How leaders think about diversity: A guide

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Leading Off
ESSENTIALS FOR LEADERS AND THOSE THEY LEAD
February is Black History Month, and a time for continued reflection on addressing racial disparities. Faced with urgent calls for equity in the workplace, organizations must take a hard look at gender and cultural representation on their executive teams. The good news is that the business case for diversity and inclusion in corporate leadership is stronger than ever; the bad news is that progress remains slow and has even declined in some cases. What should leaders do to offer a level playing field for advancement and opportunity? This week, let's look at how to lay the turf in a systematic way.
AN IDEA
Tetris like blocks
Make the business case—then go beyond it
Diversity in leadership pays off. A McKinsey survey of more than 1,000 large organizations in 15 countries found that companies with the most gender and ethnic diversity on executive teams outperform less diverse companies on profitability. But diversity goes beyond the data: there is also a moral case to be made for doing the right thing. The principles of rising stakeholder capitalism call for taking into account the interests of not only shareholders but also customers, suppliers, workers, and communities, and purpose-driven organizations are looking to have a unique, positive impact on society. As these trends gather steam globally, organizations have a moral responsibility to advance equity and justice in their workplaces, including moving diverse talent into the C-suite.
A BIG NUMBER
60
That’s the number of Black CEOs there would be if representation in the Fortune 500 matched the 12 percent Black population density of the US. But just four Black chief executives—about 1 percent of all Fortune 500 heads of companies—make the list. And though the number of women leading Fortune 500 companies has hit an all-time high of 41, they still account for only 8.1 percent of the total. Women of color are losing ground at every step in the pipeline—their representation plunges more than 75 percent between the entry level and the C-suite, and they account for only 4 percent of top leaders. If you’re moving into a CEO role, grab the opportunity to move the needle on diversity, as most major policy changes occur in the first two to three years of a CEO’s tenure.
Quote
A QUOTE
“We seem to have hit a wall.”
That’s Darren Walker, president of the Ford Foundation, quoted in a New York Times article on discrimination in corporate America. Research shows that despite the efforts of many well-meaning companies, Black executives still face systemic inequity in hiring, compensation, promotion, and retention practices, and they are more likely to encounter prejudice than any other ethnic or racial group. The roots of the problem go deep and there are no easy solutions, but some emerging best practices include expanding the sources of talent, supporting Black entrepreneurship, building capabilities and skills to advance the next generation of Black leaders, and holding leaders and their organizations accountable for progress.
A SPOTLIGHT INTERVIEW
A photo of a Black person posing in front of a table in a bakery
Racial wealth disparities may cost the US close to $1 trillion a year in economic output, says McKinsey partner Shelley Stewart III in this podcast on strategies to promote racial equity. “Black Americans in particular face staggering inequality that is only matched in some instances by the Native American population, at least in the US,” he says. For business leaders, a key tactical step to address this challenge is understanding the equity implications of every decision they make. “Whether it is how you recruit, promote, develop, or pay, you need to take that equity lens,” urges Stewart. He also notes the importance of investing in Black community development, education, and entrepreneurship as a way to advance Black economic mobility.
IN SEARCH OF EXCELLENCE
A close up of a pen checking off a box
There’s no checklist for what makes a good CEO, but outstanding chief executives have certain attributes in common, new McKinsey research shows. For example, one quality is universal: “Regardless of context, regardless of circumstance, regardless of industry, there is an aspect around great CEOs: great CEOs are bold,” says McKinsey’s Vik Malhotra in this Author Talks interview. To increase diversity in their leadership ranks, organizations should consider the fundamental qualities that make C-suite leaders exceptional—and enhance them with the strengths that diverse perspectives and experiences can bring.
Lead equitably.
— Edited by Rama Ramaswami, a senior editor in McKinsey’s Stamford office
McKinsey & Company
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