketing or a sophisticated diversity strategy?

For Women’s Day, companies post tiles on LinkedIn; during Pride Month, company logos appear in rainbow colors. Is it all just “diversity washing” or genuine commitment? It turns out that it depends.

Many companies have departments whose job it is to communicate both internally, with employees, but also externally. This external communication is the company’s shop window: outsiders are given insights, but these are chosen deliberately. For example, what is said in job interviews and written down in value agreements is part of external communication. So is the rainbow-colored company logo.

However, external communication also has an impact on the inside of the organization – just like the shop window of a business. Companies communicate values such as diversity precisely because the term is open. Many people can be enthusiastic about it: the workforce but also potential customers and applicants.

It becomes critical if the external image does not match the company’s reality in the long term. This can become apparent internally and quickly lead to problems. For example, when employees no longer believe the diversity successes communicated by management, as revealed by the EY European DEI Index published in 2024. The study analyzed the impact of diversity and inclusion initiatives on companies. Surveys have shown that while managers claim their companies are diverse and inclusive, many employees disagree. Where does this discrepancy come from? One conclusion of the EY European DEI Index is that managers underestimate the task and are themselves too optimistic about their inclusion and diversity performance.

These varying perceptions can lead to frustration, which in turn can severely disrupt the well-being of the organization, as a vision with a common starting point is missing. Does this mean there is no point in positioning yourself in an attention-grabbing way? Of course not. Decorating the company shop window with diversity is indeed important. This is how companies signal to the outside world whom they want to be enthusiastic about. But this is only the first step.

When diversity costs, commitment wavers

In the mid-1960s, the USA passed a revolutionary anti-discrimination law. This enshrined equal opportunities, inclusion, and diversity in law, and companies had to fear waves of lawsuits if they were unable to guarantee accessibility, for example. In the meantime, diversity in companies in the USA is to some extent on the retreat. Nevertheless, the USA has been able to gather experience for more than half a century, as documented in studies. In Germany, the General Act on Equal Treatment (AGG) did not come into force until 2006. This is another reason why research in this area is less extensive in Germany – but it does exist.

In 2023, together with colleagues, organizational sociologist Julia Gruhlich published a handbook on diversity and organizational research that provides an overview for academics and practitioners. In it, the authors describe “that the win-win promise of diversity as a ‘business case’ reaches its limits when it is not expected to deliver direct gain or is associated with high costs [...]’. Anything that is not profitable from a corporate perspective is easily ignored.

“Diversity has the reputation of being a neoliberal management strategy that is primarily geared toward wanting to utilize diversity economically.”

At the same time, it is often unclear exactly what diversity means. If this definition is missing, no structures that are important for the further development of organizations cannot be put in place. The focus on individuals and their potential or discriminatory behavior means that structures for diversity receive little attention: “This has earned the concept the reputation of being a neoliberal management strategy that is primarily geared toward wanting to exploit diversity economically,” write Gruhlich and her colleagues in the handbook.

Diverse teams generate more revenue - a myth

A study by McKinsey found that diverse management teams lead to increases in turnover. A misconception, says Jutta Rump, Professor of General Business Administration at the Ludwigshafen University of Business and Society: “In order to be able to seriously establish that there is a unicausal relationship between diversity and increased turnover, a study would have to be conducted over a long period of time, ideally under laboratory conditions and with the inclusion of a control group.”

In contrast, the costs of diversity can be very easily determined. Promoting diversity would mean equalizing wages, implementing objective evaluation systems, and offering training for employees. Last but not least, structural changes would sometimes have to be implemented to make companies barrier-free. All of this is expensive. “You can calculate quite well what diversity costs. But not what it yields,” confirms Gruhlich.

“You can calculate quite well what diversity costs. But not what it yields.”

Developing diversity is not always harmonious

A 2016 study by the London Business School compares the advantages and disadvantages of diverse teams: The wider range of knowledge, more intensive discussions of decisions, and more creative idea development are cited as positive points. The disadvantages would primarily lie in communication: Teams would find it more difficult to exchange ideas with each other, for example due to language barriers or varying levels of qualification. According to the study, this would lead to an increase in conflicts and team members supporting each other less. In the worst-case scenario, the consequence would be that employees change companies more frequently, fall ill more quickly, or contribute less often and less productively to individual processes.

Organizational sociologist Maja Apelt from the University of Potsdam puts it in concrete terms and uses the example of hospitals to explain the challenges that arise when massive staff shortages force companies to diversify. Applicants from abroad, for example, often come to Germany with only initial language skills: “These new workers encounter stress and understaffing in German hospitals. Colleagues on-site don’t have time to induct them into their new job or adapt to their often inadequate language skills. Reservations and contradictions arise in the workforce. Ultimately, diversity is not the problem, but the generally difficult staffing conditions.”

Formal structures help. Onboarding processes must be adapted to the situation and language barriers must be taken into account and supported. Even if time and resources are precisely the things that companies with a shortage of skilled labor lack, nothing else will help.

But we have a diversity working group!

Asserting that a corporate culture is diversity-friendly does not create a new culture. The opposite is the case: Instead of short-term assurances, a diversity-friendly corporate culture requires a sustainable strategy with a concrete plan of action. Diversity management helps with this. According to the University of Kassel, it not only helps to achieve corporate goals, but also has an impact on mindsets and qualifications within and between companies.

Establishing a corporate culture is not that easy, because it is like a footpath in a public park. The official, formal path leads around the outside of the green space. Because this is inconvenient, people walk diagonally across the meadow and gradually wear a path into the grass. In companies, this path is known as a short official channel. Corporate culture includes how people treat each other, what they laugh about, and who goes to the canteen with whom.

“Those responsible for diversity need power and resources.”

As a corporate culture can only be influenced indirectly through formal rules, it is important that organizations establish formal responsibilities for diversity. If appointed diversity officers have to carry out their work in their free time alongside their job, this allows conclusions to be drawn about how important the desired diversity really is: not that much. “Diversity officers need power and resources,” explains Gruhlich. If they have no decision-making powers, the accusation of diversity as pure showmanship activism will be fulfilled and they will have a hard time. 

Why diversity should be the aim, despite the effort

The studies show that diversity brings with it uncertainties and conflicts that do not exist in homogeneous companies. The benefits, on the other hand, are qualitative and anecdotal, but difficult to measure empirically. Should we therefore just forget all about it if the benefits can hardly be measured on the basis of evidence?

The question of whether diversity is an outdated concept seems like a farce, given the demographic facts: Germany’s citizens are getting older and older and are leaving the labor market. The shortage of skilled labor is already noticeable in many sectors and is causing a loss of revenue. If Germany’s economic strength alone were at stake, diversity and inclusion in companies would have to be focused on and promoted even more – because the labor market is dependent on this diversity.

But alongside the question of how relevant diversity is for the labor market, we can also ask: What kind of society do we want to live in? Aren’t companies always places where we negotiate social challenges? Brooke Gazdag, organizational psychologist at Kühne Logistics University in Hamburg, says that we shouldn’t get hung up on the term, but rather focus on what it stands for: “It’s not about diversity. That’s just a description of the status quo. It’s about inclusion and belonging. The question that companies need to ask themselves is how they can ensure that everyone in the company feels wanted.”

Genuine diversity: We are still a long way away

Social cohesion: what makes our society strong, justice concerns all of us.