Underrepresentation in leadership can make diversity efforts feel hollow and forced. Having wide representation in staff will fall flat without corresponding diversity within management and executive roles at the company.
Let’s take a closer look at why a diverse workforce requires diverse management:
Closing the gap between intention and reality
Research indicates that diversity in leadership teams is lacking. In some industries, there is a wide disconnect between a stated commitment to diversity and actually putting it into practice.
For example, one study conducted by Koya Leadership Partners and Education Pioneers found that while 98 percent of nonprofit organizations surveyed supported diversity, only 26 percent had a budget for programs related to supporting diversity. Furthermore, leadership representation was lacking, with a steep decline of team members of color with titles beyond the director level.
It’s not only the nonprofit space where this is a problem. White men represent 72 percent of corporate leadership at 16 of the Fortune 500 companies. And research by Catalyst showed that women of color make up just 4.7 percent of executive, senior-level, and management roles at S&P 500 companies.
Many companies commit to diverse hiring and actively create a welcoming, inclusive work culture. It’s important that the leadership at organizations reflect diversity.
The benefits of diverse leadership
Companies that are committed to establishing diverse leadership are more successful, noted the McKinsey&Company report, Diversity Matters. The firm found that companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above the national medians for their industries. It also found that for every 10 percent increase in diversity on the leadership team, companies see their earnings before interest and taxes increase by 0.8 percent.
In addition, researchers from the University of Maryland and Columbia Business School found that companies with at least one woman on the top management team tend to be more innovative. The group’s findings suggest that the presence of just one woman in upper management creates 1 percent more economic value for the organization, equal to $40 million.
Why are diverse leadership teams more successful?
According to the Harvard Business Review, it’s because diverse teams are smarter. Working with people who are different from you requires you to adopt new ways of thinking and look at facts more critically, the publication said, citing two studies that back up this assertion.
In one, people were placed on either an ethnically diverse or homogeneous team and asked to price stocks. The diverse teams were 58 percent more accurate in their pricing. In the second study, people were assigned to ethnically diverse or homogenous mock jury panels. Those on the diverse panels made fewer factual errors while talking about the evidence presented to them.
Diversity in leadership improves company performance. It can also create a more inclusive culture, where employees see people who share their backgrounds in influential executive roles. Take a second look at your company and see how more women and minorities can take on leadership roles.