Does diversity truly benefit business?

Debunking the Myth: Diversity and EBIT Performance – A Closer Look at Total Shareholder Return

A McKinsey report claimed a strong link between diversity and earnings before interest and tax (EBIT) using a certain methodology. However, it’s important to note that correlations between company performance and diversity are not always clear-cut. In fact, some studies have found little or no relationship between diversity and EBIT.

Instead of focusing on EBIT, a more natural performance measure is total shareholder return (TSR). TSR is what investors actually get from investing in a company, taking into account both stock price appreciation and dividend payments. By looking at TSR, we can gain a better understanding of how diversity impacts a company’s overall performance.

It’s crucial to critically evaluate any claims about the impact of diversity on company performance. We must be careful not to accept these claims without thoroughly analyzing the evidence. By taking off our blinkers and examining the data in a thoughtful and nuanced way, we can make more informed decisions about the role of diversity in business success.

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