Diversity Wins: How Inclusion Matters

Diversity
wins
How inclusion matters
May 2020
Preface
In the COVID-19 crisis, diversity and inclusion matter more than ever
For business executives the world over, the employees need to feel and perceive equality
COVID-19 pandemic is proving to be one of the and fairness of opportunity in their workplace.
greatest leadership tests of their careers. Not only Companies that lead on diversity have taken bold
must they protect the health of their employees steps to strengthen inclusion.
and customers, they must also navigate far-
Early signs suggest that the COVID-19 crisis could
reaching disruption to their operations, plan for
deepen these trends. Companies that already
recovery, and prepare to reimagine their business
see I&D as a strength are likely to leverage it to
models for the ‘next normal’.
bounce back quicker—and they will use this time
In this challenging context, the task of fostering to seek new opportunities to boost representation
inclusion and diversity (I&D) could easily take a and inclusion to strengthen performance and
back seat—and the painstaking progress made organizational health. As the CEO of a European
by many firms in recent years could be reversed. consumer-goods company told us: “I know we have
As this report shows, however, I&D is a powerful to deal with COVID-19, but inclusion and diversity is
enabler of business performance. Companies a topic too important to put onto the back burner”.
whose leaders welcome diverse talents and include
On the other hand, some of the companies we have
multiple perspectives are likely to emerge from the
spoken to are viewing I&D as a “luxury we cannot
crisis stronger. In short: diversity wins, now more
afford” during the crisis. We believe that these
than ever.
companies risk tarnishing their license to operate
This report was originally due for release in in the long term and could lose out on very real
March 2020, but we put publication on hold as the opportunities to innovate their business model and
COVID-19 crisis ensued. Since then, in talking to strengthen their business recovery.
CEOs, CXOs and CHROs and assessing the radically
If companies deprioritize I&D during the crisis,
changed business landscape, we have come to the
the impact is felt not just on the bottom line but in
conclusion that its findings are even more relevant
people’s lives. Research and experience warn us
right now.
that diverse talent can be at risk during a downturn
The report demonstrates that the business case for for several reasons, including that downsizing can
gender and ethnic diversity in top teams is stronger have a disproportionate impact on the roles typically
than ever. Since we first published Why Diversity held by diverse talent. 1, 2 As companies send
Matters in 2015, the likelihood of diverse companies staff home to work, this could reinforce existing
outperforming industry peers on profitability has exclusive behaviors and unconscious biases and
increased significantly. The data also shows that undermine inclusion. In addition, unequal sharing
there is a clear divergence in how companies are of childcare and homeschooling responsibilities,
engaging with I&D. A third of the firms we have and unequal availability of home workspace and
tracked over the past five years have significantly access to broadband could be putting women and
improved both gender and ethnic diversity on their minorities at a disadvantage during this time of
executive teams, while the majority have stalled or working remotely.
gone backwards.
Companies and their leaders can seize this
We also find that the dynamics around inclusion are moment—both to protect the gains they have
a critical differentiator for companies. Our evidence already made, as well as to leverage I&D to position
is that an emphasis on representation is not enough; themselves to prosper in the future.
1
How “Neutral” Layoffs Disproportionately Affect Women and Minorities, HBR, June 2016
2
McKinsey & Company, Women in the Workplace 2019
Diversity wins: How inclusion matters

There is ample evidence that diverse and inclusive purpose and values even more closely, potentially
companies are likely to make better, bolder even more so in the current pandemic. Those that
decisions—a critical capability in the crisis. tap into the growing sense of solidarity that is a
For example, diverse teams have been shown to be characteristic of the crisis—by reaffirming their
more likely to radically innovate and anticipate shifts commitment to I&D, supporting vulnerable talent
in consumer needs and consumption patterns— who are at greater risk of infection, and reaching out
helping their companies to gain a competitive edge. 3 to local communities—could strengthen employee
motivation and win lasting approval.
In this context, the shift to technology-enabled
remote working presents an opportunity for The findings and case studies presented in this
companies to accelerate building inclusive and agile report will be of enduring relevance to companies
cultures—further challenging existing management in every industry, long after the world has emerged
routines. With its benefits of increased flexibility, from the COVID-19 crisis. But we are convinced
remote working can facilitate retention of women that, as companies and their leaders navigate the
and minorities, who are often shouldered with a crisis itself and plan their emergence from it, they
disproportionate share of family duties. It thus will find that I&D is an essential enabler of recovery,
widens access to an array of diverse talent that may resilience, and reimagination.
not have been available to companies previously. 4
Moreover, a visible commitment to I&D during the

crisis is likely to strengthen companies’ global
image and license to operate. In times of crisis,
stakeholders typically interrogate a company’s
3
Ibid.
4
https://www.nytimes.com/2020/03/31/us/equal-pay-coronavirus-economic-impact.html
Vivian Hunt, DBE Sara Prince

Senior Partner, McKinsey & Company Partner, McKinsey & Company
London Atlanta
Sundiatu Dixon-Fyle Kevin Dolan

Senior Expert, McKinsey & Company Senior Partner, McKinsey & Company
London Chicago
May 2020
Diversity wins: How inclusion matters

Contents
Executive summary 3
Introduction 10
A stronger business case for diversity, but slow progress overall 13
Citigroup: strengthening equality of opportunity 22
The widening gap between winners and laggards 24
Pentair: building an inclusive culture 31
How inclusion matters 32
Target Corporation: staying open 39
Winning through inclusion and diversity: taking bold action 41
Lockheed Martin: breaking down barriers to inclusion 46
Conclusion 47
Methodology 48
About the authors 52
Acknowledgments 52
Diversity wins: How inclusion matters 1

2 Diversity wins: How inclusion matters
Executive summary
The business case for inclusion and diversity (I&D) is stronger
than ever. For diverse companies, the likelihood of outperforming
industry peers on profitability has increased over time, while
the penalties are getting steeper for those lacking diversity.
Progress on representation has been slow, yet a few firms are
making real strides. A close look at these diversity winners
shows that a systematic, business-led approach and bold,
concerted action on inclusion are needed to make progress.
Diversity Wins is the third in a McKinsey series A stronger business case for diversity,
investigating the business case for diversity, but slow progress overall
following Why Diversity Matters (2015) and
Our latest analysis reaffirms the strong business
Delivering through Diversity (2018).1 This report
case for both gender diversity and ethnic
shows not only that the business case remains
and cultural diversity in corporate leadership—
robust, but also that the relationship between
and shows that this business case continues
diversity on executive teams and the likelihood of
to strengthen. The most diverse companies are now
financial outperformance is now even stronger
more likely than ever to outperform
than before. These findings are underpinned by our
non-diverse companies on profitability.
largest data set to date, encompassing 15 countries
and more than 1,000 large companies. The report Our 2019 analysis finds that companies in the top
also provides new insights into how inclusion quartile of gender diversity on executive teams were
matters, through an analysis of employee sentiment 25 percent more likely to experience above-average
in online reviews; this shows that companies need profitability than peer companies in the fourth
to pay much greater attention to inclusion, even in quartile. This is up from 21 percent in 2017 and
relatively diverse industries. 15 percent in 2014.
By following the trajectories of hundreds of large Moreover, we found that the higher the
companies in our data set since 2014, we find that representation, the higher the likelihood of
overall slow growth in diverse representation in outperformance. Companies with more than
fact masks a growing polarization between these 30 percent women on their executive teams are
firms. While most are stalled or even slipping significantly more likely to outperform those with
backwards, some are making impressive progress in between 10 and 30 percent women, and these
improving diversity, particularly in executive teams. companies in turn are more likely to outperform
We show that these diversity winners are adopting those with fewer or no women executives.
systematic, business-led approaches to I&D, with As a result, there is a substantial performance
special focus on inclusion. And we highlight the differential—48 percent—between the most
areas where companies should take far bolder and least gender-diverse companies.
action to bring about lasting change in inclusive
culture and behavior.
1
The data set for Diversity Matters was assembled in 2014, while that for Delivering through Diversity was assembled in 2017. Likewise,
this report, published in 2020, is built on data gathered in 2019. We therefore refer to three data sets in this report—for 2014, 2017
and 2019.

In the case of ethnic and cultural diversity, the The widening gap between winners
findings are equally compelling. We found that and laggards
companies in the top quartile outperformed those
While overall progress on representation is slow,
in the fourth by 36 percent in terms of profitability
our research makes it clear that this in fact hides
in 2019, slightly up from 33 percent in 2017
a widening gap between leading I&D practitioners
and 35 percent in 2014. And, as we have previously
and companies that have yet to embrace diversity.
found, there continues to be a higher likelihood
A third of the firms we analyzed have achieved
of outperformance difference with ethnicity than
real gains in top-team diversity over the five-year
with gender.
period. But most firms have made little progress or
Despite this, progress overall has been slow. remained static and, in some, gender and cultural
In the companies in our original 2014 data set, representation has even gone backwards.
based in the United States and the United Kingdom,
This growing polarization between high and low
female representation on executive teams has
performers is reflected in an increased likelihood
risen from 15 percent in 2014 to 20 percent in
of a performance penalty. In 2019, fourth-quartile
2019. Across our global data set, for which our data
companies for executive-team gender diversity
starts in 2017, this number has moved up just one
were 19 percent more likely than companies in
percentage point from 14 to 15 percent in 2019—
the other three quartiles to underperform on
and more than a third of companies still have no
profitability. This is up from 15 percent in 2017
women at all on their executive teams. This lack of
and nine percent in 2015. And for companies in
material progress is evident across all industries and
the fourth quartile of both gender and ethnic
in most countries. Similarly, representation of ethnic
diversity the penalty is even steeper in 2019:
minorities on US and UK executive teams stood at
they are 27 percent more likely to underperform
only 13 percent in 2019, up from just 7 percent in
on profitability than all other companies in our
2014. For our global data set in 2019, this number
data set.
is 14 percent, up from 12 percent in 2017.

By tracking the progress of companies in our To further understand how inclusion matters—and
original 2014 data set, we identified five cohorts specifically what aspects of inclusion employees
based on their starting points and speed of consider to be significant—we conducted for
progress on executive-team gender representation the first time an analysis of indicators relating to
and, separately, ethnic-minority representation. inclusion, outside-in. This analysis focused on
The first two cohorts, Diversity Leaders and employee reviews about the firms they work for
Fast Movers, have shown strong improvement over made on online recruitment websites.
the past five years. For example, gender Fast
While this approach is indicative, it provides a more
Movers have almost quadrupled representation of
candid read on inclusion than internal employee-
women on executive teams to 27 percent in 2019;
satisfaction surveys do—and it allows data across
for ethnicity, companies in the equivalent cohort
dozens of companies to be analyzed rapidly and
have increased representation from just 1 percent
simultaneously. We focused on three industries
in 2014 to 18 percent in 2019.
with the highest levels of executive-team diversity
At the other end of the spectrum are the Laggards, in our data set: financial services, technology
which have seen their already poor diversity and healthcare. In these sectors, comments directly
performance decline further. In 2019, these firms pertaining to I&D made up around one-third of the
had an average of 8 percent female representation total comments made, showing that this topic is high
on their executive teams—and no ethnic-minority on employees’ minds.
representation at all. The two other cohorts
We analyzed comments relating to five indicators.
are Moderate Movers, which have on average
The first two—diverse representation and
experienced slower growth, and Resting on Laurels,
leadership accountability for I&D—are markers
which started with higher levels of representation
of a systematic approach to I&D. The other three
than did Laggards, but have similarly seen this
indicators—equality, openness, and belonging—
decline since 2014.
are core components of inclusion. Across several
We also found that the average likelihood of of these indicators, our findings suggest that there
financial outperformance in these cohorts are marked “pain points” in the experiences of
is consistent with our findings in the quartile employees, as follows:
analysis above. For example, in 2019 companies
— While overall sentiment on diversity was
in the Resting on Laurels cohort on average
52 percent positive and 31 percent negative,
have the highest likelihood of outperformance
sentiment on inclusion was markedly worse
on profitability, at almost 62 percent—possibly
at only 29 percent positive and 61 percent
reflecting their historically high levels of diversity on
negative—which encapsulates the challenge
executive teams. Laggards, on the other hand, are
that even the more diverse companies still face
more likely to underperform their national industry
in tackling inclusion. Hiring diverse talent isn’t
median profitability, at 40 percent.
enough—it’s the experience they have in the
workplace that shapes whether they remain
How inclusion matters and thrive.
We sought to explore how differing approaches
— Leadership and accountability as it pertains
to I&D could have shaped the trajectories of
to I&D accounted for the highest number of
the companies in our data set, through analysis
mentions, and was also strongly negative.
of surveys and company research. These pointed
On average across industries, 51 percent of
to two critical factors: a systematic approach to I&D,
the total mentions related to leadership, and
and bold action on inclusion.
56 percent of those mentions had negative
We have previously advocated a systematic, sentiment. This underscores the increasingly
business-led approach to I&D, based on a robust recognized need for companies to engage their
bespoke business case, evidenced-based targets core business managers better in the I&D effort.
and core-business leadership accountability.

— Considering the three indicators of inclusion— — Strengthen leadership accountability and
equality, openness, and belonging—we found capability for I&D. Companies should place
particularly high levels of negative sentiment their core business leaders and managers at
around equality and fairness of opportunity. the heart of the I&D effort—beyond their
Negative sentiment around equality ranged from HR functions or employee resource-group
63 to 80 percent across the industries analyzed. leaders. They also need to strengthen inclusive
Openness of the working environment, which leadership capabilities among their managers as
encompasses bias and discrimination, was also well as their executives, and more emphatically
of significant concern, with negative sentiment hold all leaders to account for progress on I&D.
across industries ranging from 38 to 56 percent.
— Enable equality of opportunity through
Belonging elicited overall positive sentiment,
fairness and transparency. It is critical that
but from a relatively small number of mentions.
companies ensure that there is a level playing
These findings highlight the importance not just field in advancement and opportunity, in pursuit
of inclusion overall, but specifically of the varying of true meritocracy. Companies should deploy
extents to which particular aspects of inclusion analytics tools to build visibility into
matter. Even where companies are more diverse, the extent to which promotions and pay
many appear as yet unable to cultivate work processes and criteria are transparent and fair.
environments which effectively promote inclusive They should de-bias these processes and work
leadership and accountability among managers, to meeting diversity targets across long-term
equality and fairness of opportunity, and openness workforce plans.
and freedom from bias and discrimination.
— Promote openness and tackle
microaggressions. Companies should uphold
Winning through inclusion a zero-tolerance policy for discriminatory
and diversity: taking bold action behavior such as bullying and harassment—
We took a close look at the companies in our data and actively build the ability of managers and
set that are achieving higher levels of diversity— staff to identify and address microaggressions.
and benefitting from an increased likelihood of They should also establish norms for what
financial outperformance. The common thread for constitutes open, welcoming behavior, and ask
these diversity winners is a systematic approach, leaders and employees to assess each other on
together with bold steps to strengthen inclusion. how they are living up to that behavior.
Drawing on best practices from these firms,
— Foster belonging through unequivocal
this report highlights five areas of action for
support for multivariate diversity. Companies
companies, as follows:
should build a culture in which all employees
— Ensure representation of diverse talent. This feel they can bring their whole selves to work.
is still an essential driver of inclusion. Companies Managers should communicate and visibly
should focus on advancing diverse talent into embrace their commitment to multivariate forms
executive, management, technical and board of diversity, building connection with diverse
roles. They should ensure that a robust, bespoke individuals and supporting employee resource
business-driven case for I&D exists and is well groups to foster a sense of community and
accepted, while being thoughtful about which belonging. Companies should also explicitly
forms of multivariate diversity to prioritize (for assess belonging in internal surveys.
example, going beyond gender and ethnicity).
They also need to set the right data-driven
targets for representation of diverse talent.

The business case for inclusion & diversity
is stronger than ever
Diverse companies are more likely to financially outperform their peers
Difference in likelihood of outperformance of 1st vs 4th quartile¹
Gender Ethnicity
15% 21% 25% 35% 33% 36%

2014 2017 2019 2014 2017 2019
The penalty for lagging on gender diversity is Progress on executive team diversity in our
growing, while top quartile companies are more 2014 dataset continues to be slow
likely to be at an advantage
Representation in US and UK
Difference in likelihood of financial outperformance² Gender Ethnicity
Penalty for bottom quartile 2014
14%
2014
-9% 7%
2017 -15% 2017
2019 -19% 18%
12%
Advantage for top quartile 2019
20%
2019 11%
13%
¹ Difference in likelihood of financial outperformance vs the national industry median of five years average EBIT margin, using the full dataset of companies in each year.
² Difference in likelihood of financial outperformance vs the national industry median of five years average EBIT margin for 4th quartile vs 1st-3rd quartile, and 1st quartile vs
2nd-4th quartile, using the full dataset of companies in each year.

There is a widening gap between leaders and laggards
One-third of the firms we tracked since 2014 have achieved real gains in executive team diversity. However
about 50% have made little or no progress and, within that, many have seen gender and ethnic minority
representation even go backwards.
Representation in US and UK, % 2014 2019
Diversity leaders Fast movers Resting on laurels Moderate movers Laggards
40
26 27 28
Gender 22 19
7 12 9 8
% of companies 5% 28% 29% 10% 28%
32
Ethnicity 17 18 18 3
1 12 10 1 0
% of companies 15% 24% 22% 12% 28%
Promoting diversity does not ensure a culture of inclusion
We used a social listening approach to analyze employer reviews posted online³
Overall sentiment on diversity is positive But sentiment on inclusion is the opposite
52% 31% 29% 61%

positive negative positive negative
Bold actions are needed to strengthen both inclusion and diversity
A systematic, business-led approach to I&D Bold steps to strengthen inclusion
Increase diverse representation, particularly Enable equality of opportunity through fairness

1 3
in leadership and critical roles and transparency
Strengthen leadership and accountability Promote openness, tackling bias and

2 4
for delivering on I&D goals discrimination
Foster belonging through support for

5
multivariate diversity
³ Social listening is the action of tracking social media platforms for mentions and conversations related to a brand or topic, then analyzing them for
insights to discover opportunities to act; US only.

Introduction
Over the past decade, many companies around the world have
incorporated I&D into their visions and strategies. Increasingly,
business leaders recognize that a diverse and inclusive employee
base—with a range of approaches and perspectives—is an asset
when competing in a fast-moving, globalized economy.
Along with growing acceptance of the business teams—the leadership groups that drive company
case for I&D, progress has been helped along strategy and organizational transformation, and act
by regulatory pressure, media scrutiny, and an as bellwethers for a company’s commitment
upswelling of social-justice demands. to I&D. Diversity Wins draws on an expanded data
set of more than 1,000 large companies in
Yet significant, sustainable progress remains
15 countries, comprising of company surveys, case
challenging. Companies are struggling not
studies, and interviews, as well as new analysis
because they haven’t put I&D on the agenda, but
of employee sentiment about I&D. (See Box 1:
because it’s hard to get right. Common pitfalls
Expanded data set, updated methodology.)
include fragmented I&D initiatives, overly relying
on individual commitments, and the lack of a clear The report sets out the findings of this research, and
link with the company’s core business strategy. the actions needed to strengthen I&D,
Many companies are battling additional headwinds in four sections as follows:
of uncertainty over the economy and the future of
— A stronger business case for diversity,
work more broadly, as well as the threat of diversity
but slow progress overall
fatigue and backlash.
— The widening gap between winners
This report, the third in the series after Why
and laggards
Diversity Matters (2015) and Delivering through
Diversity (2018), shows how some companies are — How inclusion matters
winning through diversity—and how others can — Winning through inclusion and diversity:
do the same. It continues to focus on diversity of taking bold action
gender and of ethnicity and culture in executive
Box 1
Expanded data set, updated methodology
Our purpose in the Diversity Matters series is to explore the link between increased gender and ethnic
diversity in companies’ top teams, and those companies’ business performance. We also seek to
provide a robust basis for tracking companies’ progress in advancing I&D among their leadership.
In so doing, we continue to substantiate the business case for diversity, and provide helpful insights
for companies seeking to strengthen diversity and translate it into business results.
Over the past five years, we have tracked the progress of hundreds of large companies (each with
annual revenues exceeding $1.5 billion) in countries around the world. For this report, we have
expanded that global data set to take in 1,039 companies in 15 countries: Australia, Brazil, France,
Germany, Norway, Denmark, India, Japan, Mexico, Nigeria, Singapore, South Africa, Sweden, the
United Kingdom, and the United States.

Our data set spans over 1,000 companies in 15 countries
Exhibit 1
Our data
Our dataof
Distribution set
set spans
spans
sample over1,000
by over
country1,000 companies
companies
and industry inin1515countries
group1, % countries
Distribution of sample by country and industry group1, %
Countries
Countries
2017 2019
2014
2019
+ 2014 2017
+
Brazil United Kingdom + Australia Germany Japan Singapore + Denmark Sweden
Mexico United States France India Nigeria South Africa Norway
Brazil United Kingdom Australia Germany Japan Singapore Denmark Sweden
Mexico United States France India Nigeria South Africa Norway
Regions, %
Regions, % 21 Continental
Europe
21 Continental
Europe
31 12
31
United
12
UK
States
United
States UK
4
4
Sub-Saharan 26
Africa
Sub-Saharan 26
Asia
Pacific
7 Africa Asia
Pacific
7
Latin
America
Latin
America
Industries, %
Industries, % 7
9 7 24
9 24
Consumer goods and retail
11 Energy, basic materials and environment
Consumer goods and retail
11 Heavy
Energy,industry
basic materials and environment
Telecom,
Heavy media and technology
industry
Finance,
Telecom,insurance
media andand professional services
technology
13 Healthcare and pharmaceuticals
Finance, insurance and professional services
22
13 Transportation,
Healthcare and logistics and tourism
pharmaceuticals
22
Transportation, logistics and tourism
15
1. n = 1,039. 15
Source: McKinsey Diversity Matters data set
1. n = 1,039.
Drawing on this unique data set, we have That said, I&D in other areas of leadership and
been able to conduct longitudinal analysis management is, of course, important too. We
of 365 large US- and UK-based companies include a brief discussion of diversity at board
included in our sample since 2014. For dozens level in this report, and we consider I&D across
of these companies, we have conducted company levels in other McKinsey research.2
in-depth interviews with senior executives to
Finally, although our research focuses on
understand their I&D challenges, strategies
gender and ethnicity as intrinsic forms of
and progress. That, in turn, has supported
diversity which are measurable at scale,
a segmentation of the companies into five
we recognize the increasingly multivariate
distinct cohorts.
nature of diversity—including multiple forms
We also undertook additional quantitative of acquired diversity such as educational or
analysis of inclusion in this report—the first socio-economic background, or diversity of
time we have done so. We used outside- thought. Over the past decade, traditional
in analysis of employee sentiment on I&D identities of race and gender have fractured
in several major industries to understand as people start to embrace openly a more fluid
the relationship between inclusion and the sense of who they are, highlighting the need to
experiences of diverse talent in organizations, recognize multiple forms of intersectionality.
what drives their engagement, and how this Although this is more difficult to measure,
influences diverse representation. it is a significant additional driver of the need
to focus on inclusion.
We should note that this report’s focus on
executive teams is deliberate, as these For further detail on our methodology,
leaders are the primary drivers of company see page 48.
strategy and organizational transformation.
2
See, for example, Women in the Workplace 2019, October 2019, McKinsey.com.

A stronger business case for
diversity, but slow progress overall
The business case for I&D as a source of competitive advantage
is growing stronger. Increasingly, we find that the most diverse
companies recognize I&D as more than a social-justice imperative;
they also see it as a core enabler of growth and value creation.
These diversity winners are pulling ahead of the rest.
For five years our research has shown a positive, For both executive teams and boards, gender
statistically significant correlation between company and ethnic diversity has progressed—but
financial outperformance and diversity, on the progress is still very slow. But this overall picture
dimensions of both gender and ethnicity. This masks the fact that some companies have made
is evident at different levels of the organization, impressive advances over the past five years.
particularly on executive teams. In our updated 2019 Across geographies and industries, these diversity
data set—covering 15 countries on five continents— winners are pulling ahead on both gender and ethnic
this correlation holds and is even stronger. And we are diversity on executive teams. In this section of the
also seeing that the positive correlation between board report we consider each dimension in turn.
diversity and financial outperformance observed in
our previous research has now become statistically
significant. (See Box 2: The increasingly clear link
between board diversity and business performance.)
Box 2
The increasingly clear link between board diversity
and business performance
Our expanded 2019 data set shows that companies whose boards are in the top quartile of gender
diversity are 28 percent more likely than their peers to outperform financially. In previous years, while
the correlations were positive between board gender diversity and outperformance on earnings
before interest and taxation (EBIT) margin, they were not statistically significant; now they are.
This difference in significance could be linked to an overall rise in female representation on boards.
In recent years, many countries have ramped up efforts to boost this, as evidenced by the significant
uptick in representation we have observed in several countries. For example, companies in France
and Norway have, on average, over 40 percent women on their boards. We hypothesize that this
higher representation may be linked to the increased likelihood of financial outperformance of their
companies becoming statistically significant.
The interplay between boards, executive teams and company profitability is not well understood.
Could these more diverse boards be operating differently? Or could a visible commitment to board
diversity be signaling a company’s openness towards increasingly diverse customers, employees,
businesses and communities, which in turn is positively influencing financial performance?
Board diversity could symbolize a company’s commitment to equality, innovation and inclusive growth.
Certainly, these questions warrant further research. 3
3
“Toward a value-creating board: McKinsey Global Survey results,” 2016, McKinsey.com.

A clear opportunity from pushing on gender diversity in boards has been similarly
towards gender parity slow, albeit with a marked uptick in the past two
years. Across our full 2019 data set of 15 countries,
When we assessed our original 2014 data set,
progress (tracked since 2017) has been even slower
we found that companies in the top quartile for
(Exhibit 3). Women make up just 15 percent of
gender diversity in their executive teams were 15
executive-team membership, and more than
percent more likely to experience above-peer-
a third of companies have no women at all on their
average profitability than companies in the fourth
executive teams.
quartile. 4 Three years later, in our Delivering through
Diversity report, this had increased to 21 percent. Taking a country lens, progress towards female
In our 2019 data set, it has increased again to 25 representation on executive teams is low in most
percent (Exhibit 2). As mentioned above, female countries (Exhibit 4). We observe extremes in
representation on executive teams has also representation, ranging from Norway, where all
increased slowly but steadily during this time frame, the companies in our data set have at least one
widening the gap between the top and bottom female executive, to several major economies—
quartiles. This has also been the case for gender including Brazil, India, Germany and Japan—
diversity on boards, which we discuss in Box 2. where up to 83 percent of companies have zero
women on their executive teams, and female
Female representation on the executive teams of
representation averages 8% or less. Developed
the mostly US and UK companies we have been
countries on average have higher rates of diversity
tracking since 2014 has risen from 15 percent in
representation than do emerging economies.
2014 to 20 percent in 2019. This represents an
(See Box 3: Comparing gender diversity in
annual average change over the past five years
developed and emerging economies.)
of just 1.1 percentage points per year. Progress
4
Our 2014 original data set consisted of 383 companies largely in the United States and the United Kingdom. In 2017, this data set had
grown to 991 companies from 12 countries and our 2019 data set consisted of 1,039 companies from 15 countries, including three
Scandinavian countries; Women Matter: Reinventing the workplace to unlock the potential of gender diversity, 2015, McKinsey.com.
Exhibit 2
The business
The business case
case for
forgender
genderdiversity
diversityononexecutive
executive teams
teams is is stronger
stronger than
than ever
ever
Likelihood of financial outperformance1, %
Quartile 4th 1st Median
Why diversity matters Delivering through diversity Div ersity win s

20142 20173 20194
+15% +21% +25%

54 55 55
47 45 44
50 50 50
1. Likelihood of financial outperformance vs the national industry median. p-value <0.05, except 2014 data where p-value <0.1.
2. n = 383; US, UK, and Latin America; EBIT margin 2010-2013.
3. n = 991; US, UK, Brazil, Mexico, Australia, Japan, India, Singapore, Germany, France, South Africa, and Nigeria; EBIT margin 2011-2015.
4. n = 1,039; 2017 companies for which gender data available in 2019 plus Denmark, Norway, and Sweden; EBIT margin 2014-2018.
Source: Diversity Matters data set

Gender and ethnic diversity in leadership teams has progressed slowly in our 2014 data set
and even slower in our global 2017 data set
Gender
Exhibit 3 and %
Representation, ethnic diversity in leadership teams has progressed slowly in our 2014 data set
Gender and ethnic diversity
and even slower indiversity
and ethnic in2017
in
our global leadership
leadership teamshas
teams
data set hasprogressed
progressedslowly
slowly
in in our
our 2014 data
original 2014set
and
data even
set slower in our global 2017 data set
Representation, %
Leadership teams
Representation, % from 2014 data set Board Executive team
Leadership
Gender teams
1 from 2014 data set Ethnic minorities1
Board Executive team
Leadership teams from 2014 data set Board Executive team
Average annual change,
Gender1 percentage points Ethnic minorities1
Gender1 Ethnic minorities1
Average annual
percentage change,
points Average annual change,
percentage points
+1.3 percentage points
28
24 +1.3 Average annual
percentage change,
points
21 28 20
+1.1
+1.3 percentage points
19 28 17
+0.8
24
15 24 +1.1 +1.1
21 20 +1.1 14 13
21 19 20 13 12 +0.8
19 17 +0.8
15 17
15 7 14 +1.1
13 14 12 13 +1.1
13 12 13
7
2014 2017 2019 2014 7 2017 2019
1. n = 365 for women and n = 241 for ethnic minorities; Subset of companies from Diversity Matters 2014 dataset with ethnicity data available for 2014,
2017 2014
and 2019. 2017 2019 2014 2017 2019
2014 2017
2019 2014 2017 2019
1. n = 365 for women and n = 241 for ethnic minorities; Subset of companies from Diversity Matters 2014 dataset with ethnicity data available for 2014,
2017
1. n andfor
= 365 2019.
women and n = 241 for ethnic minorities; Subset of companies from Diversity Matters 2014 dataset with ethnicity data available for 2014,
2017McKinsey
Source: and 2019.Diversity Matters data set
Leadership teams from global 2017 data set Board Executive team
Leadership teams from global 2017 data set Board Executive team
Genderteams
Leadership 1
from global 2017 data set Ethnic minorities2 Board Executive team

Gender1percentage points Ethnic minorities2
Gender1 Ethnic minorities2
Average annual change, Average annual change,
Average annual
percentage change,
points percentage points
percentage points
+0.0 Average annual change,
24 24 Average annual
percentage change,
points
percentage points
24 24 +0.0 +1.0
+0.5
+0.0 16
24 14 24 15 14 14 +1.0
12
16 +1.0
15 +0.5 +1.0
14 +0.5 14 16 14 +1.0
14 15 14 12 14 +1.0
12
2017 2019 2017 2019
1. n = 957 (global dataset) in 2017 and 2019.

2017 2019 2017 2019
2017 2019 2017 2019
2. n
1. n== 957
528 (global
(global dataset)
dataset) in
in 2017
2017 and
and 2019.
2019.
2. n = 528
Source: (global Diversity
McKinsey dataset) in 2017 and
Matters data
Diversity 2019.
set How inclusion matters
wins: 15
Exhibit 4
In
In nearly
nearly all
nearly all 15
all 15countries,
15 countries,women
countries, womenare
women areunderrepresented
are underrepresentedonon
underrepresented onexecutive teams
executive
executive teams
teams
Female
Female representation,
representation, %
%
Average female
Average female Companies
Companies with
with at
at
Female
Female workforce
workforce
representation11
representation least one
least one woman
woman onon participation
participation
executive
executive team
team
Norway
Norway 28
28
100
100 48
48
Australia
Australia 27
27
98
98 46
46
Sweden
Sweden 24 94
94 47
47
24
United
United States
States 21 90
90 45
45
21
Singapore
Singapore 19 73
73 44
44
19
United
United Kingdom
Kingdom 18
18 76
76 46
46
South
South Africa
Africa 18 75
75
44
44
18
Nigeria
Nigeria 17
17 80
80 46
46
Denmark
Denmark 13
13 47
47 47
47
France
France 13
13 64
64 45
45
Brazil
Brazil 8
8 40
40 42
42
Germany
Germany 8
8 48
48 45
45
Mexico
Mexico 8 46
46
36
36
8
India
India 5 28
28
23
23
5
Japan
Japan 3 17
17
42
42
3
A
Avve
erraa g
gee 15 65
65
15
1.
1. nn=
= 1,039;
1,039; 2019.
2019. Respective
Respective weighted
weighted averages:
averages: 9%
9% and
and 45%
45%
Source:
Source: Diversity Matters data set; World Bank (labor force participation
Diversity Matters data set; World Bank (labor force participation rate,
rate, September
September 2019)
2019)

At the current rate of progress, it will take 29 years better all-round board performance, and ultimately
and 24 years respectively for the average US and increased corporate performance for both
UK company in our data set to reach gender parity companies and their shareholders.”7
on its executive team, and 18 years and 13 years
Our data set appears to substantiate this view and
on boards. 5 Again, that picture differs radically
shows that there are likely additional benefits to
by country: comparable figures for Brazil are 238
pushing for gender parity on executive teams.
years on executive teams and 27 years on boards. 6
In our US and UK data set, companies with female
The overall slow pace of progress across industries executive-team representation exceeding
and countries is a missed opportunity—and 30 percent are significantly more likely to
leaves most companies far off well-established outperform those whose executive teams are
targets, such as the minimum 30 percent female between 10 and 30 percent female. 8 Those
representation on boards and executive teams companies, in turn, are more likely to outperform
put forward by the United Kingdom’s 30% Club those with fewer than 10 percent female
a decade ago. This coalition of business leaders executive-team representation. As a result, there
believes the following: is a substantial likelihood of outperformance
differential—48 percent—between the most
“Gender balance on boards and in senior
and least gender-diverse companies (Exhibit 5).
management not only encourages better leadership
and governance, but diversity further contributes to
5
Calculated by extrapolating rates of increase in representation since 2014 in our original data set.
6
Our 2015 Women in the Workplace report stated that companies in the United States were 100 years away from gender parity in the
C-suite, based on progress in female representation between 2012 and 2015. While this progress has accelerated over the 2014–19 time
period, we should also note that our current report draws on a different data set of companies, so its findings are not strictly comparable
with those of Women in the Workplace.
7
https://30percentclub.org/about/who-we-are. In the United Kingdom, the target of 30 percent average female representation on
executive teams and boards of major listed companies has since been met.
8
On EBIT margin.
Exhibit 5
Executive
Executive teams
teams with
withmore
morethan
than30%
30%women
womenare
aremore
morelikely toto
likely outperform those
outperform with
those with
fewer or
fewer or no
nowomen
women
Likelihood of financial outperformance1, 2014, %
+18%
Median
+25%
63
54
50 43
+48%
Women on executive teams2, % 0-10 10+ 30+

Number of companies 114 210 41
1. Likelihood of financial outperformance vs the national industry median.

2. n = 365; US and UK; EBIT 2014-2018.

This finding begins to substantiate the business We also took a close look at the roles women occupy
rationale for pushing further than historical 30 in executive teams—in particular, the extent to which
percent representation targets, and closer towards they occupy line decision-making roles, which have
gender parity on executive teams. Yet very few the most direct influence on business performance
companies today are close to this. In our latest data and provide a stronger path to the CEO position.
set, only around 4 percent of companies have more Only one-third of women executives in our 2019
than 40 percent women on their executive team. data set sample occupied line roles, with two-
On the other hand, 42 percent of companies have thirds occupying support or staff roles. Further, for
10 percent or less female executives. companies in the bottom two quartiles for gender
diversity, the proportion of women in staff roles is
Taking a view across industries, we find significant
even greater. These proportions have barely shifted
differences in the rates of progress since 2014
since we started tracking such roles in 2017, and are
(Exhibit 6). Female representation in executive
consistent across other areas of our research.9
teams has increased at the fastest rates in the
financial services and the technology and media Taking an intersectional lens to our US data
industries, at about 1.5 percentage points a year. set, we find that black women continue to be
In healthcare, by contrast, it has increased at just disproportionately underrepresented in line roles,
0.3 percentage points a year, despite this being with only 5 percent of female line roles held by black
an industry where female representation at entry women. Of the 33 percent of women who occupy
level is particularly high. Surprisingly, this starting line roles, the vast majority—83 percent—are white.
point does not appear to have led to a stronger push Asian women (9 percent) and Hispanic women (2
towards gender parity in healthcare leadership— percent) make up the rest. In the United Kingdom
as the slow growth rate shows. the picture is similar.
9
Women in the Workplace, October 2018 & 2019, McKinsey.com.
Exhibit 6
Acrossmajor
Across majorindustries,
industries, female
female executive
executive representation
representation remains
remains below
below 25%, and 25%,
has and
has increased
increased slowlyslowly since 2014
since 2014
Average female representation 1, % 2014-2019 annual growth, p.p.
Healthcare 24 0.3
Finance 24 1.5
Technology and media 21 1.4
Retail 20 0.8
Transport and tourism 19 1.1
Energy and materials 18 1.3
Heavy industry 18 1.1
Average 21 1.1
1. n = 365; US and UK; 2019.


Previous McKinsey research has found that black In aggregate, the above findings make it clear that
women face the greatest barriers to progress in there is opportunity for most companies to take
the workplace, a consequence of accumulation of much bolder action to advance gender diversity
different forms of discrimination, including racism, on executive teams—and to push towards parity
sexism, and classism. In the United States, for and increased representation in line decision-
example, we have shown that for every 100 men making and technical roles.
who receive their first promotion from entry level
to manager, only 79 women receive that same
promotion. For black women that number is 60.10
10
Women in the Workplace 2019, op. cit.

Box 3
Comparing gender diversity in developed and emerging economies
We compared the likelihood of outperformance on profitability for firms in advanced economies
with that for their counterparts in emerging economies. We hypothesized that the business case for
gender diversity would be stronger in advanced economies where markets are typically more efficient
and the I&D agenda is often more advanced at national level.
What we found backs this up. The likelihood of financial outperformance by companies with gender-
diverse executive teams climbs to a high of 47 percent in advanced economies that have high gender
parity, such as the United States, the United Kingdom, Finland, and Sweden. By contrast, the
likelihood of financial outperformance by such gender-diverse companies stood at an average of
17 percent in lower-parity emerging economies such as Brazil, India, and Nigeria.
The fact that they are trailing offers firms in emerging and low gender-parity economies an
opportunity to learn from the progress and mistakes of their peers in more developed markets.
They have the opportunity to replicate what works and, more importantly, skip what doesn’t—
creating the possibility that they can leapfrog to a position of greater competitive advantage.
Ethnic and cultural diversity: 36 percent higher likelihood of outperformance

potentially an even bigger opportunity on EBIT margin for top quartile companies for
As with our Delivering through Diversity report, we ethnic and cultural diversity on executive teams—
analyzed data from countries where the definition up from 33 percent in 2017 and 35 percent in 2014
of ethnic and cultural diversity was consistent, (Exhibit 7). This is consistently higher than for
and our data were reliable.11 We found that the gender diversity, but with progress similarly slow.
business case for ethnic and cultural diversity was The business case for ethnic and cultural diversity
comparable to our previous findings, with a on boards remained significant in 2019. (See Box 2).
11
The countries included in the analysis were the United States, the United Kingdom, Brazil, Mexico, and Singapore.
Exhibit 7
The business
The business case
case for
forethnic
ethnicdiversity
diversityon
onexecutive
executiveteams
teams remains
remains strong
strong
Quartile 4th 1st Median
Why diversity matters Delivering through diversity Diversity wins

20142 20173 20194
+35% +33% +36%

58 59 59
43 50 44 50 43 50
2. n = 364; US, UK, and Latin America; EBIT margin 2010-2013.
3. n = 589; US, UK, Brazil, Mexico, Singapore, and South Africa; EBIT margin 2011-2015.
4. n = 533; US, UK, Brazil, Mexico, Singapore, Nigeria, and South Africa where ethnicity data available in 2019; EBIT margin 2014-2018.

The findings highlighted in Exhibit 7 support representation in the general population.12
the argument that there is significant opportunity The United Kingdom, at 9 percent non-majority
from promoting ethnic and cultural diversity in representation on executive teams, is just under
companies’ top teams. Yet despite this, ethnic halfway to achieving fair-share representation
diversity appears to have been less of a focus of ethnic minorities (20 percent), while all others
than gender for many companies—hence the slow are further behind, including the United States
progress. In the United States and the United (14 percent on executive teams compared to
Kingdom, overall ethnic-minority representation 37 percent fair share).
in executive teams moved from 7 percent in 2014
Beyond average representation, the proportion of
to 13 percent in 2019 (see Exhibit 2, above). Not
companies in our data set with zero non-majority
surprisingly, as with gender diversity, we found that
representation in their executive teams is a telling
most countries and industries need to pick up the
measure of the lack of progress: in the United
pace in strengthening ethnic diversity in leadership.
States this is 31 percent, in the United Kingdom
As we saw for gender above, we found significant 58 percent, and in Brazil 73 percent. There is a
differences across the six countries for which significant opportunity for many companies that
we analyzed executive ethnic diversity. Only have fallen behind on this measure. By increasing
in Singapore was this in line with “fair share” ethnic and cultural diversity on their top teams,
representation, with the companies in our data set they could potentially reinvigorate performance
averaging 33 percent non-majority representation and growth.
on their top teams—well above the 24 percent
12
Fair share is calculated based on diverse representation in each country’s population.

Citigroup: strengthening
equality of opportunity
Global investment banking company Citigroup is powering
ahead with a no-nonsense I&D agenda and placing equality,
accountability and transparency at the center of everything
that it does.
It’s a common refrain in the I&D space: there’s majority talent by location to counter
not enough female or black talent in a particular the talent-shortage myth and uses a heatmap
industry and that is why targets can’t be achieved— showing how different areas are trending in order
but that’s a story Citigroup just isn’t buying into. both to increase transparency and to create a bit
of healthy competition.
A fast mover—Citigroup has gone from 8 percent
gender diversity on its executive team in 2014 to Having secured diverse talent, the retention and
over 30 percent in 2019—the firm places equality promotion of this is a key priority. “You can’t over-
of opportunity, accountability and transparency index on hiring and expect that that’s going to
at the center of everything that it does. Business solve the problem,” says Hogan. “You can’t just
leaders at all levels are directly involved in and held think about retention, you also have to think about
accountable for advancing I&D across the firm, promotion. In this it all comes down to culture.”
with scorecards presented at each board meeting
Which is why the firm is ratcheting up the focus
where “very granular” and “very transparent”
on building an inclusive workplace. Here too,
conversations are encouraged.
transparency is key. Believing that creating a diverse
“We are not debating any more whether I&D is and inclusive culture is the responsibility of all of its
the right thing to do,” says Teri Hogan, Global Head employees, not just those who identify with a certain
of Talent and Diversity. “We spent a long time on gender, ethnicity or affinity, Citigroup has invested
the business plan and our CEO is on record as heavily in Implicit Association Test (IAT) training
saying it’s simply ‘smart business’—now we just and Affinity Groups to enable people to talk openly
need to get down to delivering.” about barriers and the need to hold themselves and
others to account. They are not shying away from
The focus is on three key areas: targeted
difficult and uncomfortable conversations and,
recruitment, development and retention, and
when they do fall short, they strive not to sweep
promotion paths and processes. On the recruitment
their failings under the carpet.
front, accountability is foregrounded through
cascading targets for women and non-majority “You have to think big and bold,” says Hogan.
staff. And these targets are in the public domain. “When it comes to I&D you have to address every
The company also works with external providers to part of the system because this cuts across all
set targets and determine the availability of non- aspects of the organization.”

The widening gap between
winners and laggards
One-third of the firms we tracked—our diversity winners—have
achieved real gains in top-team diversity. But most of the firms we
analyzed have made little or no progress and, for some, gender
and cultural representation has even gone backwards.
We sought to establish whether the few penalty highlighted in our earlier reports remains.
companies progressing far more boldly on diverse Companies in the bottom quartile for gender diversity
representation in leadership were also starting to on executive teams are more likely to underperform
pull away from their peers in terms of a widening all other companies in the data set to an increasing
likelihood of financial outperformance. Our analysis extent: from 9 percent in 2014 to 19 percent in 2019.
shows clearly that this is the case: companies in the Considering both gender and ethnicity, bottom-
top quartile for both gender and ethnic diversity quartile companies on both dimensions were 27
are 12 percent more likely to outperform all other percent more likely to underperform than all other
companies in the data set (Exhibit 8). firms in the data set in 2019, similar to the 29 percent
we found in 2017 (Exhibit 8).
For the larger group of companies that are making
little or slow progress with diversity, the performance
Companies in the top quartile

for both gender and ethnic
diversity are 12 percent more
likely to outperform all other
companies in the data set.

Exhibit 8
The penalty for
for lagging
laggingon ondiversity
diversityisisgrowing,
growing,while
whiletop-quartile
top quartilecompanies are
companies more
are likely
more
likely
to to outperform
outperform all theirallpeers
their peers
Penalty for bottom quartile Advantage for top quartile

Quartile 4th 1–3rd Quartile 2nd–4th 1st
Why diversity Delivering through Diversity wins Diversity wins

matters 20142 diversity 20173 20194 2019
-9% -15% -19% +11%
47 52 45 53 44 54 50 55
Gender
-25% -29% -27% +12%
53 57 54 51 57
40 40 39
Gender
and Ethnicity
2. n = 383 for Gender; n = 364 for Gender and Ethnicity; US, UK, Brazil, and Mexico; EBIT 2010-13.
3. n = 991 for Gender; n = 589 for Gender and Ethnicity; US, UK, Brazil, Mexico, Australia, India, Japan, Singapore, France, Germany, Nigeria,
and South Africa; EBIT 2011-2015.
4. n = 1,039 for Gender; n = 533 for Gender and Ethnicity; US, UK, Brazil, Mexico, Australia, India, Japan, Singapore, France, Germany,
Nigeria, South Africa, Denmark, Norway, and Sweden; EBIT 2014-18.

Defining five cohorts of companies — Fast Movers (28 percent of the data set). These
with different rates of progress companies have shown exceptional improvement
on diversity to an average of 27 percent female representation
in 2019, off a very low base (an average of
The above findings highlight the fact that companies
7 percent in 2014). It is encouraging that this
across countries and industries are facing
cohort makes up a significant share of the data
significant challenges in actually capturing the
set—and that almost 30 percent of companies
potential of diversity. To extend our understanding
in this cohort are also Fast Movers on ethnic
of why this is the case—and what firms need to
diversity. These companies have typically placed
do differently—we tracked the progress of 365 of
strong recent focus on I&D, with systematic
the companies in our original 2014 data set, based
moves including developing a bespoke business
in the United States and the United Kingdom.
case with ambitious I&D targets, promoting full
We segmented these firms into cohorts based on
transparency including talent processes and pay,
their starting levels of executive-team diversity,
and deploying effective retention initiatives. They
and their rates of progress between 2014 and 2019.
are increasingly emphasizing developing a fair
We then complemented this analysis with research
and inclusive culture. Many are in traditionally
and interviews with a variety of companies, from
more male-dominated industries such as mining,
those that had made huge strides in top-team
finance, and professional services.
representation to those that had struggled to do so.
— Resting on Laurels (29 percent of the data
For progress on executive-team gender diversity,
set). These companies started with significant
we identified the following five cohorts (Exhibits 9
diversity, with an average of 28 percent female
and 10):
representation on their executive teams in
— Diversity Leaders (5 percent of the data 2014—but they have made no progress over
set). These companies have shown sustained the past five years, on average slipping to 22
improvement and are approaching gender percent female representation in 2019. This is
parity, with on average 40 percent women despite many being in traditionally more female-
executives in 2019, off an already solid base of oriented industries, such as healthcare and
26 percent in 2014. Our interviews showed that retail. These companies have tended to take
these firms have typically taken a systematic, a less systematic approach to I&D, supporting
business-led approach to I&D for at least five initiatives such as employee resource groups
years, have a strong culture of accountability, but with apparently less emphatic efforts to
and are deploying innovative and ambitious tackle the barriers limiting representation of
interventions, supported by strong leadership women and minorities at the very top. In some
commitment. Most are taking bold and instances, the issue has been holding on to
courageous steps to build fairer and more progress in representation. This was particularly
inclusive workplace cultures at all levels of the striking in companies whose executive teams
organization. We found Diversity Leaders across were more than 40 percent female in 2014: all
industries, from consumer goods experienced a drop in executive-team gender
and retail through to aerospace. diversity between 2014 and 2019.
Diversity Leaders are taking bold and

courageous steps to build fairer and
more inclusive workplace cultures
at all levels of the organization.

— Moderate Movers (10 percent of the data set). — Laggards (28 percent of the data set). These
Among these companies, female representation companies’ already low gender diversity has
on executive teams increased from 12 percent declined further over the five-year period, from
to 19 percent over the five-year period. an average of 9 percent female representation
Typically, these companies have found that on executive teams in 2014 to 8 percent in
their generally unspecific and low-profile public 2019. A large proportion, 51 percent, are also
commitments to I&D are failing to translate into Laggards on ethnicity. Companies in this cohort
tangible progress on representation, including have typically not embarked on a purposeful
that at senior levels, or into a fair and inclusive I&D journey, or have taken a fairly unambitious,
workplace culture. This limited momentum somewhat “box-ticking” view of I&D. They
results from a host of factors which include generally lack data and insight into their I&D
the lack of a robust articulation of a “reason performance and are fragmented in their
why” for diversity, unclear accountability at all approaches, which may be primarily bottom-
levels, talent policies and practices which are up and led by fledgling employee resource
not effective at removing bias, and insufficient groups. We found limited accountability for I&D
attention to inclusive mindsets and behavior. at all levels of these companies, and significant
challenges with inclusion.
Exhibit 9
found five
We found fivecohorts
cohortsofofcompanies
companiesbased
basedononprogress
progressonon executive
executive diversity
diversity between
between 2014
2014
2019
and 2019
% of total number of companies
Gender1 Ethnicity2
Strong
Fast Diversity Fast 24 Diversity
28
movers leaders movers leaders
2014 - 2019 improvement
>=10 p.p. >=25 p.p.

Moderate Moderate
Moderate
movers 10 movers 12
5 15
< 5 p.p. < 0 p.p.
Laggards Laggards
Resting Resting
Decline, 28 on laurels 29 28 on laurels 22
flat or slow
<10 10-20 20-30 30+ <10 10-20 20-30 30+
2014 representation, 2014 representation,

% women % ethnic diversity relative to fair share
1. n = 365; US and UK.

2. n = 241; US and UK.

There are stark differences in how executive gender and ethnicity has evolved in each
cohort since
There10are 2014
stark differences in how executive gender and ethnicity has evolved in each
Exhibit
cohort since
Representation, 2014
%
There are stark differences in how executive gender and ethnic diversity has evolved in each
cohort since %
Representation, 2014 2014 2019
Representation, % 2014 2019
Diversity Fast Resting Moderate Laggards

leaders movers on laurels movers
Diversity Fast Resting Moderate Laggards
leaders 40 movers on laurels movers
26 40 27 28
22
19
26 27 28
22 12 9 8
Female 7 19
representation1 12 9 8
Female 7
representation1 32
32
18 18
17
12
18 18 10
17
Ethnic minority 12 3
1 10 1 0
representation2
Ethnic minority 3
1 1 0
representation2
1. n = 365; US and UK.

2. n = 241; US and UK. Absolute representation, not relative to fair share.
1. n = 365;
Source: US and
Diversity UK. data set
Matters
2. n = 241; US and UK. Absolute representation, not relative to fair share.
We
Source: Diversity Matters data setalso found that the 2019 likelihood of financial executives on their top teams—from 17 percent
outperformance differences between the cohorts in 2014 to 32 percent in 2019. The Fast Movers,
is consistent with our findings in the quartile which constitute a quarter (24 percent) of all
analysis above. Companies in the Resting on companies assessed, made even more dramatic
Laurels cohort on average have the highest progress: they moved from an average of 1 percent
likelihood of outperformance on profitability, non-majority representation on executive teams
at almost 62 percent, reflecting their historically in 2014 to 18 percent in 2019. Yet, as for gender
high levels of diversity on executive teams. diversity, a larger group of companies made
Diversity Leaders and Fast Movers are next no progress on ethnic diversity or even moved
with an average of 55 percent and 52 percent backwards. Laggards, at 28 percent of the data
respectively. They are followed by Moderate set, make up the largest cohort when it comes to
Movers, which have exactly average likelihood ethnic diversity—and they had zero non-majority
of outperformance, as would be expected. representation on their executive teams in 2019
Finally, Laggards are more likely to underperform (Exhibits 9 and 10).
their national industry median profitability.
For both gender and ethnic diversity on executive
We found similar trends in companies’ progress teams, our cohort analysis shows a contrasting
on ethnic-minority representation between picture by industry. Taking gender for example,
2014 and 2019, within our 2014 US and UK data healthcare companies in our data set are
set. Interestingly, companies in the cohorts at overwhelmingly (51 percent) in the Resting on
the extremes of progress on executive gender Laurels cohort. The finance industry, on the
diversity—that is, Fast Movers and Laggards— other hand, is more polarized, with 42 percent
also had the highest and lowest levels of ethnic of companies in the Fast Movers cohort and
diversity respectively. 39 percent in Resting on Laurels (Exhibit 11).
Technology, Media and Telecoms companies are
The Diversity Leaders in the case of ethnic
slightly more likely to be Fast Movers than the
diversity (15 percent of companies in the data set)
other cohorts.
almost doubled the representation of non-majority

The picture across different industries contrasts sharply
Exhibit 11
The picture
Distribution
The picture
picture acrossacross different
of companies industries
across cohorts
across different
differentindustries
by industry1contrasts
industriescontrasts
, % of cohort sharply
contrastssharply
sharply
The
Distribution of companies across cohorts by industry11, % of cohort 0-10 10-20 20-30 30-40 40+
Distribution of companies across cohorts by industry , % of cohort
0-10 10-20 20-30 30-40 40+
0-10 10-20 20-30 30-40 40+
Healthcare and Finance, insurance, and Telecom, media, and

pharmaceuticals professional services technology
pharmaceuticals professional services technology
pharmaceuticals Diversity professional services
Diversity technology Diversity
Fast movers Fast movers Fast movers
leaders leaders leaders
Diversity Diversity Diversity
Fast movers Diversity Fast movers Diversity Fast movers Diversity
2014–2019 Fast movers
Moderate leaders Fast movers
Moderate leaders Fast movers
Moderate leaders
leaders leaders leaders
improvement movers movers movers
2014–2019 Moderate Moderate Moderate
2014–2019 Moderate Moderate Moderate
improvement movers movers movers
improvement movers Resting movers Resting movers Resting
Laggards on laurels Laggards on laurels Laggards on laurels
Resting Resting Resting
Resting Resting Resting
2014 executive team gender representation

1. n = 39 for Healthcare and pharmaceuticals, n = 36 for Finance, insurance and professional services, n = 55 for Telecom, media,
and technology; US and UK.
Source:
1. n = 39Diversity Mattersand
for Healthcare datapharmaceuticals,
set n = 36 for Finance, insurance and professional services, n = 55 for Telecom, media,
1. and
n = 39 for Healthcare
technology; US andand
UK.pharmaceuticals, n = 36 for Finance, insurance and professional services, n = 55 for Telecom, media,
and technology; US and UK.

Why commitment to building an the company says and the progress it is making
inclusive culture is not enough on the ground can seriously erode credibility both
inside and outside of the organization, and further
As we have mentioned, the gap in executive gender
contribute to a lack of experienced inclusion”.
representation has widened between leading I&D
practitioners in our data set and other companies, A second barrier in many companies, particularly
with only a third achieving real gains and the those that are yet to embark on a purposeful
majority remaining static or declining—even where I&D journey, relates to inclusion. Unaddressed
their leaders have articulated noble aspirations for misconceptions about fairness and meritocracy
inclusion and diversity. Two critical barriers appear to are one critical issue. There is often a prevailing
stand in the way of the sustained change in company belief that “everything should be the same for
culture, and the individual mindsets and behavior, everyone”, and this fails to factor in the reduced
extent to which women and ethnic minorities
that are needed to build a truly inclusive culture.
benefit from support and sponsorship—and
The first barrier is a lack of purposeful follow- the greater extent to which they face bias and
through on diversity pledges. Many companies, microaggressions versus the dominant majority.
including those in our Laggards cohort, have
McKinsey’s Women in the Workplace research, for
publicly committed to building a diverse and
example, has found that women, especially black
inclusive company culture, and in some cases
women, are more likely to face microaggressions—
with their CEOs have even signed public pledges
also known as everyday discrimination—than
to do so.13 But many companies have yet to adopt
men.14 Cumulatively, these microaggressions have
the systematic, business-led approach to I&D
been shown to contribute to a rise in perceptions
that is needed to translate these pledges into
of unfairness and an increase in the likelihood
actual change. Such companies have tended to
of people thinking about leaving their jobs. By
rely overly on employee resource groups to drive
contrast, when employees believe they have equal
their I&D agendas, rather than giving leaders and
opportunity and the workplace is fair then they are
managers true accountability for strengthening
three times more likely to say they are happy with
diversity. Aspirations and ad hoc interventions
their career and will stay at their company longer.15
are not enough. In the words of one HR director
we interviewed: “A disconnect between what
13
https://www.ceoaction.com/pledge/i-act-on-pledge/
14
Women in the Workplace, McKinsey & Company, October 2018.
15
16
ibid.
A disconnect between what the company

says and the progress it is making
on the ground can seriously erode
credibility both inside and outside of
the organization, and further contribute
to a lack of experienced inclusion.

Pentair: building an
inclusive culture
Pentair—a water-treatment company with a global footprint—
is sharpening its focus on I&D as a core business opportunity.
For Kelly Baker, Executive Vice President and Chief 1. Talent acquisition and deployment, with a focus
Human Resources Officer at Pentair, focusing on fair hiring practices at every level.
on building an inclusive culture as a business
2. Development and retention of diverse talent for
opportunity means taking a contemporary view of
leadership roles. Focus areas include expanding
I&D. This includes a broader definition of diversity
participation in leadership-development
encompassing race, gender, ethnicity, country
programs, prioritizing career-development
of origin, age, personal style, sexual orientation,
planning for all talent, including diverse talent,
physical ability, religion, and life experiences. It also
and leveraging employee resource group
translates into a stronger focus on company culture,
networks to attract, retain, and develop people
creating a space where employees are enabled to
from diverse backgrounds. The company has
leverage their unique strengths and work in
also revised its benefits to support families and
the ways that suit them best.
work–life balance.
“I&D is not just about setting targets and having
3. Leadership of diverse teams. The focus is
women on the slate; we are spending significant
on cultivating an environment that values
time on education—building the business case
differences, fairness, and inclusion.
for I&D and pointing out why it’s not just about
This includes Global Effectiveness training,
being politically correct,” says Baker. They are also
which fosters insights about global differences
working on developing a shared language on I&D.
and strengthens manager and employee
This focus fits easily into the company’s existing
capabilities in working across countries,
commitment to building what it calls a Win Right
cultures, and languages.
culture and values.
While it can be challenging to carve out the time
Baker says the organization takes an integrated
for people to engage on the question of I&D, Baker
approach to supporting and promoting workplace
says they know that it’s worth persevering on
I&D based on the following three pillars:
this important journey. “We know that a diverse
and inclusive workforce contributes different
perspectives and creative ideas that enable us to
improve every day. So we continue to be bold in
advancing these ideas in the organization.”

How inclusion matters
The evidence presented in this report highlights the challenges
for companies in making sustained progress on increasing
gender and ethnic and cultural diversity on their top teams.
And among those companies that do make tangible gains,
holding onto these gains represents a further challenge.
Why this is the case was one of the themes we explored in our
interviews with companies in our data set. What we discovered
emphasized the need for a systematic, business-led approach
to I&D, as we have advocated in previous reports. But it also
shed new light on the relative importance of inclusion.
Indeed, we found that every company in our data For example, our most recent Women in the
set that has made sustainable progress towards Workplace study found that commitment to gender
increasing gender and ethnic and cultural diversity diversity at the leadership level had increased
on its top team over the past five years has also significantly: 87 percent of companies stated that
made real strides in creating an inclusive work they were highly committed to gender diversity in
culture. Lockheed Martin, for example, has sought 2019, compared to 74 percent in 2014. However,
to “create an environment where our employees employees at these companies were much less
feel welcomed and encouraged to bring their whole likely to perceive that their companies or their
selves to work” (see case study on page 46). managers had actually made diversity a priority.17
Several of the executives we interviewed made it Just 61 percent of women employees in 2019
clear that their companies could not have improved agreed that commitment to gender diversity was
on diversity without investing in inclusion. For a priority, for example. (This is up from 44 percent
example, leaders at Pentair talk about moving in 2014, suggesting that a shift may be underway.)
beyond a focus on representation as a tick-box There is much work still to be done in bridging
exercise to one that embraces a “shared language this gap.
on I&D” across the organization (see case study
on page 31). And executives at Target say they are Outside-in: a new lens on how inclusion matters
committed to building an “ecosystem” around I&D, The logic behind prioritizing inclusion alongside
“rather than just having it as an isolated function.” diversity is coming more clearly into focus—but
These companies’ efforts point to inclusion as an the full dynamics of the different aspects of
important emerging differentiator of success among inclusion, and their relative importance, are
leading diversity practitioners. This dovetails with the not yet fully understood. There is evidence
findings of previous reports by ourselves and others, that inclusion is closely linked to employee
including Women in the Workplace.16 These studies, engagement, itself in turn a critical component
as well as the research presented in this report, of employee retention, productivity and financial
show that employees’ experience of inclusion in their performance. For example, research has shown
workplace matters enormously to them, and is not that business units that score in the top quartile of
always aligned with their companies’ or even their their organization in employee engagement have
managers’ official commitments to inclusion. nearly double the odds of success.18
16
17
ibid.
18
State of the Global Workplace report, Gallup, 2017. Specifically, business units in the top quartile of are 17% more productive and 21%
more profitable than those in the bottom quartile. They also have 20% higher sales, 10% higher customer metrics.

A significant challenge for senior leaders is that and neutral—in employee mentions about I&D,
inclusion and workplace culture are inherently difficult focusing on 10–30 companies in each of three
to measure. There is no standardized, universal industries: financial services, technology, and
metric, and employee survey data are typically healthcare. (These industries have the highest
required, limiting the scale of the analysis in terms of levels of executive-team diversity in our data set,
the number of companies from which data can easily but not necessarily the highest levels of overall
and rapidly be gathered. Further, it is unclear that diversity or indeed inclusion.)20
employee responses to internal satisfaction surveys, We searched for I&D-related reviews using
even if anonymous, are fully representative of their keywords relating to two indicators of a systematic
experiences and are not influenced by employees’ approach to I&D, diverse representation itself,
perceptions about what their employers consider to and leadership accountability for I&D.21 We then
be acceptable responses. specifically researched three core indicators of
These limitations can, in part, be overcome by an inclusion, as follows:
outside-in approach, which is what studies such — Equality—fairness and transparency in
as Culture 500 have taken. This collaboration promotion, pay and recruitment, and equal
between MIT Sloan and Glassdoor developed and
access to sponsorship opportunities as well
validated a methodology for measuring company
as other resources and retention support.
culture outside-in, using sentiment analysis of
Companies that embrace equality ensure
employee reviews of their employers posted
a level playing field across critical talent
on job-search websites. We sought to build on
processes, building representation targets
these efforts to obtain a directional read on
into workforce plans and deploying analytical
how inclusion matters, and specifically on what
aspects of inclusion employees considered to be tools to build transparency.
significant, based on comments made outside-in.19 — Openness—an organizational culture where
In partnership with McKinsey Digital Consumer people treat each other with mutual respect,
Insights, we carried out an analysis of employee and where bias, bullying, discrimination and
reviews about the companies they work for, made micro-aggressions are actively tackled. In
on Glassdoor and Indeed, both public forums companies that embrace openness, the work
based in the United States, during 2017–19. environment is welcoming and conducive to
Using a natural language processing algorithm, discussion, feedback which includes the most
we analyzed the sentiment—positive, negative senior leaders, and risk taking.
19
“Culture matters. Now we can measure it,” MIT SMR / Glassdoor Culture 500, https://sloanreview.mit.edu/culture500?utm_
medium=pr&utm_source=release&utm_campaign=Culture500.
20
This research builds on and corroborates other research that has been done on this topic, especially the MIT / Glassdoor report (our
results are similar) and McKinsey’s Women in the Workplace.
21
See page 48 for a detailed understanding of our methodology.

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.
— Belonging—an outcome resulting from the — Considering the three indicators of inclusion—
organization’s demonstrating commitment to equality, openness, and belonging—we found
support the well-being and contributions of particularly high levels of negative sentiment
diverse and other employees. Leaders and around equality and fairness of opportunity.
managers foster connection with their diverse Negative sentiment around equality ranged
talent and between all employees, building from 63 to 80 percent across the industries.
a sense of community and encouraging them Openness of the working environment, which
to contribute their diverse talents fully. encompasses bias and discrimination, was also
of significant concern, ranging from 38 to 56
In our sentiment analysis, comments directly
percent of negative sentiment across industries.
pertaining to I&D made up around one-third of
the total comments made, showing that this topic Belonging elicited overall positive sentiment,
is high on employees’ minds. Key findings across but from a relatively small number of mentions.
the five indicators we tested suggests that there These findings, although indicative, highlight
are marked “pain points” in the experience of the importance not just of inclusion overall,
employees, as follows (Exhibits 12, 13a and 13b): but specifically of the varying extents to which
— While overall sentiment on diversity was particular aspects of inclusion matter. They can
also provide companies with “another version of
52 percent positive and 31 percent negative,
the truth” on inclusion by complementing internal
sentiment on inclusion was markedly worse
employee-satisfaction surveys—and highlighting
at only 29 percent positive and 61 percent
the gap between public pronouncements
negative—which encapsulates the challenge
of commitments to I&D, and the sentiments
that even the more diverse companies still face
employees are willing to express in the relatively
in tackling inclusion.
risk-free environment of a job-search website.
— Leadership and accountability as they pertain
In aggregate, this research shows that even
to I&D accounted for the highest number of
where companies are more diverse, many
mentions, and were also strongly negative. appear as yet unable to cultivate inclusive work
On average across industries, 51 percent of the environments in an effective and consistent way.
total mentions were related to leadership, and Such environments promote inclusive leadership
56 percent of those mentions had a negative and accountability among managers, equality
sentiment. This underscores the increasingly and fairness of opportunity, and openness
recognized need for companies to engage their and freedom from bias and discrimination.
core business managers better in the I&D effort.

Exhibit 12
Employee reviews
Employee reviewsprovide
providecompanies
companieswith
withadditional
additionalinsight
insightinto
into workplace
workplace experiences of
experiences
inclusion
of inclusion
Positive comment examples Negative comment examples
“Great place to work because of “Full of white male

all the walks of life coming privilege…No diversity, the
Diversity through the doors… from company churns out all these
different cultures/ethnic positive phrases but doesn't
backgrounds.” abide by them.”
“Management makes a strong

effort to create an outstanding “Management does not
Leadership work environment, the culture foster an inclusive culture
is inclusive and for all levels of employees.”
encouraging.”
“Fair promotion process… “Heavy on favoritism. How

Equality and if you perform well then you are promoted depends on
[you will get] amazing pay.” which supervisor you get.”
“This toxic environment is

“Everybody treats you with
not built to develop or care for
Openness Humility, Respect, and
minorities or people with
Trust.”
disabilities.”
“I don't feel valued or a

“Best company to work for,
sense of belonging, I feel
Belonging they really make you feel
like a number who's opinion
like family!”
is not valued.”
Source: Glassdoor and Indeed user-generated reviews

To further understand how inclusion
matters we conducted an analysis of
indicators relating to inclusion, outside-in
Exhibit 13a
Sentiments on inclusion are on average more negative than those on diversity
% of negative sentiments1
Negative Neutral Positive
Diversity Leadership Inclusion²
31% 56% 61%
Equality Openness Belonging
74% 44% 32%
1. Total number of mentions by theme: Diversity 1,153; Leadership 3,216; Inclusion 2,077; Equality 1,257; Openness 710; Belonging 110
2. Weighted average of Equality, Openness and Belonging

Exhibit 13b
On most areas of inclusion and across industries, negative sentiment outweighs positive
% of negative sentiments1
Negative Neutral Positive
Finance Technology Healthcare
Diversity
32% 29% 30%
Leadership
58% 58% 42%
Equality
80% 67% 63%
Openness
38% 56% 44%
Belonging
33% 30% 29%
1. Total number of mentions by theme and industry: Diversity – Finance 607, Tech 382, Healthcare 164; Leadership – Finance 2,190, Tech 629,
Healthcare 397; Equality – Finance 668, Tech 377, Healthcare 212; Openness – Finance 391, Tech 209, Healthcare 110; Belonging – Finance 70,
Tech 23, Healthcare 17

How employees experience Positive mentions focused on respect and trust
inclusion—or the lack of it as important components in the workplace, while
negative mentions tended to cluster around bullying
A closer look at the sentiment analysis reveals some
and microaggressions. Typical examples included
differences between industries—and vivid mentions
the following:
from employees, which further illustrate the value
of this “social listening” approach to companies — “Lack of diversity in thought and in people.”
seeking to improve their inclusive culture.
— “Backstabbing, exclusive culture. No diversity
Equality of thought and opinions are not valued.”
Organizations across all three of the industries we
— “The constant rumor mill and lack of
analyzed fare poorly on this metric, with equality
communication makes it very stressful to
overwhelmingly the most negative of all dimensions
work here.”
measured. In the finance sector, sentiment was the
most strongly negative (80 percent) followed by Belonging
technology (67 percent) and healthcare (63 percent). On this dimension, the majority of mentions across
industry sectors were positive, although based on
Typical mentions included the following
a notably smaller number of mentions. A typical
(see Exhibit 12):
example was the following:
— “Promotions are based on WHO you know,
— “Amazing culture with an emphasis on inclusion
not WHAT you know! Good and hard work are
and diversity. There are many employee
not recognized.”
resource groups and clubs that make it easy
— “There is a lot of blatant favoritism and lack of to feel comfortable and included at work. The
strong managerial leadership which amounts people I’ve worked with truly care about helping
to swaths of displeased and un-engaged you succeed and working as a team towards a
employees. This can be seen by amount of common goal.”
people we have had leave the organization.”
Negative sentiments expressed included the
Openness following: “You cannot have your own opinion, own
On this metric, sentiment of mentions was in style of work—only what is expected, to do exactly
aggregate negative, but more mixed across industry things in the way corp says to you.”
sectors. In the technology sector, sentiment was the
most negative (56 percent) followed by healthcare
(44 percent) and finance (38 percent). No sector
was overall positive.

Target Corporation: staying open
Target Corporation is the eighth-largest retailer in the United
States and believes that its sophisticated approach to I&D—
including using data to drive real-time transparency—is a key
enabler of its success.
“Diversity and inclusion are at the heart of what we do Inclusivity is a key value in Target’s culture.
at Target,” Brian Cornell, Chairman and CEO, explains. The company believes that embracing diversity
“Seventy-five percent of the US population lives and striving to give everyone access to the same
within 10 miles of a Target store—and in order to win in opportunities helps them benefit from the richness
retail, we need to reflect that population in our team to of different perspectives and fulfill the needs of
ensure we deliver the product, services, experiences their guests better.
and messages our guests want and need.” 22
“We’ve built an ecosystem around I&D rather than
Fifteen years into its journey with an I&D office, just having it as an isolated function,” says Tariq
Target is among the 5 percent of companies in our Malik, Director of Employee Relations and Diversity
data set that is close to achieving gender parity on Analytics, who leads the company’s first ever I&D
its executive team (approaching 45 percent). Target analytics team. Every member of the organization is
pursues a broad set of I&D best practices, but it empowered to help champion an inclusive society.
stands out in the following two key regards: For example, each business area has a Diversity
Action Committee—a volunteer group that works
— A sophisticated use of data to drive real-time
with the I&D team to implement tactics specific for
transparency. Progress on I&D is meticulously
their part of the organization. There are also affinity
tracked, with a dedicated I&D analytics team.
groups for race/ethnicity, gender, ability, sexual
With multiple dashboards and through quarterly
orientation, veterans, people with different abilities,
and annual processes, the organization
and faith.
reassesses its I&D goals every year and adjusts
tactics quarterly. Business leaders are expected Despite the company’s steady progress towards
to make use of this disaggregated data to drive parity, Malik says that the journey is not over. “We
their talent decisions. When setting pay or are looking towards the future.” With a new set
advancement, for example, they can access and of goals for the business and team, the company
check their diversity statistics. will continue to pursue outcomes in three key
areas: (i) representation (equitable retention
— A radical emphasis on courageous
and advancement of diverse talent); (ii) inclusive
conversations and active listening that
experience (inclusive leadership and individual
extends beyond the organization. The company
behavior); and (iii) business (ongoing investment
culture is summed up in the call to action to “stay
in diverse suppliers, and continued reach to
open.” And through the company’s guardrails for
multicultural audiences and guests).
co-existence, employees are encouraged to be
curious and accountable, to ask questions and
have the difficult conversations and to leverage
their unique skills to drive positive impact in
business and society.
22
Comment taken from Target website: www.target.com/stayopen.

Winning through inclusion
and diversity: taking bold action
As we have shown, the business case for diversity is growing
stronger and clearer—yet too many companies appear
unable to overcome significant obstacles in their efforts to
make tangible and sustained progress. The experience of
the diversity winners we have studied suggests that it’s time
to be bold, in deploying a systematic approach to I&D, and
in purposefully tackling inclusion. There is a significant
performance opportunity for those that are prepared to step up
and do what it takes to foster significant progress on I&D.
How it can be done is exemplified in the four 45 percent and 40 percent female respectively (see
case studies shared in this report. Citigroup case studies on page 39 and page 46).
and Pentair are surging ahead in representation,
while continuing to push the boundaries and Action steps to make inclusion work
foster inclusive workplace cultures where people Our analysis of diversity winners in our data set,
are empowered to be their authentic selves. coupled with extensive insights from our research
Target Corporation and Lockheed Martin are also and practice on I&D, has helped identify the winning
prioritizing inclusion, while pushing towards gender actions and practices of diversity winners when it
parity on their executive teams—which is nearly comes to inclusion (Exhibit 14).
Companies need a systematic, business-led approach to I&D, and bolder action on inclusion
Exhibit 14
Companies need a systematic, business-led approach to I&D, and bolder action on inclusion
Systematic, Increase diverse representation, particularly in leadership

business-led and critical roles
1 approach to
Strengthen leadership and accountability for delivering
I&D on I&D goals
Enable equality of opportunity through fairness and

transparency
Bold steps to
2 strengthen
inclusion
Promote openness, tackling bias and discrimination
Foster belonging through support for multivariate diversity

We find firstly that getting the basics right is still to project future talent trends and build diversity
crucial. As we have made clear in previous reports, targets into long-term workforce plans, and using
including Delivering through Diversity, it remains sophisticated digital heatmaps of local talent
critical to deploy a systematic approach with a clear pools to target diverse potential recruits.
rationale for I&D linked to business strategy; set
Strengthen leadership accountability and
and cascade evidence-based targets; and engage
capability for I&D
and empower core business leaders in the effort.23
For diversity winners, placing their core business
The analysis presented in this report further leaders and managers at the heart of the I&D
refines our insight into the bold and often effort is critical to building an inclusive culture.
innovative actions that diversity winners are Central to this are inclusive leadership capability
taking to embed inclusive culture, mindsets and and accountability, both of which should go well
behavior in their organizations. Companies should beyond the executive team and extend to middle
take three essential actions: enable equality management, where I&D is often relegated in the
and fairness of opportunity; promote openness face of business priorities considered
and tackle discrimination; and foster a sense of more pressing.
belonging in the workplace.
Diversity winners are going beyond standard
Together, these imperatives translate into five unconscious-bias training to make inclusive
key action steps, as follows. leadership a core competency that is specified
in job descriptions, assessed in performance
Ensure representation of diverse talent
reviews, supported by capability-building, and
Not only do diversity winners articulate a bespoke,
role-modeled by leaders and managers. Not only
business-driven case for I&D change and set
should companies also hold their leaders and
themselves general representation targets,
managers to account for delivering against diverse
they also thoughtfully consider what forms of
representation targets, this should be extended
multivariate diversity (for example going beyond
to inclusive leadership behavior. This includes
intrinsic forms such as gender and ethnicity)
advocating I&D amongst their teams, promoting
to prioritize, and why. They focus on advancing
flexible ways of working, tackling bias, and
various forms of diverse talent specifically into
“conscious inclusion” of diverse team members,
executive, line-management, technical and
with particular attention to “onlys”—people in teams
board roles—not only addressing leadership
where no one else is of the same diversity status.
appointments but also fixing the “broken rungs”
of the corporate ladder along the way.24 For example, one company includes in its
evaluation of its managers the share of their
This entails making hiring, appointments, and
male and female team members who take their
succession planning fair, with appropriate targets,
full parental leave, managers included. This
diverse slates and talent process changes,
sends a strong signal to both female and male
all grounded in advanced pipeline analytics
team members and levels the playing field on
with interactive dashboards to visualize key
parental leave and child care, which too often
metrics. It also entails rethinking roles in terms
still overwhelmingly penalizes women’s careers,
of capabilities required. Organizations need
as well as on the growing numbers of male parents
to open the door to large-scale reskilling and
seeking greater involvement with their families.
reaching beyond traditional recruiting channels
and qualifications to access diverse talent whose These raised expectations of managers and leaders
profiles likely differ from the status quo—or who go hand-in-hand with capability building and the
may be re-entering the labor market after a long use of approaches such as frequent and repeated
break. For example, many companies are setting nudges and reverse mentoring, to support them
targets for diverse representation in specific roles, in practicing inclusive leadership in day-to-day
such as for women in STEM-related positions, behavior, as well as at critical talent-management
using strategic workforce-planning approaches decision points such as hiring or promotions.
23
Delivering through Diversity, 2017, McKinsey.com; Women Matter: Reinventing the workplace to unlock the potential of gender diversity,
op. cit.
24
Women in the Workplace, October 2018 and 2019, op. cit.

Enable equality of opportunity through fairness support for dual-career couples and single
and transparency parents, or exposure to senior leaders. These can
Diversity winners recognize equality and a sense be assessed through HR data and by redesigning
of fairness of opportunity as key areas of attention employee experience or satisfaction surveys, as
in promoting inclusion, and hence retaining and well as through dedicated sponsorship surveys.
advancing diverse talent. They attend to this both
Promote openness and tackle discrimination
in terms of leadership mindsets, behavior and
It goes without saying that diversity winners
capabilities, as described above, and through
uphold—and enact—a zero-tolerance policy
de-biasing talent processes, primarily in relation
for discriminatory behaviors such as bullying,
to advancement and equal pay.
harassment and microaggressions. The key here
These companies start by building transparency is congruence between policies, which most
into the extent to which their organizations are companies have aplenty, and actions to support
true meritocracies today, and where the impact victims and apply consequences to perpetrators;
of traditional notions of privilege are understood, lack of such congruence is common and has a
and employees are promoted on skill and significant impact on inclusion.
potential, regardless of their ethnicity, gender
Across their organizations, diversity winners
or other identity attributes. This entails using
actively build the ability of both managers
people-analytics tools and internal qualitative
and junior staff to identify, surface and address
research to build visibility into the extent to
microaggressions. They achieve this in part by
which promotions and pay are transparent and
strengthening awareness of the multiple forms
fair. And, in acting on this, a growing number of
microaggressions take, through training that
companies are training performance evaluators
sensitizes employees to be more conscious of
to minimize bias in their decision making,
their communication styles. This is often supported
supporting review committees with observers to
by organization-wide, day-to-day nudges.
flag decisions influenced by unconscious bias,
One large multinational has deployed an inclusion
and deploying software tools to debias recruiting
program specifically for its predominantly white
and, increasingly, advancement processes.
male leaders. The program aims to help these
Diversity winners also assess the extent to which managers understand the impact of their behavior
their staff have access to the support needed to on perceptions of openness among diverse
succeed, including sponsorship and mentorship, employees, and how they can contribute to
access to resources and high-profile career- fostering a positive company culture by shifting
advancing opportunities, access to training, attitudes and behaviors.

More broadly, diversity winners establish Companies should recognize and support the role
norms and language for what constitutes open, employee resource groups, and allies supporting
welcoming behavior—and then ask employees them, play in building community around shared
and leaders to assess each other on how they are characteristics and creating a space for diverse
doing in living up to that behavior. They focus on individuals to reflect on their specific strengths
building a company culture which encourages and contribute them better.
open, productive discussion of difficult topics—for
example, through townhall sessions in which CEOs Starting points differ, but all
encourage participation and actively listen to companies can act now
employees’ ideas, issues, and questions. Indeed,
As discussed earlier, our longitudinal lens has
diversity winners strive to empower employees
allowed us to see the opportunities for, and
and create safe spaces for them to share upward
barriers to, I&D over time. Companies in each of
feedback about their day-to-day experiences
the five distinct cohorts—Diversity Leaders, Fast
as well as broader career-shaping situations.
Movers, Resting on Laurels, Moderate Movers,
A simple yet powerful tool that some companies
and Laggards—can and should deploy a strategy
use is the daily check-in, in which employees share
reflecting their current baseline when considering
any challenges they might be facing at home or
ways to enhance their I&D performance.
at work, and how they are dealing with those.
The ultimate objective of such interventions is to Companies across cohorts face many similar
allow people to bring their full selves to work. barriers. Those can include external barriers,
such as an image of their industry that hampers
Foster belonging through unequivocal support
recruitment of women and minorities, or the
for multivariate diversity
prevailing culture in the wider societies in which
Diversity winners are increasingly extending
they operate. The internal barriers companies
their scope for action beyond traditional diversity
face can have an even more direct impact on
and inclusion goals to include fostering a sense
I&D outcomes. These barriers include a failure
of belonging among all their employees, and
of leadership support for I&D, insufficient drive
particularly among diverse employees. This aims
behind implementation, fragmentation of largely
to create a culture which not only emphasizes
bottom-up initiatives, an entrenched traditionalist
equality and openness, but in which employees
culture, and company-performance challenges.
feel that they can contribute their unique talents,
All of them can lead to I&D not being considered
that these talents are valued by their managers,
a priority. Additionally, slower-moving companies
teams and the wider organization, and that they
may be held back by complacency about current
can bring their full selves to work. Diversity
representation levels, or even by diversity
winners are increasingly explicitly assessing
backlash and fatigue.
belonging in their employee-engagement surveys.
What, then, are the specific steps that companies
While this feeling is largely an outcome, it results from
in each cohort should prioritize? We suggest
specific actions on the part of the company, including
the following:
clear communication and behavior from managers
signaling their support to diversity in its varied — Diversity Leaders have a unique opportunity to
forms, through their support for diverse individuals create truly diverse and inclusive organizations,
as well as employee resource groups. Belonging also and sustainably so. They should push for fair-
results from encouraging and building capabilities share representation across diverse profiles in
among diverse talent to contribute their unique line with their business strategy, emphasizing
strengths, engage authentically and bring their the business and organizational benefits of
whole selves to work, often through tailored doing so, and moving to best practices across
leadership-development programs. the board. In particular, they may need to push
For example, a major fashion retailer provides for consistency in equality of opportunity and
immersive leadership-development training, openness across specific areas of the company.
supplemented by one-to-one coaching, designed Many are already seizing an industry, supply-
to help leaders learn early in their career how to be chain and wider societal leadership opportunity
more self-aware and supportive. Another company to advance the I&D agenda, while strengthening
has built a software tool that identifies “onlys” at their sense of purpose and ability to attract
risk of feeling isolated and connects them with customers and talent.
other “onlys” to help create a sense of belonging.

Many Diversity Leaders are seizing
the opportunity to advance the
I&D agenda, while strengthening
their sense of purpose and ability
to attract customers and talent.
— Fast Movers have typically set themselves identifying and addressing key gaps, which are
robust targets for representation, developed often around target setting and transparency,
a bespoke understanding of the business case leadership accountability, particularly in middle
for diversity, deployed measures to strengthen management, fairness of opportunity, and
leadership accountability, and built a solid level openness. There is typically an opportunity for
of transparency and understanding around their these companies to raise their ambition level
talent pipeline metrics. They should continue and delivery focus significantly around existing
to develop inclusive leadership capabilities interventions, and implement targeted bold
among their managers, ensure that principles moves inspired by their faster-moving peers.
of equality of opportunity are rigorously applied
— Laggards need to put in place the basics,
to their talent processes, and maintain a sharp
building a bespoke business case, setting
focus on promoting openness and belonging to
themselves targets to increase diverse
mitigate any risk of diversity fatigue or backlash.
representation informed by relevant
— For companies in the Resting on Laurels cohort, benchmarks, and more forcefully championed
the emphasis should be on renewing or extending by senior leaders, review their HR policies
their ambitions on diverse representation, and practices to start removing bias, and
understanding the specific barriers to leadership encourage flexible working for all. They should
accountability, equality, openness, and belonging start to build among their managers a culture
which have slowed progress, and tackling them of accountability for delivery and inclusive
through the targeted acceleration of initiatives leadership behavior, deploying initiatives such
in these areas. For example, companies in as inclusion training and capability building.
traditionally female-oriented industries such
Companies in STEM-focused industries such
as healthcare could benefit from more robustly
as heavy industry or basic materials, where
tackling the “glass ceiling” for women in top-
the traditional educational pipeline may be
management line and technical roles, updating
less diverse, could benefit from emphasizing
their hiring and promotion practices, and taking
capabilities over qualifications in their hiring, and
steps to tackle bias.
explore reskilling. They should also start building
— Moderate Movers should prioritize and scale an evidence base on inclusion through appropriate
up the subset of interventions that are already employee surveys, as the basis for an ambitious
working within their organizations across drive to tackle bias and build a culture of equality,
the five domains identified above, while also openness and belonging for all employees.

Lockheed Martin: breaking
down barriers to inclusion
Lockheed Martin, a global security and aerospace company, is
engaging in courageous conversations to drive equality and build
an inclusive culture across its global operations.
Lockheed Martin is breaking down barriers in of I&D and is putting significant resources into
diversity and inclusion by educating its leaders creating equality and building an inclusive culture.
on how to engage effectively in the tough “Our values to do what’s right, respect others,
conversations necessary to make step-change and perform with excellence guide everything
differences to the organization’s 110,000 we do. Respecting others means creating an
employees. The global security and aerospace environment where our employees feel welcomed
company, which is highly regarded for its innovation and encouraged to bring their whole selves to
in technology, work,” she says.
is pioneering a novel experiential immersive
Recognizing that inclusivity helps drive its success,
program that challenges its leaders to confront
Lockheed Martin is committed to cultivating a
privilege head on. Lockheed Martin has embraced
world-class workforce and working culture.
the immersive-leadership approach for more than
And with gender representation approaching
a decade and it is consistently considered to be
40 percent on its executive team, it is getting
a game changer in driving for increased levels
things right. The company has a four-pronged
of inclusion.
strategy that includes the following:
Leaders from top and middle management explore
— Ambitious, enterprise-wide targets for gender
the uncomfortable issues of bias and exclusion in
representation
the workplace to build empathy and understanding,
and foster a working environment that is equitable, — Talent-evaluation processes via an external
productive, and inclusive. Critically, this process partner to eliminate unconscious bias in talent
starts to chip away at the myth of meritocracy acquisition, succession planning and promotions
by giving leaders insight into how they may have — Novel experiential learning, such as the
benefitted from their class or race—rather than immersion program, to shift people’s behavior
their innate ability—to get to where they are. and foster a sense of belonging
The teams of leaders that have participated in
the immersion report higher levels of inclusion, — Data gathering via focus groups, anonymous
engagement, and trust than teams of leaders that employee feedback, and exit surveys to inform
haven’t gone through training. As part of broadening decision making and targets
the perspectives of others, the immersive program What is critical, says Washington, is that efforts don’t
has expanded to include cross-race and cross- just come from the HR team, as executives have
gender sessions where all dimensions of diversity also bought in, with the “CEO serving as the lead
participate in sessions to have open conversations champion for this and also setting expectations.”
and explore experiences in highly transparent ways. Additionally, there is a zero-tolerance policy for any
The initiative is just one of the many robust form of discrimination or retaliation in the workplace.
approaches at Lockheed Martin that have “We’re not trying to change people’s beliefs—but we
strengthened its I&D efforts. Rainia L. Washington, are trying to change behavior, so that when they walk
vice president of Global Diversity & Inclusion, says through the doors our people know how we expect
the company prides itself on setting the pace in them to behave.”
the industry because it looks across the spectrum

Conclusion
The business case for I&D remains strong; To make progress in these areas, companies
companies should act with urgency. In previous will typically require a step change in the level of
reports, notably Delivering through Diversity courage and boldness they have displayed so far.
(2018), we laid the foundations for progress, They must also be ready to tackle sensitive topics
presenting a framework for four imperatives around cultural norms, and to shine a spotlight on
for building an effective I&D strategy. Those and apply consequences for individual behavior,
imperatives include committing and cascading including that in management and leadership.
ambitious aspirations; linking I&D to company Moreover, they need to sustain these efforts
growth strategy; crafting a prioritized portfolio of over time.
initiatives addressing inclusion; and tailoring the
It’s worth the push. As this report makes clear,
strategy to maximize impact.
greater diversity, in terms of both gender and
In this report we have laid out a path for ethnicity, is correlated with significantly greater
acceleration. We have shown that, to achieve likelihood of outperformance. More than that,
lasting progress, companies must go beyond fostering a diverse and inclusive culture is a critical
the systematic approach to I&D we have previously success factor: it enables individuals both to shine in
advocated—namely, to ensure representation of their own right and to pull together as a team.
diverse talent and to strengthen leadership and
accountability for I&D. They must also focus on
boosting inclusion by enabling equality, promoting
openness, and fostering belonging.

Methodology
Company diversity and financial data Definition of company levels
Our assessment of gender and ethnic/cultural — Executive team is defined in line with
diversity is based on publicly available data from each company’s definition of its executive
1,039 companies across 15 countries globally. management team or executive management
We reviewed corporate websites, annual reports, committee. Typically, this refers to C-2, the CEO,
and other industry websites to gather statistics and up to two levels below: the executives on
on the proportion of women and the split of C-suite level who report directly to the CEO (for
ethnic/cultural groups for the whole company, example, the CFO, COO, and presidents). In some
the executive team, and the board of directors. cases, we also include C-3 (for example, vice
We also gathered the representation of male and presidents) where these executives are listed on
female executives (by ethnic/cultural group) in a company’s website or annual report as being
line and staff positions for most of the US- and part of the executive management team.
UK-headquartered companies in our data set.
— Board of directors refers to the official
Our data comes from the period December 2018 to
directors of the corporate board, including
November 2019.
both independent and executive directors,
These demographic data were not available uniformly responsible for governance and, in some cases,
for each company in our data set. For this reason, management of the business. The composition
the final tally of companies analyzed for a given of boards varies considerably across the
correlation is less than the full sample of companies sample, and the degree of diversity observed
available. The exact sample size for each correlation in particular geographies may be influenced by
appears in the exhibits where our correlation findings government diversity quotas.
are shown.
Methodology for determining diversity quartile
Financial data came from the Corporate Companies in our global data set were grouped
Performance Analytics database by McKinsey into quartiles based on the diversity of their
and S&P Global. We measured profitability using organizations at each level. For gender diversity,
average earnings before interest and taxes (EBIT) quartiles were based on the percentage of
margins for non-financial companies and average women at a given level, and set relative to the total
return on equity (ROE) for financial companies over (“global” sample) of 15 countries: Brazil, Mexico,
the five-year period from 2014 to 2018. United Kingdom, United States, Australia, France,
Germany, India, Japan, Nigeria, Singapore, South
We limited our data set to those companies for
Africa, Denmark, Norway, and Sweden.
which we could obtain complete financial data—
EBIT (or ROE in the case of financial companies)— For ethnic diversity, we reprised a metric used in
and at least one diversity data metric (gender or our original Why Diversity Matters publication:
ethnicity) for at least one level of the organization the normalized Herfindahl-Hirschman Index
(executive or board of directors). Our observations (NHHI) used by economists to measure market
on other forms of diversity beyond gender and concentration and competition within an industry.
ethnic/cultural diversity, such as LGBTQ+ or age/ We adapted the NHHI metric to differentiate
generational diversity, were limited by a lack of diversity in companies that had the same number
access to publicly available representation data. of non-majority executives, but where one

executive team included a greater range of ethnic Methodology for financial performance
backgrounds. Since the publication of the original We grouped companies into peer groups based on
research, we have inverted the ratio such that an industry group and headquarters geography (nationally
NHHI measure of 0 indicates a team where everyone or, if necessary, to ensure a sufficient sample size,
has the same race or gender. Increases in NHHI regionally). Within each industry-geography pair,
indicate an increase in ethnic/cultural diversity. we then determined the relevant benchmark for
“outperformance” for the financial metric:
HHI=∑N(si 2)
— EBIT margin benchmark set to be above the
NHHI=(HHI-1∕N) ⁄ (1-1 ∕∕N)
median for the relevant industry-geography
NHHInew = 1—NHHIold peer group
where N is the number of ethnic groups in the We fit all the financial data to curves and
specific geography determined that differentiating the bar for financial
Ethnic diversity quartiles were also set globally. performance was a necessary step to ensure that
However, given the limited availability of ethnic/ we were truly capturing those companies with
cultural demographic data, the sample was much superior profitability.
smaller—only 6 countries out of 15: United States, Regression analyses
United Kingdom, Brazil, Mexico, Singapore, and We ran multivariate regressions to confirm that the
South Africa. relationship between either type of diversity and
While our correlations are based on the companies’ financial performance exists. We generally publish
NHHI ratios, we also aggregated ethnic/cultural all results and note statistical significance. We
minority representation among the companies, by consider as statistically significant any correlations
industry and by geography. We define ethnic group with a p-value of <0.05. We also note where
identity as it is understood in each geography: p-values meet a slightly lower bar of <0.1.
— United States: white/European ancestry, black/ Cohort analysis

African ancestry, Latino/Hispanic of any race, For gender-cohort analysis, a subset of US and
Asian/Asian ancestry (including South Asian), UK companies with available gender data in 2014
other (including mixed race) and 2019 was used (365 companies). They were
segmented into cohorts based on diversity baseline in
— United Kingdom: white/white British, black/ 2014 and rate of change to 2019 diversity landscape.
Afro-Caribbean, Asian (including South Asian),
other (including mixed race) For ethnic cohort analysis, a subset of US and UK
companies with available ethnicity data in 2014
— South Africa: black, white, colored, other and 2019 was used (241 companies). They were
— Singapore: Chinese, Malay, Indian, other segmented into cohorts based on diversity baseline
(including white European) in 2014 and rate of change to 2019 diversity
landscape relative to the “fair share” of ethnic and
— Brazil: black, brown (including mixed race),
cultural diversity of the respective country (non-
white, yellow (Asian), other
majority population percentage).
— Mexico: white, mestizo, indigenous, black, other
In both cases, we established the matrix cutoffs based
on the companies’ distribution in each of the axes.

Sentiment analysis methodology The benefits of this approach are as follows:
We followed a three-step process for this analysis:
— Scale: We have used an advanced natural
1. We analyzed comments from Glassdoor and language processing algorithm which has
Indeed. We considered US-based comments analyzed 30,000+ comments and is able to
made in 2017–19. pick up how people speak colloquially about
I&D topics and distinguish between different
2. We selected keywords based on the following
meanings of the same words.
factors:
— Accuracy: The average US political poll surveys
• We utilized results from the 2020 McKinsey
1,000 voters, or approximately 0.001% of all
Quarterly inclusion survey to develop
registered voters in the United States, whereas
keywords and phrases.
the proportion of our scraped comments to the
• We applied an inclusion framework with US employee base is an average of 0.26%.
indicators of equality, openness, and
— Representativeness: Glassdoor’s give-to-
belonging, and enablers of diversity and
get requirement whereby users must leave
supportive leadership.
reviews in order to read reviews results in lower
• We scrutinized the existing set of polarization of comments.
comments to align language used in
— Consistency: We are able to compare
comments with keywords.
companies across an identical time period
• We assigned each comment a sentiment and method of giving feedback.
through an algorithm: positive, negative, or
Nevertheless, we recognize inherent limitations to
neutral. We analyzed keywords in phrase
our sentiment-analysis methodology, as follows:
groups, applying unique word usage and
colloquial expressions (for example, boys’ — The volume of relevant comments may be
club, pilot project versus airline pilot). Finally, insufficient for certain industries.
we iterated the algorithm to reduce the error
— There is limited ability to assess sentiment
rate; the sample error rate for sentiment
expressed specifically by diverse talent owing
analysis is between 3 and 10 percent.
to the lack of gender/racial minority markers.
3. We analyzed the results by industry and by
— The methodology may be paradoxically biased
themes. We focused on our inclusion scores
towards positive comments in low-representation
and on comparing industry differences.
industries (for example, basic materials).
This methodology was corroborated by MIT
— Certain keywords are inherently skewed
researchers in the Culture 500 research and in a
negatively or positively (for example,
study undertaken over three years, which provides
microaggressions, supportive manager).
some validation to our approach.25 MIT / Glassdoor
had a similar error rate, which they have indicated — It may be difficult to distinguish comments made
is a typical rate for sentiment analyses. MIT / by frontline workers where relevant.
Glassdoor also had statistically significant findings — There is no employee-verification system to
on the determinants of culture from analyzing ensure that employees do indeed work for the
publicly posted employee comments. referenced companies.
25
Donald Sull, Charles Sull, and Andrew Chamberlain, “Measuring Culture in Leading Companies,” MIT Sloan Management Review,
June 2019.

Deep-dive company profiles Taking all these into account, we think companies
We conducted outside-in research on 18 companies on the hunt for growth can get much more
in our data set and developed case studies for tactical on how they think about I&D as a lever
each, using publicly available information from their to pull on the path to growth.
respective websites. We supplemented our findings
— Just as we cannot assert causality, we cannot
with senior executive interviews, including the
say definitively what drives the correlations we
companies profiled.
find. It is theoretically possible that the better
To know more about our case studies, or if your financial outperformance enables companies to
company would like to participate in our research in achieve greater levels of diversity. Companies
the future, please contact the authors. that perform well financially may choose to
deploy more of their resources toward more
Limitations of this work
advanced talent strategies, thus allowing them
This work adds to a growing body of research on
to attract more diverse talent, for example.
the business case for I&D, and sheds light on how
However, in practice this seems unlikely.
companies can use diversity as an enabler of business
We have observed that most companies only
impact. Several caveats are worth highlighting:
embark on a major transformation when they
— Correlation is not causation. There are real have a burning platform to do so.
limitations, and we are not asserting a causal link.
— As standardized measures of inclusion are
As with many levers of business performance,
developed, it may become possible in the future
particularly at such a high level, this would be
to conduct more large-scale analysis to explore
challenging to demonstrate, likely requiring
a potential correlation between inclusiveness
detailed longitudinal studies. Yet, while not
and financial performance.
causal, the relationship is real. We have found
statistically significant correlations between — Measuring diversity in critical value-creation
higher levels of diversity and above-industry- roles is a logical next step in this analysis, as an
average financial performance in our original outside-in assessment of top teams is limited
2015 report, our 2018 update, and this report. in its ability to focus on diversity in value-
Moreover, other research gives us good insight critical business areas and roles throughout
into what might underpin the relationship, and the organization.
our interviews tell us how companies can make
material differences in their I&D outcomes.

About the authors
Sundiatu Dixon-Fyle is a senior expert in McKinsey’s London office, where Vivian Hunt, DBE, is a
senior partner; Kevin Dolan is a senior partner in the Chicago office; and Sara Prince is a partner in
the Atlanta office.
Acknowledgments
The authors thank the executives and I&D leaders at Citigroup, Lockheed Martin, Pentair, and Target
featured in the case studies in this report, as well as the many other executives who agreed to speak with us,
for contributing their time and sharing their companies’ experiences with I&D. The authors would also like to
thank the following senior colleagues for their commitment to this topic: Kweilin Ellingrud, Diana Ellsworth,
Alexis Krivkovich, Anu Madgavkar, Brian Rolfes, Sandra Sancier-Sultan, Kevin Sneader, and Jason Wright.
Further, we thank the contributors to the report, drawn from across McKinsey’s global offices. They include
Alberto Cordeiro (Sao Paolo), Treina Fabre (London), Drew Goldstein (Miami), Gabriela Gunawan (London),
Martine Johannesen (alumnus), Kay Kiladze (London), Ankita Kodavoor (Bangalore), Lungile Makhanya
(London), Martina Miskufova (alumnus), Claire Nesbitt (alumnus), Paula del Rey Puech (London), Bárbara
Régis (Sao Paolo), Chloe Reiss (London), Zinnia Siddiqi (London), Celine Toh Hsin Lin (London), Shreya Vora
(London), and Shani Wijetilaka (London). We also thank Colin Douglas and Jane Notten of the Editorial team,
Nicola Montenegri, Denise Renner, and Linnea Jonsson of the External Relations team, Margaret Swink of
McKinsey’s Global All In, Diversity and Inclusion and Beth Devine and Rich Nunn of Visual Media Europe for
their collaboration and support. Finally, the authors appreciate the support of colleagues from McKinsey’s
Strategy Analytics Center (STAC) in compiling financial metrics for the companies in our sample, McKinsey
Digital Consumer Insights as well as Data2Impact, EvalueServe, Revuze, Glassdoor and Indeed.

May 2020
Copyright © McKinsey & Company
Designed by US Design Center
www.mckinsey.com
@McKinsey
@McKinsey

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Diversity

Diversity wins: How inclusion matters

Moreover, a visible commitment to I&D during the

Vivian Hunt, DBE Sara Prince

Sundiatu Dixon-Fyle Kevin Dolan

Diversity wins: How inclusion matters

A stronger business case for diversity, but slow progress overall 13

Citigroup: strengthening equality of opportunity 22

The widening gap between winners and laggards 24

Pentair: building an inclusive culture 31

How inclusion matters  32

Target Corporation: staying open 39

Winning through inclusion and diversity: taking bold action  41

Lockheed Martin: breaking down barriers to inclusion 46

About the authors  52

Diversity wins: How inclusion matters 1

Diversity wins: How inclusion matters 3

4 Diversity wins: How inclusion matters

Diversity wins: How inclusion matters 5

6 Diversity wins: How inclusion matters

Difference in likelihood of outperformance of 1st vs 4th quartile¹

15% 21% 25% 35% 33% 36%

Difference in likelihood of financial outperformance² Gender Ethnicity

Penalty for bottom quartile 2014

2017 -15% 2017

2019 -19% 18%

Advantage for top quartile 2019

8 Diversity wins: How inclusion matters

Representation in US and UK, % 2014 2019

Diversity leaders Fast movers Resting on laurels Moderate movers Laggards

% of companies 5% 28% 29% 10% 28%

% of companies 15% 24% 22% 12% 28%

Promoting diversity does not ensure a culture of inclusion

We used a social listening approach to analyze employer reviews posted online³

Overall sentiment on diversity is positive But sentiment on inclusion is the opposite

52% 31% 29% 61%

Bold actions are needed to strengthen both inclusion and diversity

A systematic, business-led approach to I&D Bold steps to strengthen inclusion

Increase diverse representation, particularly Enable equality of opportunity through fairness

Strengthen leadership and accountability Promote openness, tackling bias and

Foster belonging through support for

Diversity wins: How inclusion matters 9

10 Diversity wins: How inclusion matters

12 Diversity wins: How inclusion matters

Diversity wins: How inclusion matters 13

Quartile 4th 1st Median

Why diversity matters Delivering through diversity Div ersity win s

+15% +21% +25%

14 Diversity wins: How inclusion matters

Average annual change,

1. n = 957 (global dataset) in 2017 and 2019.

16 Diversity wins: How inclusion matters

Women on executive teams2, % 0-10 10+ 30+

1. Likelihood of financial outperformance vs the national industry median.

Diversity wins: How inclusion matters 17

Average female representation 1, % 2014-2019 annual growth, p.p.

Technology and media 21 1.4

Transport and tourism 19 1.1

Energy and materials 18 1.3

A stronger business case for diversity, but slow progress overall 13

Citigroup: strengthening equality of opportunity 22

The widening gap between winners and laggards 24

Pentair: building an inclusive culture 31

How inclusion matters 32

Target Corporation: staying open 39

Winning through inclusion and diversity: taking bold action 41

Lockheed Martin: breaking down barriers to inclusion 46

About the authors 52