Study Challenges Claim That Business Benefits From “Diversity”
Regarding influential McKinsey findings: ”Our inability to [replicate] their results suggests that … they should not be relied on to support the view that US publicly traded firms can expect to deliver improved financial performance if they increase the racial/ethnic diversity of their executives.”
A new study challenges the conventional wisdom that diversity improves a business’s financial performance. The study attempted—and failed—to replicate the results of four well-known and widely relied-on studies showing a financial performance benefit from executive team “racial/ethnic diversity.”
The study by Jeremiah Green and John R.M. Hand appeared in the March 2024 issue of the peer-reviewed Econ Journal Watch and attempted to replicate the results of four studies from the management consulting firm McKinsey & Company. The McKinsey & Company studies, published in 2015, 2018, 2020, and 2023, have influenced thought and policy on diversity initiatives in academia, industry, and the military:
Here's why this is such a big deal:
These McKinsey studies were the gold standard in the DEI industry.
Nearly every major institution in America cited them to justify their DEI programs.
Turns out, it was all a lie. The studies were false.
Let's look at a few examples…🧵 https://t.co/47hUSUp2Ij
— America 2100 (@America_2100) April 2, 2024
The 2023 McKinsey & Company study summarizes the firm’s prior results showing that businesses with racially and ethnically diverse executive teams had a strong advantage in financial performance. McKinsey & Company’s studies used unspecified “publicly available data” from more than 1,000 companies worldwide. The Econ Journal Watch study limited its focus to companies in the United States because “racial and ethnic diversity is an ongoing and currently politically and socially important issue in the US.”
McKinsey & Company, according to Green, would not share its dataset, citing the confidentiality of its clients, some of whom were presumably included in the McKinsey & Company studies. Green and Hand instead had to use companies from the S&P 500, the index of the largest publicly traded companies in the United States.
“Since we know [McKinsey & Company] have substantial business in the U.S. and we don’t know the scope or location of their international clients, we had to start with what we could reasonably collect,” Green told Legal Insurrection.
Green and Hand replicated McKinsey & Company’s methodology, which included sorting executive team members into racial categories after reviewing the executive’s picture and name. Green and Hand, like McKinsey & Company, then determined financial performance using the EBIT margin, which measures a business’s earnings before interest and taxes.
Green and Hand’s study critiqued McKinsey & Company’s methodology for getting causation backward. They note that McKinsey & Company “measures firm financial performance over the four or five years leading up to the year in which they measure the race/ethnicity of the firm’s executives,” so financial performance precedes and may, in fact, lead to diversity.
McKinsey & Company conceded this possibility, noting that
It is theoretically possible that the better financial outperformance enables companies to achieve greater levels of diversity. Companies that perform well financially may choose to deploy more of their resources toward more advanced talent strategies, thus allowing them to attract more diverse talent, for example.
McKinsey & Company further acknowledged that its work established “a correlation, not a causal link.”
Green and Hand, unlike McKinsey & Company, found no statistically significant relationship between diversity in the executive team and financial performance.
“We did try to exactly replicate their results as much as we could with what we know with a reasonable sample,” Green told Legal Insurrection.
Green and Hand then relaxed their methodology in an attempt to find some financial benefit to diversity in the executive team.
“[W]e tried different definitions of diversity, different measures of performance, and different testing methods,” Green continued. “Despite trying our best, we could not get the same or similar results to what they have.”
Green offered some insight into why his study could not replicate McKinsey & Company’s results, including McKinsey & Company’s use of international companies and the possibility that his study and McKinsey & Company’s studies classified executives by ethnicity differently.
“There may be a reasonable explanation for this, but we can’t definitively identify it if they won’t share their data or more of what they did,” Green told Legal Insurrection.
“McKinsey’s Diversity Matters/Delivers/Wins Results Revisited”:
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Comments
Pretty basic, if diversity made a business more profitable, they wouldn’t have to be forced to do it.
Absolutely! If basketball and football had just remained segregated, then basketball and football would have remained the same. Diversity made basketball and football less profitable. Right?
This is dumb even for you, JR.
The sports you named are based on merit and nothing else. There is no DEI in pro sports as there is big business. Diversity like multiculturalism has no value that anyone can quantify.
Integrating professional Major League Baseball after WWII destroyed the “Negro Leagues.”
Black ballplayers’ careers were destroyed.
Black communities and businesses that had for years relied on the Negro Leagues were destroyed. Gutted.
Mandatory inclusion based on immutable characteristics is as bad as mandatory exclusion based on immutable characteristics.
If instead we use actual diversity of experience or academic background and professional expertise then we can absolutely have better outcomes from decision making. See Covid where the Fauci Fascists in the Public Health profession were given the only seats at the table with predictable results; no consideration for any other factors or second and third order effects. Mandatory lockdown = no employment = no foot traffic into businesses= no revenue = layoffs and firings = gov’t subsidies = massive increase in govt debt = increase in money supply = massive inflation. And round and round it goes.
Diversity in Basketball would mandate no more than 13% black players.
David Ricardo showed that trade with peoples no matter how backward benefited everybody. Paradoxically the best division of labor doesn’t always have people doing what they’re best at doing. It can be doing something to free up somebody else to something that they’re even better at.
Modern DEI doesn’t seem to involve much freeing-up though.
Same crap as the whole ‘Women only get paid 72% of what men get paid!’ lie that they spewed out for a couple years until they realized nobody believed them. Everybody knew it was nonsense because if it were true then companies would be falling over themselves to hire women at that price and get the same quality of work and slaughtering their competition.
The same is true here.
If ‘diversity’ was such a strength then companies that were already doing it would have been killing the competition. Since they had to artificially FORCE it, its not a strength.
McKinsey has lost all credibility by proffering this garbage and nonsense. Pure Leftist/Dhimmi-crat propaganda, contrived by conjuring out of thin air a fabricated narrative and statistics to support “DEI” hiring policies. Quite the magic trick, but, Dhimmi-crats and Leftists are mendacious and greasy conjurers par excellence.
A lot of previously unassailable Leftist/Dhimmi-crat totems and orthodoxies are being thoroughly discredited, recently. Wuhan virus masking, lockdowns and assorted, lawless/totalitarian diktats; “ESG” investment policies and “DEI” hiring/contracting/admissions policies. We still have a long way to go to fully destroy these racist, unlawful and inequitable conceits, though.
Diversity is our strength. Why?
NBA: Scrawny white boy point guards!
Diversity is our strength.
Military: Old women platoon leaders!
Diversity is our strength.
Mfg: steam powered machine tools!
Diversity is our strength.
Board room: illiterate migrants!
Diversity is our strength.
Mosques: Christian preachers!
Diversity is our strength.
See. It makes perfect sense.
I was one of those scrawny white boys, over six ft and 145 lbs.
Did you play in the NBA?
“conventional wisdom”??
Everyone has always known that was a crock – a bad joke. No one ever believed that, least of all the substandard tokens, themselves.
Diversity for diversity’s sake is as stupid as telling guys that they can become girls just by saying so and clicking their new high heels three times.
The Western left are some of the sickest, most deranged people who have ever walked this Earth. They are, generally, miserable self-hating nihilists who are just doing all they can to burn this society to the ground. They are the worst sorts of errors in the “trial and error” of evolution. They might, indeed, prove fatal as things unfold. That is how dangerous and destructive they are.
A study says whatever those funding it want it to say.
You’re right.
Otherwise, the funders will not permit the findings to be published …… even when the scientists do the study faithfully.
I’m not sure the average citizen realizes the extent of this problem.
Just like “climate change;” they fake the data, but proclaim it as gospel in all media outlets.
The truth, like the job number corrections, follow after the damage is done.
The science is never settled in any field. In academic journals you need to make your data available. The fact that they don’t, citing privacy concerns and whatnot, pretty much tells me this is a lie. I am an RKI (reasonably knowledgable individual) in a few areas. Whenever a media outlet reports something that I know is patently untue, I then suspect their reporting in other areas to be equally without validity. Unlike your typical liberal, I live in the real world and don’t tolerate being lied to.
Ten years ago I was telling people in Portland that the bottle redemption system, while possibly a good idea when they started it 50 years ago, was now causing more problem than it was solving. Liberals always argue “but we like it” because the data simply does not support continuuing it. And this was before they raised it by 100%, which really accelerated the homeless and drug problems. Now that it has gotten so bad that they can’t hide it anymore, suddenly politicians are getting religion and instituting a bunch of guaranteed-to-fail half-measures, when a full-measure of completely dismantling the whole system is the only path to something resembling success.
Career assassination incoming for Green and Hand.
I had a talk with a “diversity trainer” years ago about the lack of credible evidence behind her views. Her position was that it doesn’t matter if there’s evidence, it’s still the right thing to do.
Let’s just say we didn’t see eye to eye.
Let me guess, the trainer was NOT a white Christian male of European ancestry. How else would the “trainer” have gotten the job?
That explains a lot.
My woke ass employer (who is failing wildly- with DEI as a huge contributor) uses these clowns.
Their fresh faced recent MBA consultants are such frauds my team and other have had to stop sending them ppt because they kept stealing it and passing it off as their own. Now we will only send them jpg of content in pdf. We ice them out of everything when the execs send them in.
Andy, your last paragraph has me lost. I’ve been away from office jargon a long time. Please, will you translate this for me? Thanks.
I read the acronyms laden paragraph as them not sending powerpoint files because the MBA consultants steal the contents and pass it off as their own work, so they’ve switched to only sending images, perhaps screen grabs, of content in pdf files, and limiting any responses to or support for said consultants.
That is kinda what I thought it meant. I got the part about JPGs and PDFs, but thought “ppt” was something obscure. I have seen it either spelled out, or, PPT.
PS: Thank you.
correct-
So if execs send McKinsey “consultant” in to “analyze” your situation and they ask for materials- expect them to gut and steal it- and pass the ideas and recommendations off as their own. Just take screen shots and send it to them in adobe pdf format which makes it 2-3 degrees more difficult to plagiarize. This is especially true if you have any smart art or graphics.
Pointy headed intellectuals with little real world experience. Yes, I too suffered through McKinsey experts…
Hmmmmm why do they have lower standards
If diversity is code for non-White, then non-White countries hiring non-White staff and succeeding in business, would be evidence that non-White ‘diversity’ works in non-White countries.
Actual diversity would be businesses in non-White countries hiring White staff to supplement their majority non-White staff. But that still wouldn’t necessarily mean diversity offers success as it could simply be White experts being hired, their performance no different to theoretical but non-existent non-White local peers.
Garbage In, Garbage Out!
DIE is about bringing everyone down to the lowest common denominator, anything trying to show anything different has to be fabrication
Letting the air out of three tires to match the under inflated tire.
That makes for a smoother ride, but with way lower performance. In a just world, DEI would be prosecuted as a RICO violation since it only gets into companies via thinly veiled threats. Several years ago some group went around Portland and offered all shops with a storefront those “In America …” signs. I am sure that at some point they insinuated that you didn’t want to be a store without one displayed prominently, in case Antifa or the like happened to come down your street. Voila, the new version of the Swastica suddenly appeared everywhere. Ditto for BLM signs, which in Portland, can only be found in whitopia neighborhoods.
This message is for Don Lemon:
Sorry, Elon is correct. and your evidence has been proven false.
If racial diversity matters then it stands to reason that different races have different cognitive processes. If that is true, then one race might be better at a particular job. If that is true, then we have a rationale for racial discrimination. I don’t believe that but McKinsey and the DEI crowd cannot have it both ways.
Shouldn’t the DOJ and IRS be suing the authors and seeking a TRO regarding their violent and hateful speech? C’mon . . . What’s the holdup!?
Huh? There are no grounds on which they could possibly sue. No court would give them restraining orders, and the suits would be dismissed for failure to make a claim.