Academics doubt McKinsey diversity research

Two accounting professors have cast doubt on influential research that links ethnic diversity in corporate leadership with higher financial performance, suggesting the studies analysed data backwards.

Global management consultancy McKinsey published studies on the value of ethnic diversity leaders in 2015, 2018, 2020 and 2023. The most recent, Diversity matters even more: The case for holistic impact, claims that companies in the top quartile for ethnic representation at senior level are 39% more likely to outperform competitors than those in the bottom quartile.

However, in an article for Econ Journal Watch, ‘McKinsey’s Diversity Matters/Delivers/Wins Results Revisited’, Texas A&M University professor Jeremiah Green and University of North Carolina professor John Hand applied the empirical testing used by McKinsey in its first three studies to large public US companies in the S&P 500 Index between 2015 and 2019. They considered earnings before interest and tax, sales growth, gross margin, return on assets, return on equity and total shareholder return.

The professors could not replicate the studies’ results and found “no statistically significant” relationship between better financial performance and racially diverse leadership. They argue that McKinsey’s conclusions may reflect “better firm financial performance causing companies to diversify the racial/ethnic composition of their executives, not the reverse”.
McKinsey has not yet responded to the academics’ criticism.