Gender and ethnic diversity helps businesses financially, new study shows

Diverse leadership boosts profit margins, but many businesses still aren’t receptive to new ideas and experiences.

Greater diversity at management level helps businesses financially, a new study has found.

An analysis of more than 1,700 companies across eight countries by management consultancy firm Boston Consulting Group found companies with diverse management teams had higher gross profit margins than less diverse companies.

The research also suggests that diverse teams were more innovative, earning almost half their revenue from new product launches and services, 20 per cent more than companies that were less diverse.

The study measured diversity on six characteristics: nationality, career background, gender, education and age.

“Diversity offers organisations a wide range of benefits, and our analysis shows that having a more heterogeneous team can deliver measurable gains in innovation and financial performance,” said Rocío Lorenzo, co-author of the report at Boston Consulting Group.

“Multifaceted teams offer a robust range of perspectives, and this allows organisations to formulate strategic solutions that can help them efficiently accomplish their goals, overcome challenges, and bring new ideas to the table.”

The study also found small changes in recruitment including targeting new hires from different industries could boost a company’s revenue from new products and services alone by 1 per cent.

Only 40 per cent of businesses said they currently have leadership that is receptive to diversity and an open-minded working culture.

study in August found that a lack of diversity in the UK’s top boardrooms could harm the country’s ability to do deals after Brexit, with the FTSE 100’s most senior managers less ethnical diversity last year than in 2014.

Written By: Shafi Musaddique

First Published 23.01.18

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