Thomas Barta, a principal in McKinsey’s Cologne office, Markus Kleiner, a consultant in their Frankfurt office, and Tilo Neumann, a consultant in Berlin, published a report published in 2012 that many South African organisations can learn from.
Comparing executive board composition, return on equity (ROE), and margins on earnings before interest and tax (EBIT) of 180 companies across four countries and two continents, they set out to see if more diverse executive teams outperform their peers. To measure diversity they scored women and foreign nationals on the executive team.
The findings, in their words, were “startlingly consistent”:
1. For companies in the top quartile of board diversity the ROE’s were on average 53% higher than those in the bottom quartile
2. The EBIT margins similarly were 14% higher
To get a reality check on their data, they looked for evidence of diversity’s influence on the objectives of the companies. It appeared that apart from the obviously broader strategic perspective we gain from more diverse input, and the obvious advantage of being able to draw from a broader base of talent, our talent managers and leaders who do set about actively pursuing diversity targets and inculcating these from the bottom up are the most successful.
What this means is that we need to have a clear vision of what diversity means, and then to set achievable targets using modern and relevant methods to ensure that we reach them. In the South African context this would mean attracting and retaining the talent and skills we need in times of skills shortage.
For example, to attract a female accountant we may need to ensure that we have flexi-hours or childcare facilities in place. Plus, the working environment needs to be female-friendly, for example, issues like sexual harassment would need to be addressed and have clear conflict resolution paths.
One would also have to include regular diversity training workshops to broaden the message of equality and respect throughout the organisation. The company code of conduct would need input from females and the management would all need to be supportive of the strategic objective.
At Staff Training we have had the privilege of working with a number of organisations to provide diversity training, and whilst many of the employees are on board and have very little malice towards any of their peers , there are still some that do not see how their behaviour can be construed as offensive to others. One incident on its own is seldom a problem but without the forums for these incidents to be discussed and brought into the open we are unlikely to learn at the pace we need to, ensuring that we gain the benefit from a more diverse working environment, and ultimately that we will be able to compete favourably in the open market, be it nationally or internationally.
An interesting example of where a more diverse executive body could have provided better strategic vision occurred in one of our top schools in South Africa recently. Many of you would be aware of the negative press and subsequent conflict at the Pretoria Girls High School a perfect example of the kind of incident that can be avoided by embedding an inclusive culture in your organisation. Fortunately this is a lesson that another school has learnt from; Parktown High headmaster having gone on record in favour of diversity training that they have included as part of their programmes for all teaching staff.
From our perspective annual diversity workshops are one of the most powerful steps you can take to show intent, support your diversity objectives and succeed in bringing to your top management structure the skills, input and vision needed to lead you into the next few years of success.
Reference: Is there a pay-off from top team diversity? McKinsey & Company
© Debbie Engelbrecht