Diversity, equity, and inclusion are three closely linked values held by many organizations that are working to be supportive of different groups of individuals, including people of different races, ethnicities, religions, abilities, genders, and sexual orientations.
Variety, as they say, is the spice of life. If diversity is another word for variety, how can it enhance or flavor the world?
Bob Sternfels is McKinsey’s global managing partner and is based in the Bay Area office. Tiffany Burns and Sara Prince are senior partners in McKinsey’s Atlanta office; Michael Chui is a partner in the Bay Area office, where Alexis Krivkovich and Lareina Yee are senior partners, and where James Manyika is a senior partner emeritus; Maurice Obeid, Shelley Stewart, and Jill Zucker are senior partners in the New York office; and Jonathan Woetzel is director of the McKinsey Global Institute and a senior partner in the Shanghai office.
Diversity—through the lenses of race, ethnicity, ability, gender, sexual orientation, neurodiversity, and beyond—can help to strengthen organizations, as studies have shown time and again. Quite simply, diversity, equity, and inclusion (DEI) is used to describe three values that many organizations today strive to embody to help meet the needs of people from all walks of life. While concepts such as biodiversity are important offshoots of the core idea of diversity, this article focuses on diversity, equity, and inclusion in business and society rather than in other contexts.
Companies that are diverse, equitable, and inclusive are better able to respond to challenges, win top talent, and meet the needs of different customer bases. With DEI in mind, companies are considering how to better support employees. Over the past few years, many organizations have taken strides to build diversity, equity, and inclusion into their policies and hiring practices.
Diversity, equity, and inclusion are often grouped together because they are interconnected and it is only in combination that their true impact emerges. Some organizations include related concepts, such as belonging, in their DEI strategies. But all of these terms are also easily misunderstood. It’s important to grasp the individual meanings and implications of each of these terms:
These are a few of the most common examples, but what is considered diverse can range widely. Nobel Prize winner Richard Thaler touches on this in an interview with McKinsey on debiasing the corporation. “There’s lots of talk about diversity these days,” says Thaler. “We tend to think about that in terms of things like racial diversity and gender diversity and ethnic diversity. Those things are all important. But it’s also important to have diversity in how people think.”
A series of three McKinsey reports shows the impact of diverse workplaces: Why diversity matters (2015), Delivering through diversity (2018), and Diversity wins: How inclusion matters (2020). The latest findings draw from a data set that encompasses 15 countries and more than 1,000 large companies, as well as research on employee sentiment, and the results show a correlative relationship between business performance and diversity. It’s worth noting that greater access to talent and increased employee engagement contribute to this performance effect. The business case for diversity is robust, and the relationship between diversity on executive teams and the likelihood of financial outperformance has gotten stronger over time. And the results have been replicated in further research, for instance, in Latin America and Central Europe.
Some of the key findings from the latest Diversity wins report include the following:
Even during a crisis, when leaders might be tempted to shelve DEI efforts to ensure the company’s financial survival, there is value to prioritizing diversity, equity, and inclusion. In the words of McKinsey’s Bryan Hancock from McKinsey Talks Talent: “D&I is good business. It doesn’t have to be at the expense of financial outcomes. . . . This isn’t an issue where leaders can say, ‘We can’t do diversity right now, because we’re under a lot of pressure.’ Diversity is one of the things you’ve got to be mindful of in every context.”
In addition to profitability, there are five key domains in which inclusion and diversity can significantly affect an organization’s overall performance:
For companies looking to bolster inclusion and step up their DEI efforts more broadly, five areas of action stand out:
A McKinsey survey about inclusion at work and how to address organizational barriers to it offers unique insight at a more granular level. The research finds that respondents of all backgrounds encounter barriers to feeling included—and that women, respondents who are ethnic and racial minorities, and those who identify as LGBTQ+ encounter additional challenges.
A few key data points from the survey add nuance about the lived experiences of employees in workplaces, inclusive and otherwise:
To serve these workers better, organizations can pay attention to four main factors associated with employees’ inclusion:
Intersectionality, a term coined by Professor Kimberlé Crenshaw in 1989, refers to the ways different parts of one’s identity intersect or overlap with one another. For instance, gender is one aspect of a person’s identity, but so are sexual orientation and race. A Black woman who is queer, or a White woman who has a disability, may take a perspective that acknowledges how those different aspects of their identity overlap or intersect. McKinsey’s Women in the Workplace 2021 report, for instance, found that LGBTQ+ women, as well as women with disabilities, are much more likely than women overall to experience microaggressions on the job.
Acknowledging intersectional identities can strengthen companies and communities more broadly. “Everyone deserves to feel empowered across all aspects of who they are,” says McKinsey senior partner Guangyu Li. “It shouldn’t be left to any individual community to defend itself. It’s in our collective interest to show up for each other with concrete action and to come together in solidarity.”
Allyship is a concept that is closely related to intersectionality. An ally aligns with people in the minority to help foster equitable and inclusive opportunities for all. In corporate America, White women, for instance, may take allyship actions such as mentoring women of color, advocating for new opportunities for them, and actively confronting any discrimination they might face. However, there is a notable disconnect between the allyship actions that women of color say are most meaningful and the actions that White employees prioritize—suggesting opportunities for recentering efforts around the experience of women of color and other marginalized groups.
Women’s representation in the corporate world has largely increased in recent years, but the pandemic has affected their participation in the workforce. It is worth noting that dynamics of gender in the workplace may be regionally specific. While much of McKinsey’s work offers insight into women in corporate America, you can explore additional material on global gender equality, as well as gender diversity in Africa, Canada, Central Europe, France, Japan, the Middle East, and other regions.
The largest study of women in corporate America is Women in the Workplace, conducted by McKinsey in partnership with LeanIn.Org. The latest research, now in its seventh year, reflects information from 423 organizations that employ 12 million people, and includes responses from more than 65,000 people surveyed on their workplace experience, as well as in-depth interviews with women of diverse identities.
Findings from the Women in the Workplace 2021 report include the following:
To support women in the workplace, companies need to invest deeply in all aspects of diversity, equity, and inclusion. Although there are no quick fixes, there are some steps companies should take to empower women at work:
Black Americans in the workforce are at a disadvantage; the median annual wage for Black workers is approximately 30 percent, or $10,000, lower than that of White workers, with serious implications for economic security, consumption, and the ability to build generational wealth. They are underrepresented in higher-wage industries and executive roles, and they face lower odds for advancement. Clear racial patterns exist across the US labor force, with nearly half of Black workers concentrated in low-paying healthcare, retail, food services, and accommodations roles.
There are many benefits to righting historical wrongs and realizing the full potential of Black American talent: addressing wage disparities alone, for instance, could propel two million Black Americans into the middle class for the first time.
Doing so will take effort on many levels. Research from the McKinsey Institute for Black Economic Mobility suggests some jumping-off points:
The stories of Black leaders’ journeys can offer inspiration and hope for personal and professional development. Get insight from Jason Wright (president of the National Football League’s Washington Commanders), Stephanie Hill (an executive vice president at Lockheed Martin), and Barry Lawson Williams (the founder of Williams Pacific Ventures).
In the United States, Latinos make up 18.4 percent of the population and 17.3 percent of the labor force, and that share is projected to rise to more than 30 percent by 2060. This community faces challenges, and US- and foreign-born Latinos alike remain far from equal with non-Latino White Americans, with Latino Americans earning just 73 cents for every dollar earned by White Americans. They face discrimination in securing financing to start and scale businesses, and they face challenges accessing food, housing, and other essentials.
McKinsey research on the economic state of Latinos in America finds that they are underpaid, collectively, by $288 billion a year. At full parity, though, Latinos could spend an extra $660 billion annually, and Latino businesses could generate trillions in revenue and support millions of new jobs, while also creating new flows of generational wealth. Addressing barriers faced by Latinos in America could make the economy more robust for all.
Asian Americans have contributed to the US economy since the 1800s, yet they have historically been overlooked. This group as a whole is often perceived as the “model minority,” a term that diminishes the unique issues faced by their diverse community. Recently, given the rise in racially motivated attacks on Asian Americans during the COVID-19 pandemic, historically unaddressed challenges faced by this group are coming to light, offering a fresh reminder of the need to support and include Asian Americans at work.
In corporate America, Asian Americans are underrepresented in senior leadership roles (as are Black, Hispanic, and Latino Americans). What might help? Recognizing where in the corporate pipeline Asian Americans are underrepresented, mitigating implicit and unconscious bias during promotion and performance evaluations, fostering sponsorship for Asian American employees, and expanding workplace flexibility and support such as paid sick leave.
For LGBTQ+ employees, many workplaces today fall short of full inclusion, even if there is visible corporate support for LGBTQ+ communities. For example, LGBTQ+ women are more underrepresented than women generally in America’s largest corporations. Just four LGBTQ+ CEOs head these corporations—only one woman, and none identifies as transgender. An episode of the McKinsey Talks Talent podcast considers the latest research on the LGBTQ+ experience in the workplace and highlights practical steps for all employees to signal support and boost progress for this community.
Transgender employees face a unique set of challenges. They earn 32 percent less money than cisgender employees (cisgender refers to people whose gender identity aligns with the sex assigned to them at birth). More than half of transgender employees say they are not comfortable at work, and they report feeling less supported by managers. These strong feelings of exclusion have significant economic implications: greater transgender inclusion in the workforce through wage equity and increased employment could boost annual consumer spending by $12 billion a year. To help address the issues, companies can be intentional in recruiting (for example, by asking applicants what pronouns or names they prefer to use) or offer trans-affirming benefits, among other actions.
Different industries may well need to take different approaches to diversity, equity, and inclusion, depending on the composition of their workforces. Several articles offer insight into those industry-specific dynamics, especially with regard to gender diversity:
For more in-depth exploration of these topics, see McKinsey’s collection of insights on diversity and inclusion. Learn more about Diversity, Equity & Inclusion consulting at McKinsey—and check out DEI-related job opportunities if you’re interested in working at McKinsey.
Articles referenced include:
