A recent article in the prominent U.S. publication, «The Wall Street Journal,» has reignited an old debate: the scientific foundation of the well-known 2015 McKinsey study linking diversity to corporate success appears to be shaky.
It is one of those significant questions people prefer to discuss privately and certainly not on the grand stage: Does diversity in companies—meaning a diverse executive team and a «colorful» board of directors—positively impact business success, ultimately reflected in the stock price?
Proponents of diversity rules often refer to a 2015 McKinsey study that suggests a positive correlation between ethnic and gender diversity in leadership bodies and company performance.
Widespread Impact
This study had a broad impact: Whenever there was a need to demonstrate that diversity in companies aligns with shareholders' interests and isn't just politically or reputationally motivated, financial institutions, regulators, and politicians cited it as a scientific basis.
It was also grist to the mill of the sustainability movement in the financial sector (ESG), as diversity is an important element of «Governance.»
McKinsey Study Scrutinized
Skeptics never fully quieted down. They may now feel vindicated by a report (subscription required) in «The Wall Street Journal» (WSJ). The Journal refers to recent investigations examining the methodology and results of the McKinsey study.
Researchers apparently found no correlation (a mere connection) and certainly no causation (a causal connection) between diversity and performance.
Correlation vs. Causation?
In response to the WSJ, McKinsey now asserts that a recent review of their study results, prompted by the latest criticism, confirmed that «diversity in leadership teams is associated with a higher likelihood of above-average financial performance.»
However, they have always pointed out that this is a correlation, not a causal relationship. The WSJ notes wryly that McKinsey itself has always spoken of the «benefits of diversity,» implying causation.
Alternative Explanations
For instance, women, who have more job opportunities due to many companies' diversity pledges and the still comparatively limited pool of female executives, might simply choose the better, more financially successful companies as employers (which is not unreasonable).
This could explain why the connection proposed by McKinsey exists, while leaving open the question of whether a higher proportion of women actually boosts company performance.
New Fuel for the Debate
One thing seems certain already: The debate over whether diversity is truly a positive driver of performance is gaining new momentum—and might soon be discussed again on stages and panels in a more contentious manner rather than as a matter of faith.
