When management consulting firm McKinsey declared in 2015 that it had found a link between profits and executive racial and gender diversity, it was a breakthrough. The research was used by investors, lobbyists and regulators to push for more women and minority groups on boards, and to justify investing in companies that appointed them.
Unfortunately, the research doesn’t show what everyone thought it showed.
There are obvious benefits of diverse corporate leadership for society, both in providing role models and in showing a commitment to promoting the best people, irrespective of skin color or gender. But doing it because it is the right thing is not the same as doing it because it makes more money.
Since 2015, the approach has been tested in the fire of the marketplace and failed. Academics have tried to repeat McKinsey’s findings and failed, concluding that there is in fact no link between profitability and executive diversity. And the methodology of McKinsey’s early studies, which helped create the widespread belief that diversity is good for profits, is being questioned.