Does leadership diversity lead to innovation? We said “show us the data.”

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Management diversity is good for business, says conventional corporate wisdom – and common sense. The more ideas, viewpoints, and skillsets in your arsenal, the greater the chance someone will have a big idea that leads to real innovation, strategic jujitsu, or disaster avoidance.

But we’re data scientists here at MiQ, so we tend to want more than intuitive arguments to back up our actions.

So, is there a data-based correlation between management diversity  and innovation (and resulting financial success?) The answer is yes, and it’s a strong one.

At the workforce level, research by McKinsey & Company suggests that companies in the top 25% for gender diversity are 15% more likely to have financial returns above their industry medians. If they lead in both gender and racial and ethnic diversity, that figure jumps to 35%.

But what about higher up the org chart? It appears the gains are just as compelling. A recent Boston Consulting Group study supports the idea that more diverse leadership teams lead to more and better innovation and improved financial performance. In fact, companies with more diverse management teams reported innovation revenue 19% higher than those with below-average management diversity. 

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Women in the boardroom are valuable, too. Harvard Business Review reports that according to a Credit Suisse analysis of 2,400 global companies, organisations like MiQ with at least one female board member yielded higher return on equity and higher net income growth than those with all-male boards.

Despite the convincing math, women account for an average of just 16% of top executives in the United States. But there’s reason for hope.

According to the BCG study, even small changes in the leadership profile can have statistically significant bottom-line benefits - especially if that diversity includes a gender balance and a mix of national origins, industry backgrounds, and career paths. “Companies that take the initiative and actively increase the diversity of their management teams—across all dimensions of diversity and with the right enabling factors in place… outperform their peers financially.”

The anecdotal, ethical and rational arguments for corporate diversity and gender equity are clear. And with so much good data science to back it up, so is the business case.

Published by MiQ New York.