Lack of Diversity Hurts a Company’s Performance

Lack of Diversity Hurts a Company’s Performance

December 12, 2017  |  Blog Post

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Key Insight

"Studies show that increased diversity and key performance indicators are corralated."

To everyone that has been considering switching between Lyft and Uber, the latest news regarding diversity within these two companies may help users decide. On Jun 1st, Lyft released its first diversity report, which stabilized its top place of diversity in the industry. 42% of Lyft’s workforce identify as female, compared to Uber’s 36%. 63% of Lyft’s staff is white, 19% is Asian, 7% is Latino, and 6% is black. Although the percentages are still not matched with the composition of the population of the nation, Lyft has been doing a better job of promoting diversity and inclusion in its company than its rival Uber and the entire tech industry. Lyft also admitted that it “has a lot of work to do” in the future with diversity. Many studies show that raising diversity can improve a company’s performance. Large companies such as Twitter, Uber, and Lyft have been emphasizing their company’s diversity and inclusion to maintain the company’s positive reputation, but how exactly diversity and inclusion can affect a company’s bottom line was not sufficiently explained.

The Forbes article by James Heskett stated two findings of a McKinsey Global Institute study. The study sampled 366 companies in Canada, Latin America, United Kingdom, and the U.S., and concluded that companies lacking gender diversity tend to have lower business performance. Also, companies who maintain diverse leadership are more successful than others.

"The study seems to perfectly prove that lack of diversity can hurt a company’s performance." 

However, critics of the study argue that the sample size of 366 companies is too small of selection for some countries. Also, many potential factors are influencing a company’s financial performance, and there is no sufficient evidence showing that gender diversity necessarily accounts for much if any of the financial performance. Therefore, the result of the study is not convincible to indicate the enormous effect that lack of diversity may have on a company’s performance.

On the other hand, an earlier McKinsey study researched more than 58,000 employees of 101 organizations around the world and demonstrated that there is a huge difference in companies’ business performance between companies with at least 30% female in leadership positions and companies with no female leadership involvement. The employees in the diverse workforce gave positive feedback on work environment, values, direction, coordination, and control, which are factors contributing to the better performance of the employees and the company. On the contrary, in companies lacking diverse leadership, employees complained about work motivation, capability, accountability, and innovation, which are factors most likely leading to low company performance. Therefore, the study contained the proper size of samples and concluded that the company with at least 30% female in leadership has better business performance than the company with no female leadership.

More studies analyzing the effects of lacking diversity in a company’s performance are necessary in the future, but we cannot ignore the trend that the world, the society, and every industry need to focus on raising the awareness of diversity and inclusion since the nature of the world is diverse and inclusive.

To further explore the influence of lacking diversity in a company’s performance, CHI is organizing 2nd Annual Breakthroughs in Healthcare Diversity Symposium on 2/10/18 in San Francisco, CA. The symposium is a leading collaborative symposium for patients, patient groups, clinicians, researchers, technologists, healthcare and life science executives, and diversity and inclusion advocates to discuss diversity and inclusion in healthcare. The symposium will discuss best practices, and exchange new ideas related to making healthcare more diverse, with a specific focus on understanding how to serve underserved patient groups, including racial and ethnic minorities, women, and the LGBT community. The symposium will also focus on helping provider, pharma, and other organizations who serve patients with the latest ideas and insights on how these organizations can become more diverse and inclusive in order to best understand the unique and diverse needs of the patients they serve. Attendees will learn the newest insights and ideas, discuss practical solutions, and meet industry and marketplace colleagues. 

Authors

Aaron Wang

Analyst at CHI

Citations

i. Guynn, Jessica. “Twitter Users Are Diverse but Not Its Staff.” USA Today, Gannett Satellite Information Network, 19 Jan. 2017, www.usatoday.com/story/tech/news/2017/01/19/twitter-diversity-2016/96749454/.

ii. Hawkins, Andrew J. “Lyft’s Diversity Numbers Are Better than Uber’s, but Only Slightly.” The Verge, The Verge, 1 June 2017, www.theverge.com/2017/6/1/15725676/lyfts-diversity-report-ethnicity-gender-silicon-valley.

iii. Heskett, James. “Why Does Lack Of Gender Diversity Hurt A Company’s Performance?” Forbes, Forbes Magazine, 5 Nov. 2015, www.forbes.com/sites/hbsworkingknowledge/2015/11/04/why-does-lack-of-gender-diversity-hurt-a-companys-performance/#44c24a8d2332.